Exhibit 10.13
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of July 18, 2001 by
and among xXxxxx.xxx, Inc., a Delaware corporation with offices located at 000
Xxxxxxx 00, Xxxxxxx, XX 00000 (the "COMPANY"), and the undersigned investor (the
"INVESTOR").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $5,000,000 to
purchase the Company's Class A common stock, $.001 par value per share (the
"COMMON STOCK");
WHEREAS, such investments will be made in reliance upon registration
under the Securities Act of 1933, as may be amended (the "1933 ACT").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act, and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings specified orindicated, and such meanings shall
be equally applicable to the singular and plural forms of the defined
terms."1933 ACT" shall mean the Securities Act of 1933, as it may be amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as it may be amended.
"AFFILIATE" shall have the meaning specified in Section 5(h).
"AGREED UPON PROECEDURES REPORT" shall have the meaning specified in Section
2(o).
"AGREEMENT" shall mean this Investment Agreement.
"BUY-IN" shall have the meaning specified in Section 6.
"BUY-IN ADJUSTMENT AMOUNT" shall have the meaning specified in Section 6.
"CLOSING" shall have the meaning specified in Section 2(h).
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"CLOSING DATE" shall mean, as defined in Section 2(h), the date which is five
(5) Trading Days following the expiration of the related Purchase Period (or
such other time or later date as is mutually agreed to by the Company and the
Investor).
"COMMON STOCK" shall mean the Class A Common Stock, par value $.001 per share,
of the Company.
"CONTROL" or "CONTROLS" shall have the meaning specified in Section 5(h).
"COVERING SHARES" shall have the meaning specified in Section 6.
"DOLLAR AMOUNT" shall mean the Dollar Amount of shares of common stock the
Company requests Investor to purchase.
"EFFECTIVE DATE" shall mean the date the SEC declares effective the Registration
Statement covering the transactions described in the Agreement.
"ENVIRONMENTAL LAWS" shall have the meaning specified in Section 4(m).
"ESCROW AGENT" shall mean Xxxxxx X. XxXxxxx.
"ESCROW AGREEMENT" shall mean the Escrow Agreement entered into between the
Company, Investor and Escrow Agent and attached as Exhibit F.
"EXECUTION DATE" shall mean the date all Transaction Documents are executed by
the Company and Investor.
"INDEMNITEES" shall have the meaning specified in Section 10.
"INDEMNIFIED LIABILITIES" shall have the meaning specified in Section 10.
"INEFFECTIVE PERIOD" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use for
the sale or resale, as applicable, of any or all of the Registrable Securities
(as defined in the Registration Rights Agreement) for any reason (or in the
event the prospectus under either of the above is not current and deliverable)
during any time period required under the Registration Rights Agreement.
"MAJOR TRANSACTION" shall have the meaning specified in Section 2(g).
"MATERIAL ADVERSE EFFECT" shall have the meaning specified in Section 4(a).
"MATERIAL FACTS" shall have the meaning specified in Section 2(m).
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"MAXIMUM COMMON STOCK ISSUANCE" shall have the meaning specified in Section
2(j).
"MAXIMUM PUT AMOUNT" shall mean the lesser of (a) 150% of the Volume Weighted
Average Price for the thirty (30) Trading Day period prior to the Put Notice
Date or $2,000,000.
"OPEN PERIOD" shall mean the period beginning on and including the Trading Day
immediately following the Effective Date and ending on the earlier of (i) the
date which is eighteen (18) months from the Effective Date and (ii) termination
of the Agreement in accordance with Section 9.
"Partial Release Form" shall have the meaning set forth in Section 2(i).
"PAYMENT AMOUNT" shall have the meaning specified in Section 2(p).
"PRINCIPAL MARKET" shall have the meaning specified in Section 2(f).
"PROSPECTUS" shall mean the prospectus, preliminary prospectus and supplemental
prospectus used in connection with the Registration Statement.
"PURCHASE AMOUNT" shall mean the amount being paid by Investor on a particular
Closing Date to purchase the Shares.
"PURCHASE PERIOD" shall mean the period beginning on the Put Notice Date and
ending on and including the date which is ten (10) Trading Days after such Put
Notice Date.
"PURCHASE PRICE" shall mean 92% of the average of the lowest three (3) closing
bid prices of the Company's common stock during the specified Purchase Period.
"PUT NOTICE" shall mean a written notice sent to the Investor by the Company
stating the Dollar Amount of Shares the Company intends to sell to the Investor
pursuant to the terms of the Agreement and stating the current number of Shares
issued and outstanding on such date.
"PUT NOTICE DATE" shall mean the Trading Day immediately following the day on
which the Investor receives a Put Notice, however a Put Notice shall be deemed
delivered on (x) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 12:00 noon Eastern Time (receipt
being deemed to occur if the Company possess a facsimile confirmation showing
completed transmission by such time), or (y) the immediately succeeding Trading
Day if it is received by facsimile or otherwise after 12:00 noon Eastern Time on
a Trading Day (receipt being documented as described in (x) above). No Put
Notice may be deemed delivered on a day that is not a Trading Day.
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"REGISTRATION OPINION" shall have the meaning specified in Section 2(m).
"REGISTRATION OPINION DEADLINE" shall mean the date that is three (3) Trading
Days prior to each Put Notice Date.
"REGISTRATION PERIOD" shall have the meaning specified in Section 5(c).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Agreement entered into by the
Company with Investor for the registration of this transaction.
"REGISTRATION STATