Exhibit 4.4
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT, dated as of February 3, 2000 (this
"Agreement"), by and among INTERACTIVE XXXXXXXXXXXX.XXX, LTD., a Delaware
corporation (the "Company"), and YOUNG LLC, a Cayman Island limited liability
company ("Purchasers").
Recitals
A. Purchaser desires to purchase, and the Company desires to issue and
sell, shares ("Shares") of the Company's Common Stock, $.001 par value per share
("Common Stock"), on the terms and conditions set forth below. For purposes of
this Agreement, the Shares shall mean the Initial Shares (as defined below) and
the Repriced Shares (as defined below).
B. The parties hereto intend that the issuance of the Shares as
anticipated by this Agreement shall be accomplished without registration under
the U.S. Securities Act of 1933, as amended (the "Securities Act"), and without
registration or qualification under the securities laws of any state or other
jurisdiction, in reliance on exemptions from the registration requirements of
the Securities Act, including, without limitation, Regulation D under the
Securities Act and Section 4(2) of the Securities Act; provided, however, that
nothing in this Agreement shall act or be construed as a limitation on
Purchaser's right to sell any of the Shares to be acquired pursuant to this
Agreement pursuant to the Registration Statement (the "Registration Statement")
contemplated by the Registration Rights Agreement (as defined below), or other
provisions of the Registration Rights Agreement or in accordance with applicable
laws.
THEREFORE, in consideration of the mutual promises and covenants set forth
below and for other good and valuable consideration, the receipt and sufficiency
of which the parties acknowledge by their signatures below, the parties hereto
hereby agree as follows:
AGREEMENT
1. Purchase of Common Stock. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell, and Purchaser agrees to
acquire, nine hundred seventy thousand two hundred eighty-five (970,285) fully
paid and non-assessable shares (the "Initial Shares") at 85% of the Initial
Closing Price as hereinafter defined, in exchange for Purchaser's payment to the
Company of aggregate consideration of Four Million Dollars ($4,000,000) (the
"Purchase Price").
1.1 Form of Payment. Purchaser shall pay the Purchase Price for the
Initial Shares by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Exhibit E (the "Joint Escrow Instructions"). No
later than the Closing Date (as defined below), the Company shall deliver one or
more certificates representing the Initial Shares duly executed on behalf of the
Company (collectively, each the "Certificates") to the Escrow Agent. By signing
this Agreement, each Purchaser and the Company, and subject to acceptance by the
Escrow Agent, each agrees to all of the terms and conditions of, and becomes a
party to, the Joint Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
1.2 Method of Payment. Purchasers shall pay into escrow the Purchase
Price for the Initial Shares by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, LLP
Account No.:
Purchaser shall deliver payment of the Purchase Price at or before 1:00 p.m.,
New York time, on the date which is one (1) Business Day after the Company
executes and delivers this Agreement and returns a signed counterpart of this
Agreement to the Escrow Agent by facsimile. Purchaser shall deposit the Purchase
Price for the Initial Shares with the Escrow Agent in immediately available
funds. Time is of the essence with respect to such payment, and failure by
Purchaser to make such payment shall allow the Company to cancel this Agreement.
For purposes of this Agreement, "Business Day" shall mean a day on which the New
York Stock Exchange is open for business.
1.3 Escrow Property. The Purchase Price and the Certificate
delivered to the Escrow Agent as contemplated by Section 1.1 hereof are referred
to as the "Escrow Property."
2. Closing.
2.1 Initial Closing. Upon execution of this Agreement (the "Initial
Closing"), and on the date set forth above (the "Initial Closing Date")
Purchaser and all other Purchasers hereunder shall pay Four Million Dollars
($4,000,000). At the Initial Closing the parties hereto shall execute and
deliver the following documents (incorporated herein by this reference,
collectively with this Agreement, the "Transaction Documents"): (i) the
Registration Rights Agreement (the "Registration Rights Agreement") in the form
attached hereto as Exhibit A; (ii) the Escrow Agreement in the form attached
hereto as Exhibit B; (iii) the Warrant (the "Warrant") in the form attached
hereto as Exhibit C; and (iv) the additional agreements (the "Additional
Agreements") in the form attached hereto as Exhibit D. On the Closing Date (as
defined below), the Escrow Agent shall deliver (i) the Purchase Price to the
Company and (ii) the Certificate to the Purchaser.
2.2 Repriced Shares. Definitions:
(a) As used herein, "Closing Bid Price" shall mean the closing
bid price
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of the Common Stock as reported, at the option of Purchaser, by Bloomberg, LP or
the National Association of Securities Dealers ("NASD").
(b) "Effective Date" shall mean date on which the Securities
and Exchange Commission (the "SEC") declares effective the registration
statement covering the Registrable Shares (as defined in the Registration Rights
Agreement).
(c) "Initial Closing Price" shall mean the average Closing Bid
Price for the five (5) consecutive Business Days immediately prior to the date
of the Initial Closing.
(d) "Repricing Period" shall mean each of the First Repricing
Period, the Second Repricing Period, the Third Repricing Period and the Final
Repricing Period, each as defined below.
(e) "Repriced Shares" shall mean the First Repriced Shares,
the Second Repriced Shares, the Third Repriced Shares and the Final Repriced
Shares, each as defined below.
2.3 First Repricing Period. (a) The "First Repricing Period" shall
commence on the later of (a) the day that is ninety (90) days after the Closing
Date or (b) the Effective Date, and end thirty (30) days after such later date.
If the average Closing Bid Price for any five (5) Business Days (not necessarily
consecutive) during the First Repricing Period (the "First Repricing Price"), is
not equal to or greater than 117% of the Initial Closing Price, then Purchaser
may request that up to one-third (1/3) of the Initial Shares be repriced (the
"First Repriced Shares"). Purchaser shall provide facsimile notice to the
Company substantially in the form of Exhibit 2 hereto, within three (3) Business
Days of the end of the First Repricing Period concerning the number of the First
Repriced Shares, if any, that Purchaser wishes to reprice. Upon receipt of
facsimile notice that Purchaser wishes to reprice some or all of the First
Repriced Shares, the Company may elect to issue to Purchaser the number of
additional Shares as determined according to the following formula:
((1.17 x Initial Closing Price) - First Repricing Price) x (# of the First
Repriced Shares) / First Repricing Price.
(b) Alternatively, if the Company does not elect to issue such additional
Shares to Purchaser, then the Company shall pay to Purchaser the amount as
determined according to the following formula:
((1.17 x Initial Closing Price) - First Repricing Price) x (# of the First
Repriced Shares).
2.4 Second Repricing Period. The "Second Repricing Period" shall
commence on the day immediately following the First Repricing Period and end
thirty (30) days thereafter. If the average Closing Bid Price for any five (5)
Business Days (not necessarily consecutive) during the Second Repricing Period
(the "Second Repricing Price"), is not equal to or greater than 117% of the
Initial Closing Price, then Purchaser may request that up to one-third (1/3) of
the Initial Shares be repriced (the "Second Repriced Shares"). Purchaser shall
provide facsimile notice to the
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Company within three (3) Business Days of the end of the Second Repricing Period
concerning the number of the Second Repriced Shares, if any, that Purchaser
wishes to reprice. Upon receipt of facsimile notice that Purchaser wishes to
reprice some or all of the Second Repriced Shares, the Company may elect to
issue to Purchaser the number of additional Shares as determined according to
the following formula:
((1.17 x Initial Closing Price) - Second Repricing Price) x (# of the Second
Repriced Shares) / Second Repricing Price.
Alternatively, if the Company does not elect to issue such additional
Shares to Purchaser, then the Company shall pay to Purchaser the amount as
determined according to the following formula:
((1.17 x Initial Closing Price) - Second Repricing Price) x (# of the
Second Repriced Shares).
2.5 Third Repricing Period. (a) The "Third Repricing Period" shall
commence on the day immediately following the Second Repricing Period and end
thirty (30) days thereafter. If the average Closing Bid Price for any five (5)
Business Days (not necessarily consecutive) during the Third Repricing Period
(the "Third Repricing Price"), is not equal to or greater than 117% of the
Initial Closing Price, then Purchaser may request that up to one-third (1/3) of
the Initial Shares be repriced (the "Third Repriced Shares"). Purchaser shall
provide facsimile notice to the Company within three (3) Business Days of the
end of the Third Repricing Period of the number of the Third Repriced Shares, if
any, that Purchaser wishes to reprice. Upon receipt of facsimile notice that
Purchaser wishes reprice some or all of the Third Repriced Shares, the Company
may elect to issue to Purchaser the number of additional Shares as determined
according to the following formula:
((1.17 x Initial Closing Price) - Third Repricing Price) x (# of the Third
Repriced Shares) / Third Repricing Price.
(b) Alternatively, if the Company does not elect to issue such additional
Shares to Purchaser, then the Company shall pay to Purchaser the amount as
determined according to the following formula:
((1.17 x Initial Closing Price - Third Repricing Price) x (# of the Third
Repriced Shares).
2.6 Final Repricing Period. (a) The "Final Repricing Period" shall
commence on the day immediately following the Third Repricing Period and end one
hundred eighty (180) days thereafter. If the average Closing Bid for any five
(5) consecutive Business Days after the commencement of the Final Repricing
Period is not equal to or greater than 117% of the Initial Closing Price, then
Purchaser may request that up to 50 % of the Initial Shares (not previously
repriced pursuant to Sections 2.3, 2.4 and 2.5 and this Section 2.6) be repriced
(the "Final Repriced Shares"). The Final Repricing Price shall be the average
Closing Bid Price for the five (5) consecutive Business Days immediately prior
to the date on which Purchaser provides facsimile notice that it wishes to
reprice the Final Repriced Shares. Upon receipt of facsimile notice that
Purchaser wishes to reprice some or all of the Final Repriced Shares, the
Company may elect to
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issue to Purchaser the number of additional Shares determined according to the
following formula:
((1.17% x Initial Closing Price) - Final Repricing Price) x (# of the Final
Repriced Shares) / Final Repricing Price.
(b) If the Company does not elect to issue such additional Shares to
Purchaser, then the Company shall pay to Purchaser the amount (the "Final
Repricing Equivalent Payment"), determined according to the following formula:
((1.17 x Initial Closing Price) - Final Repricing Price) x (# of the Final
Repriced Shares).
Notwithstanding the foregoing, no more than fifty (50%) percent of the Initial
Shares can be repriced during any thirty (30) calendar day period during the
Final Repricing Period.
3. Representations and Warranties of Purchaser. To induce the Company's
acceptance of this Agreement, each of Purchasers hereby severally certifies,
represents and warrants to the Company and its agents and attorneys as follows,
which representations and warranties are solely for the benefit of the Company
and may be waived in whole or in part at any time prior to the Initial Closing
by the Company:
3.1 Intent. Purchaser will be acquiring the Shares for its own
account, and Purchaser has no present arrangement (whether or not legally
binding) to sell any of the Shares to or through any person or entity; provided,
however, that by making the representations herein, Purchaser does not agree to
hold any of the Shares for any minimum or other specific term and reserves the
right to dispose of the Shares at any time in accordance with U.S. federal and
state securities laws applicable to such disposition and any restrictions
imposed on such transfer by the Transaction Documents. Purchaser understands
that the Shares must be held indefinitely unless the Shares are subsequently
registered under the Securities Act or an exemption from registration is
available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.
3.2 Sophisticated Investor. Purchaser is a "sophisticated investor"
(as described in Rule 506(b)(2)(ii) of Regulation D) and an "accredited
investor" (as defined in Rule 501(a) of Regulation D), and Purchaser has such
knowledge and experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Company.
3.3 Ability of Purchaser to Bear Risk of Investment. Purchaser
acknowledges that the Shares are speculative investments and involve a high
degree of risk and Purchaser is able to bear the economic risk of an investment
in the Shares, and, at the present time, is able to afford a complete loss of
such investment.
3.4 Authority. Each of the Transaction Documents (except for the
Warrant) has been duly authorized and validly executed and delivered by
Purchaser and (assuming due authorization and valid execution by the Company) is
a legal, valid and binding agreement of
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Purchaser enforceable against Purchaser in accordance with its terms, subject to
general principles of equity and to bankruptcy, insolvency or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application. The person or
persons executing the Transaction Documents (except for the Warrant) have all
requisite authority to do so on behalf of Purchaser.
3.5 Brokers, Finders. Except with respect to Ladenburg Xxxxxxxx &
Co., Inc., Purchaser has taken no action which would give rise to any claim by
any person for brokerage commission, finder's fees or similar payments by the
Company relating to this Agreement or the transactions contemplated hereby. The
Company shall have no obligation with respect to such fees or with respect to
any claims made by or on behalf of other persons for fees of a type contemplated
in this section that may be due in connection with the transactions contemplated
hereby. Purchaser shall indemnify and hold harmless the Company, its employees,
officers, directors, agents and partners, and their respective affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorneys' fees) and expenses suffered in respect of any such
claimed or existing fees, as and when incurred.
3.6 Organization; Authority. Purchaser is an entity organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by this Agreement and to carry out its
obligations thereunder. The acquisition of the Shares and the payment of the
Purchase Price therefor by such Purchaser have been duly authorized by all
necessary action on the part of Purchaser.
3.7 Absence of Conflicts. The execution and delivery of each of the
Transaction Documents (except for the Warrant), and the consummation of the
transactions contemplated by this Agreement and such other documents and
instruments, and compliance with the requirements thereof, will not violate any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Purchaser, or the provision of any indenture, instrument or agreement
to which Purchaser is a party or is subject, or by which Purchaser or any of its
assets is bound, or conflict with or constitute a material default thereunder,
or require the approval of any third-party pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which Purchaser is
subject or to which any of its assets, operations or management may be subject.
3.8 Disclosure; Access to Information. Purchaser has received copies
of or has had access to all documents, records, books and other information
pertaining to Purchaser's investment in the Company and the Shares that have
been requested by Purchaser. Purchaser or its representative has been afforded
the opportunity to ask questions of the Company and its management. Purchaser
further acknowledges that it understands that the Company is subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Purchaser has reviewed or received copies of
any such reports that it has requested.
3.9 Manner of Sale. At no time was Purchaser presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of
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general solicitation or advertising with respect to the Shares.
3.10 Accuracy of Other Materials. To the extent Purchaser has
received from the Company documents or other materials, which constitute
summaries, projections, forecasts or estimates, Purchaser acknowledges the
following with respect to such documents or other materials. Such documents or
other materials are intended to illustrate projected financial and other results
based upon a set of assumptions (in some cases based on information obtained by
the Company from outside sources) that the Company views as reasonable and
obtainable. All such summaries, projections, forecasts or estimates pertaining
to revenue growth, profitability and other similar financial or market data are
forward-looking statements. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. No representations or warranties of future performance by or market
trends for the Company are intended, and such are expressly disclaimed.
3.11 Accuracy of Representations and Information. All
representations made by Purchaser in the Transaction Documents, and all
information provided by Purchaser to the Company concerning Purchaser are
correct and complete in all material respects as of the date hereof.
3.12 Notwithstanding any other provision hereof, of the Warrants or
of any of the other Transaction Agreements, in no event (except (i) as
specifically provided in this Agreement as an exception to this provision, or
(ii) while there is outstanding a tender offer for any or all of the shares of
the Company's Common Stock) shall the Purchaser be entitled to exercise
Repricing Rights or shall the Company have the obligation, to deliver Repricing
Shares to the extent that, after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Purchaser and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership Repricing Shares not yet issued or unexercised portion of
the Warrants), and (2) the number of shares of Common Stock issuable upon the
exercise of Repricing Rights or exercise of the Warrants with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by the Purchaser and its affiliates of more than 9.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Purchaser upon such exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
The Purchaser, further agrees that if the Purchaser transfers or assigns any of
the Shares to a party who or which would not be considered such an affiliate,
such assignment shall be made subject to the transferee's or assignee's specific
agreement to be bound by the provisions of this Paragraph 3.12 as if such
transferee or assignee were the original Purchaser hereof.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as follows, which representations and
warranties are solely for the benefit of Purchaser and may be waived in whole or
in part by Purchaser at any time prior to the Initial Closing:
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4.1 Company Status. On December 23, 1999, the Company filed a
Registration Statement on Form 10-SB in connection with its proposed
registration of the Common Stock pursuant to Section 12(g) of the Exchange Act.
As of the date first above written, such Registration Statement has not become
effective. The Common Stock is not currently listed or traded on any securities
exchange or market other than the NQB Electronic Pink Sheets. The Company
intends to apply to the Nasdaq Stock Market, Inc. for admission of the Common
Stock to trading on the National Market System or the SmallCap Market.
4.2 Current Public Information. The Company has furnished or made
available to Purchaser true and correct copies of its registration statement on
From 10-SB, as filed with the SEC, pursuant to the Exchange Act ( the "SEC
Document"). The SEC Document is the only filing made by or with respect to the
Company since December 31, 1998 pursuant to the Exchange Act or pursuant to the
Securities Act. The Company has not been required to file, and has not
heretofore filed, any reports, schedules, forms, statements and other documents
under Sections 13(a), 14 and 15(d) of the Exchange Act.
4.3 No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Shares.
4.4 Valid Issuance of Common Stock. The authorized capital stock of
the Company consists of 50,000,000 shares of Capital Stock, $.001 par value per
share, of which 40,000,000 shares are Common Stock and 10,000,000 are Preferred
Stock. There are 24,261,091 shares of Common Stock issued and outstanding and no
shares of preferred stock are issued and outstanding as of January 31, 2000 .
All of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable. Except as
set forth above or as disclosed in Schedule 4.4, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to redeem or issue additional shares of capital
stock of the Company or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, (ii) there are no
outstanding debt securities and (iii) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of their
securities under the Securities Act. Except as disclosed in Schedule 4.4, there
are no securities or instruments containing any anti-dilution, right of first
refusal, preemptive rights or similar provisions that will be triggered by the
issuance of the Shares as described in this Agreement. Upon issuance of the
Shares, such securities will be duly and validly issued, fully paid and
non-assessable.
4.5 Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted.
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The Company does not have any subsidiaries. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect. "Material Adverse Effect" means any
effect on the business, operations, properties, prospects, or financial
condition of the entity or entities with respect to which such term is used and
which is material and adverse to such entity or to other entities controlling or
controlled by such entity, and/or any condition or situation which would
prohibit or otherwise interfere with the ability of the entity or entities with
respect to which said term is used to enter into and perform its obligations
under the Transaction Documents.
4.6 Authorization: Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform under the Transaction
Documents and to issue the Shares and the Warrant in accordance with the terms
of the Transaction Documents, (ii) the execution, issuance and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated by the Transaction Documents have been duly authorized
by all necessary corporate action, and no further consent or authorization of
the Company or its board of directors or shareholders is required, (iii) the
Transaction Documents have been duly executed and delivered by the Company, and
(iv) the Transaction Documents (assuming due authorization and valid and legal
execution by Purchaser) constitute legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
4.7 [Intentionally Omitted]
4.8 No Conflicts. Except as set forth in Schedule 4.8, the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby,
including, without limitation, the issuance of the Shares, do not and will not
(i) result in a violation of the Company's Articles of Incorporation or Bylaws,
(ii) conflict with, or result in a breach of or forfeiture of any rights (or
result in an event which with notice or lapse of time or both would become a
breach of or forfeiture of any rights) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company is a party or (iii) result in a
violation of any federal or state law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). To the best of its knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
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Agreement or issue and sell the Shares and the Warrant in accordance with the
terms of this Agreement (other than any SEC, NASD or state securities filings
which may be required to be made by the Company subsequent to any Closing, and
any registration statement which may be filed in furtherance of this Agreement);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of Purchaser herein. The Company is not in
violation of any material term of or in material default under its Articles of
Incorporation, of any outstanding series of preferred stock or Bylaws or their
organizational charter or Bylaws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree of
order or any statute, rule or regulation applicable to the Company, which has
not been duly waived as of the date of this Agreement.
4.9 SEC Documents. The Company has not provided to Purchaser any
information which according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company but which has
not been so disclosed. As of their respective dates, the SEC Documents complied,
and all similar documents filed with the SEC prior to the Closing Date will
comply, in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained, nor will any similar document filed with the SEC prior to the Closing
Date contain, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents, as of the dates thereof, complied, and all similar documents filed
with the SEC prior to the Closing Date will comply, as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC and other applicable rules and regulations with respect
thereto. Such financial statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements
as permitted by Form 10-Q of the SEC) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
4.10 No Undisclosed Liabilities. Except as set forth in Schedule
4.10, the Company has no liabilities or obligations of a financial nature
(whether accrued, absolute, contingent or otherwise), which are material,
individually or in the aggregate, and are not disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company's business
consistent with past practice since September 30, 1999, and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on the
Company.
4.11 Litigation and Other Proceedings. Except as may be set forth in
the SEC Documents or set forth in Schedule 4.11, there are no lawsuits or
proceedings pending or, to the best
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knowledge of the Company, threatened, against the Company, nor has the Company
received any written or oral notice of any such action, suit, proceeding or
investigation, which might have a Material Adverse Effect on the Company or
which likely would have a Material Adverse Effect on the transactions
contemplated by this Agreement. Except as set forth in the SEC Documents, no
judgment, order, writ, injunction or decree or award has been issued by or, to
the best knowledge of the Company, requested of any court, arbitrator or
governmental agency which likely would have a Material Adverse Effect on the
transactions contemplated by this Agreement.
4.12 Other Documents or Materials. With respect to any document or
other materials received by Purchaser from the Company or its representatives
other than the Transaction Documents and the SEC Documents, (i) the Company has
no reason to believe any of such documents and materials or any projections
contained therein, as of the date of such other documents or materials,
contained errors or misstatements or do not adequately describe the status of
the development of the Company's technologies or its business as of such date,
and (ii) such documents, materials and projections were prepared by the Company
and its management in good faith.
4.13 Nature of Company. The Company is not an open-ended investment
company or a unit investment trust, registered or required to be registered, or
a closed end investment company required to be registered, but not registered,
under the Investment Company Act of 1940.
4.14 Brokers, Finders. Except for the payment of consulting fees to
Ladenburg Xxxxxxxx & Co., Inc., payment of which is the sole responsibility of
the Company, the Company has taken no action which would give rise to any claim
by any person for brokerage commission, finder's fees or similar payments by
Purchaser relating to this Agreement or the transactions contemplated hereby.
Purchaser shall have no obligation with respect to such fees or with respect to
any claims made by or on behalf of other persons for fees of a type contemplated
in this Section 4.14 that may be due in connection with the transactions
contemplated hereby. The Company shall indemnify and hold harmless each of
Purchaser and its employees, officers, directors, agents, partners and
affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses suffered in respect of
any such claimed or existing fees, as and when incurred.
4.15 Absence of Certain Changes. Except as set forth in Schedule
4.15, since September 30, 1999, no Material Adverse Effect has been suffered by,
and no material adverse development has occurred in the business, properties,
operations, financial condition or results of operations of the Company. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law, nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
4.16 Intellectual Property Rights. To its knowledge without
conducting any special investigation and except as set forth on Schedule 4.16,
the Company owns or possesses adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
11
authorizations, trade secrets and rights necessary to conduct its businesses as
now conducted. None of the Company's trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights has expired or terminated, or is expected to
expire or terminate in the near future. Except as set forth on Schedule 4.16,
the Company does not have any knowledge of any infringement by the Company of
trademarks, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade
secrets or other similar rights of others, or of any such development of similar
or identical trade secrets or technical information by others and, there is no
claim, action or proceeding being made or brought against, or to the best
knowledge of the Company, being threatened against, the Company regarding
trademark, trade name, patent, patent rights, invention, copyright, license,
service name, service xxxx, service xxxx registration, trade secret or other
infringement; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
4.17 Internal Accounting Controls. The Company is not aware that its
system of internal accounting controls is not sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
4.18 Tax Status. Except as set forth in Schedule 4.18, the Company
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports,
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports, or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
12
4.19 Certain Transactions. Except as set forth in the SEC Documents
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options, none of the officers, directors or employees of the Company (or any
spouse or relative of any such person) is presently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4.20 Dilution. The number of shares of Common Stock issuable as
Repriced Shares may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines during the period between the Effective Date and the
end of the Final Repricing Period. The Company's executive officers and
directors have studied and fully understand the nature of the transactions
contemplated by this Agreement and recognize that they have a potential dilutive
effect. The board of directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the Repriced
Shares is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the
Company.
4.21 Market Quotes. The Company's Common Stock is presently quoted
on the Pink Sheets under the symbol "INTR". Except as set forth on Schedule
4.21, the Company is not in receipt of any written notice from any stock
exchange, market or trading facility on which the Common Stock is or has been
listed or traded (or on which it is or has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such stock exchange, market or trading facility or that the Common Stock will be
delisted from such stock exchange, market or trading facility.
4.22 No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since June 1, 1999, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Shares as contemplated
hereby.
5. Use and Disposition of Proceeds. The Company will use the proceeds from
the sale of the Initial Shares (excluding amounts paid by the Company for legal
fees, finder's fees and escrow agent fees in connection with the sale of the
Initial Shares) for general capital purposes and acquisition, but shall not,
directly or indirectly, use such proceeds for investment in any other affiliate
or to repay debt to affiliates.
6. Company Reliance on Purchaser's Representations. Purchaser understands
that the
13
Company is relying on the truth and accuracy of the representations and
warranties made herein by Purchaser in offering the Shares for sale and in
relying upon applicable exemptions available under the Act and applicable state
securities laws.
7. Restricted Shares. Purchaser understands and acknowledges that the
Shares have not been, and will not as of the time issued, be registered under
the Securities Act and that they will be issued in reliance upon exemptions from
the registration requirements of the Securities Act, and thus cannot be resold
unless they are included in an effective registration statement filed under the
Securities Act or unless an exemption from registration is available for such
resale. With regard to the restrictions on resales of the Shares, Purchaser is
aware: (a) that the Company will issue stop transfer orders to its stock
transfer agent in the event of attempts to improperly transfer any such Shares,
and (b) that a restrictive legend will be placed on certificates representing
the Shares, which legend will read substantially as follows:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
The legend set forth above shall be promptly removed, and the Company shall
issue a certificate without such legend to the holder of any such Unlegended
Shares (as defined below) upon which such legend is stamped, if, unless
otherwise required by state securities laws, (i) such Shares are registered for
resale under the Securities Act, (ii) in connection with a sale transaction,
such holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
such Shares may be made without registration under the Securities Act, or (iii)
such holder provides the Company with reasonable assurances that such Shares can
be sold pursuant to Rule 144 promulgated under the Securities Act without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold. Notwithstanding the removal of the legend set
forth above in the event the Shares are registered for resale on an effective
registration statement, the Company reserves the right to affix a legend on
certificates representing such Shares that any selling shareholder must comply
with the prospectus delivery requirements of the Securities Act in connection
with any resale. The Company shall bear the cost of the removal of any legend as
anticipated by this Section 7.
8. Other Covenants of the Company.
8.1 Furnishing of Information. As long as Purchaser owns Shares, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act. If at any time prior to the date on which Purchaser may resell all of its
Shares without volume restrictions pursuant to Rule 144(k) promulgated under the
14
Securities Act (as determined by counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent for the benefit of and enforceable by Purchaser) the Company is
not required to file reports pursuant to such sections, it will prepare and
furnish to Purchaser and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as Purchaser may reasonably request, all to the extent required
from time to time to enable Purchaser to sell its Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act.
8.2 Listing of Shares. The Company shall, if required by any
applicable listing agreement, (a) not later than the Effective Date, prepare and
file with any national securities exchange, market or trading facility on which
the Common Stock is then listed an additional shares listing application
covering the Shares, (b) take all steps necessary to cause such shares to be
approved for listing on any other national securities exchange, market or
trading facility on which the Common Stock is then listed as soon as possible
thereafter and (c) provide to Purchaser evidence of such listing, and the
Company shall maintain the listing of its Common Stock on such exchange or
market.
8.3 First Right. The Company shall not, directly or indirectly,
without the prior written consent of Purchaser, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its Common Stock or securities
convertible into Common Stock at a price that is less than the market price of
the Common Stock at the time of issuance of such security or investment (a
"Subsequent Financing") for a period of three hundred sixty (360) days after the
Effective Date, or the redemption of all the Shares, except (i) the granting of
options or warrants to employees, officers, directors and consultants, and the
issuance of shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares issued upon
exercise of any currently outstanding warrants or options and upon conversion of
any currently outstanding convertible debenture, in each case disclosed in
Section 4.4 or Schedule 4.4, (iii) securities issued in connection with the
capitalization or creation of a joint venture with a strategic partner, (iv)
shares issued to pay part or all of the purchase price for the acquisition by
the Company of a person (which, for purposes of this clause (iv), shall not
include an individual or group of individuals), and (v) shares issued in a bona
fide public offering by the Company of its securities, unless (A) the Company
delivers to Purchaser a written notice (the "Subsequent Financing Notice") of
its intention to effect such Subsequent Financing, which Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the person
with whom such Subsequent Financing shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) Purchaser
shall not have notified the Company by 5:00 p.m. (New York time) on the tenth
(10th) Business Day after its receipt of the Subsequent Financing Notice of its
willingness to provide, subject to completion
15
of mutually acceptable documentation, financing to the Company on substantially
the terms set forth in the Subsequent Financing Notice. If Purchaser shall fail
to notify the Company of its intention to enter into such negotiations within
such time period, then the Company may effect the Subsequent Financing
substantially upon the terms and to the persons (or affiliates of such persons)
set forth in the Subsequent Financing Notice; provided that the Company shall
provide Purchaser with a second Subsequent Financing Notice, and Purchaser shall
again have the right of first refusal set forth above in this Section 8.3, if
the Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Financing Notice within thirty (30) Business Days after the date of
the initial Subsequent Financing Notice with the person (or an affiliate of such
person) identified in the Subsequent Financing Notice. The rights granted to
Purchaser in this Section 8.3 are not subject to any prior right of first
refusal given to any other person except as disclosed on Schedule 4.4.
8.4 Certain Agreements. (a) The Company covenants and agrees that it
will not, without the prior written consent of Purchaser, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the date which is one hundred
eighty (180) days after the Effective Date, unless all of the Initial Shares and
Additional Shares held by the Investor have been redeemed by the Company
pursuant to Section 8.9 within ten (10) calendar days of the closing of such
subsequent offer or sale.
(b) The provisions of Section 8.4(a) will not apply to: (w) Common
Stock issued pursuant to Rule 144, provided the holder thereof is required to
hold such Common Stock for at least one year from the date of issuance; (x) a
secondary public offering of shares of Common Stock at market; (y) an offering
of convertible debentures or preferred stock at market or above; or (z) the
issuance of securities (other than for cash) in connection with a merger,
consolidation, sale of assets, disposition or the exchange of the capital stock
for assets, stock or other joint venture interests; and provided further, that
such securities would not be included in the Registration Statement relating to
the Initial Shares and a registration statement in respect of such stock shall
not be filed prior to sixty (60) days after the Effective Date.
8.5 Limitation on Issuance of Common Stock. If required by the
Principal Market on which the stock is listed, the Company shall not issue an
aggregate number of (i) Shares under this Agreement and (ii) shares of Common
Stock pursuant to the Warrant, that exceeds 19.9% of the shares of Common Stock
issued and outstanding on the date of the Initial Closing (the "Share
Limitation"). If, pursuant to this Agreement and the Warrant the Company
otherwise would be required to issue a number of shares of Common Stock that
exceeds the Share Limitation, then Purchaser shall have the right to require the
Company to redeem each Repriced Share for the Redemption Amount (as defined
below).
(i) the Company will take all steps reasonably necessary to be
in a position to issue Shares upon exercise of the Warrants without violating
the Share Limitation and (ii) if, despite taking such steps, the Company still
cannot issue such Shares without violating the Cap Regulations, the holder of
Initial Shares and Warrants shall have the option, excercisable in such holders'
sole and absolute discretion, to elect either of the following remedies:
16
(x) require the Company to issue Repricing Shares at a price
equal to the average of the closing bid price per share of Common Stock for the
last five (5) consecutive trading days during a Repricing Period (subject to
certain equitable adjustments for certain events occurring during such period);
or
(y) require the Company to redeem each Repriced Share for the
amount set forth in Paragraphs 2.3(d), 2.4(b), 2.5(b) or 2.6(b) as may be then
applicable.
8.6 Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the number of shares of Common Stock issuable as may be
required to issue the Repriced Shares.
8.7 Warrant. The Company agrees to issue to Purchaser at the
Closing, the Warrant for the number of shares of Common Stock equal to 20% of
the Purchase Price divided by the Initial Closing Price. The Warrant shall (i)
bear an exercise price per share of Common Stock equal to 120% of the Closing
Bid Price for the Business Day immediately prior to the Closing Date, and (ii)
be exercisable immediately upon issuance, and for a period of four (4) years
thereafter, with cashless exercise and registration rights.
8.8 Reimbursement. If (i) Purchaser, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholderr of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Purchaser is impleaded in any
such action, proceeding or investigation by any person, or (ii) Purchaser, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Purchaser is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Purchaser is a named party, the Company will pay to
Purchaser the charges, as reasonably determined by Purchaser, for the time of
any officers or employees of Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearing, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this Section 8.8 shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliates of Purchaser that are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of Purchaser and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Purchaser and any
such affiliate and any such person.
17
8.9 (i) Notwithstanding any other provision hereof to the contrary,
the Company shall have the right to redeem that portion of the Initial Shares
then held by Purchaser for which a relevant Repricing Period, other than the
Final Repricing Period, has not commenced by payment of cash for an amount (the
"Redemption Amount") equal to the Applicable Percentage (as defined below)
multiplied by the Initial Closing Price of the Initial Shares being redeemed.
(ii) The Company shall give ten (10) days' written notice of
such redemption to Purchaser (the "Notice of Redemption"). Anything in the
preceding provisions of this Section 8 to the contrary notwithstanding, the
Redemption Amount or any amount due under Paragraph 8.5 shall, unless otherwise
agreed to in writing by Purchaser after receiving the Notice of Redemption, be
paid to Purchaser in good funds on or before the tenth day from the date of the
Notice of Redemption.
(iii) Applicable Percentage ("Applicable Percentage") shall be
determined in accordance with the following schedule:
If the Redemption Payment Date is the Applicable Percentage is
--------------------------------- ----------------------------
between 1-60 days after the Closing Date 115%
between 61-120 days after the Closing Date 120%
between 121-180 days after the Closing Date 125%
between 181days after the Closing Date 130%
and the conclusion of the Final Repricing
Period
9. Transfer Agent Instructions.
9.1 Irrevocable Instructions. The Company will irrevocably instruct
its transfer agent to issue Repriced Shares from time to time in such amounts as
shall be specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 7 of this Agreement prior to
registration of the Shares under the Securities Act, registered in the name of
Purchaser or its nominee and in such denominations to be specified by Purchaser
in connection with each Closing. The Company warrants that no instruction other
than such instructions referred to in this Section 9 and stop transfer
instructions to give effect to Section 7 hereof prior to registration and sale
of the Shares under the Securities Act will be given by the Company to the
transfer agent and that the securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement, and applicable law. Nothing in
this Section 9 shall affect in any way Purchaser's obligations and agreement to
comply with all applicable securities laws upon resale of the Shares.
9.2 [Intentionally Omitted]
9.3 Transmission of Certificates. The Company will transmit the
certificates representing the unlegended securities ("Unlegended Shares") to be
issued to Purchaser via express
18
courier, by electronic transfer or otherwise, within three (3) Business Days
after receipt by the Company of the certificate representing the legended Common
Stock, and a representation by Purchaser that such shares have been sold in
accordance with the provisions of the Securities Act (the "Delivery Date").
9.4 Delay. The Company understands that a delay in the issuance of
the Unlegended Shares beyond the Delivery Date could result in economic loss to
Purchaser. On and after the Effective Date as compensation to Purchaser for such
loss, the Company agrees to pay late payments to Purchaser for late issuance of
Unlegended Shares in accordance with the following schedule (where "No. of Days
Late" is defined as the number of days beyond five (5) Business Days from
Delivery Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
---------------- -----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section 9.4 in
immediately available funds upon demand. Nothing herein shall limit Purchaser's
right to pursue actual damages for the Company's failure to issue and deliver
the Unlegended Shares to Purchaser, except to the extent that such late payments
shall constitute payment for and offset any such actual damages alleged by
Purchaser, and any Buy In Adjustment Amount (as defined below).
9.5 Cover. If the Company fails for any reason to deliver the
Unlegended Shares after such Delivery Date and the holder of the Initial Shares
(a "Holder") purchases, in an open market transaction or otherwise, shares of
Common Stock (the "Covering Shares") in order to make delivery in satisfaction
of a sale of Common Stock by such Holder (the "Sold Shares"), which delivery
such Holder anticipated to make using the Unlegended Shares (a "Buy-In"), then
the Company shall pay to such Holder, in addition to all other amounts
contemplated in other provisions of the Transaction Documents, and not in lieu
thereof, the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment
Amount" is the amount equal to the excess, if any, of (x) such Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by such
Holder from the
19
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
such Holder in immediately available funds immediately upon demand by such
Holder. By way of illustration and not in limitation of the foregoing, if such
Holder purchases Covering Shares having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock that it sold for net proceeds of $10,000, the Buy-In Adjustment
Amount that the Company will be required to pay to such Holder will be $1,000.
9.6 Electronic Transfer. In lieu of delivering physical certificates
representing the Unlegended Shares issuable upon conversion, provided the
Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, upon request of Purchaser
and its compliance with the provisions contained in this paragraph, so long as
the certificates therefor do not bear a legend and Purchaser thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock to Purchaser by crediting the account of Purchaser's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
9.7 The Company will authorize its transfer agent to give
information relating to the Company directly to the Purchaser or the Purchaser's
representatives upon the request of the Purchaser or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Purchaser, or (ii) the number of
outstanding shares of Common Stock of all stockholders as of a current or other
specified date. The Company will provide the Purchaser with a copy of the
authorization so given to the transfer agent.
10. Closing Date.
10.1 The closing of the issuance and sale of the Initial Shares
shall occur on the date (the "Closing Date"), which is the first Business Day
after the fulfillment or waiver of all closing conditions pursuant to Sections
11 and 12 hereof or such other date and time as is mutually agreed upon by the
Company and Purchaser.
10.2 Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Property only upon
satisfaction of the conditions set forth in Sections 11 and 12 hereof.
11. Conditions To The Company's Obligation To Sell.
Purchaser understands that the Company's obligation to sell the
Initial Shares on the Closing Date to Purchaser pursuant to this Agreement is
conditioned upon:
11.1 The receipt and acceptance by Purchaser of this Agreement as
evidenced by Purchaser's execution and delivery of this Agreement.
20
11.2 Delivery by Purchaser to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Initial Shares
in accordance with Section 1.2 hereof;
11.3 The accuracy on the Closing Date of the representations and
warranties of Purchaser contained in this Agreement as if made on the Closing
Date, and the performance by Purchaser on or before the Closing Date of all
covenants and agreements of Purchaser required to be performed on or before the
Closing Date;
11.4 There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
12. Conditions to Purchaser's Obligation to Purchase.
The Company understands that Purchaser's obligation to purchase the
Initial Shares on the Closing Date is conditioned upon:
12.1 Acceptance by the Company of this Agreement for the sale of the
Initial Shares, as indicated by the Company's execution and delivery of this
Agreement;
12.2 Delivery by the Company to the Escrow Agent of the Certificate
in accordance with this Agreement;
12.3 The accuracy in all material respects on the Closing Date of
the representations and warranties of the Company contained in this Agreement as
if made on the Closing Date and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date; and
12.4 On the Closing Date, Purchaser having received an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to Purchaser, to the effect set forth hereto, the
Registration Rights Agreement, the Warrant and the Additional Agreements.
12.5 No statute, rule, regulation, executive order, decree, ruling
or injunction shall be enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits or adversely
effects any of the transactions contemplated by the Transaction Documents, and
no proceeding or investigation shall have been commenced or threatened which may
have the effect of prohibiting or adversely effecting any of the transactions
contemplated by the Transaction Documents.
12.6 From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC,
or the NASD and trading in securities generally on the New York Stock Exchange
or NASDAQ shall not have been suspended or limited, nor shall minimum prices
have been established for securities traded on NASDAQ, nor
21
shall there be any outbreak or escalation of hostilities involving the United
States or any material adverse change in any financial market that in either
case in the reasonable judgment of Purchaser makes it impracticable or
inadvisable to purchase the Initial Shares, as the case may be.
13. General Provisions.
13.1 Assignment. Neither this Agreement nor any rights of Purchaser
hereunder may be assigned by either party to any other person without the prior
written consent of the Company.
13.2 Attorneys' Fees. In the event any dispute arises under this
Agreement or the documents or instruments executed and delivered in connection
with this Agreement, and the parties hereto resort to litigation to resolve such
dispute, the prevailing party in any such litigation, in addition to all other
remedies at law or in equity, shall be entitled to an award of costs and fees
from the other party, which costs and fees shall include, without limitation,
reasonable attorneys' fees and legal costs.
13.3 Choice of Law; Venue. This Agreement will be construed and
enforced in accordance with and governed by the laws of the State of Delaware
and the federal law of the United States without reference to principles of
conflicts of law. The parties agree that, in the event of any dispute arising
out this Agreement or the transactions contemplated thereby, venue for such
dispute shall be in the state or federal courts located in Wilmington, and that
each party hereto waives any objection to such venue based on forum non
conveniens.
13.4 Costs and Expenses. The parties shall be responsible for and
shall pay their own costs and expenses, including without limitation attorneys'
fees and accountants' fees and expenses, in connection with the conduct of the
due diligence inquiry, negotiation, execution and delivery of this Agreement and
the instruments, documents and agreements executed in connection with this
Agreement, except that the Company shall pay the legal and escrow fees of the
Purchaser in connection herewith.
13.5 Counterparts/Facsimile Signatures. This Agreement may be
executed in one or more counterparts, each of which when so signed shall be
deemed to be an original, and such counterparts together shall constitute one
and the same instrument. In lieu of the original, a facsimile transmission or
copy of the original shall be as effective and enforceable as the original.
13.6 Entire Agreement: Amendment. This Agreement, together with the
exhibits to this Agreement and the other instruments and documents delivered in
connection with this Agreement constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth in
this Agreement or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver,
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discharge or termination is sought.
13.7 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.8 Notices. All notices or other communications provided for under
this Agreement shall be in writing, and mailed, telecopied or delivered by hand
delivery or by overnight courier service, as follows:
If to the Company:
-----------------
Interactive Xxxxxxxxxxxx.Xxx, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxx 00000
Attention:
---------
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
23
With a copy to:
--------------
Hall Xxxxxxx Xxxx Xxxxxxxx & Xxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
---------
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
If to Purchaser:
---------------
YOUNG LLC
Xxxxxxx Xxxxx
0xx Xxxxx
P.O. Box 972
Road Town
British Virgin Island, Tortola
Tel No.: [[ ]]
-------
Fax No.: [[ ]]
-------
With a copy to:
--------------
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
---------
Tel No.: 000-000-0000
Fax No: 000-000-0000
All notices and communications shall be effective as follows: when mailed, upon
three (3) Business Days after deposit in the mail (postage prepaid); when
telecopied, upon confirmed transmission of the telecopied notice; when hand
delivered, upon delivery; and when sent by overnight courier, the next Business
Day after deposit of the notice with the overnight courier.
13.9 Publicity. The Company and Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Purchaser without the prior written consent of such Purchaser, except to the
extent required by law. Purchaser acknowledges that this Agreement and all or
part of the
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Transaction Documents may be deemed to be "material contracts" as that term is
defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore
be required to file such documents as exhibits to reports or registration
statements filed under the Securities Act or the Exchange Act. Purchaser further
agrees that the status of such documents and materials as material contracts
shall be determined solely by the Company, in consultation with its counsel.
13.10 Severability. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions of
this Agreement shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected thereby.
13.11 Survival of Representations And Warranties. The Company's
representations and warranties herein shall survive the execution and delivery
of this Agreement for one (1) year, and shall inure to the benefit of Purchaser
and its successors and assigns.
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IN WITNESS WHEREOF, the parties named below have caused this Agreement to
be executed, as of the date first above written.
PURCHASER:
YOUNG LLC
By:_________________________________________
Its:________________________________________
THE COMPANY:
-----------
INTERACTIVE XXXXXXXXXXXX.XXX, LTD.
By:__________________________________________
Xxxxxxx X. Xxxxxx, Chief Executive Officer
26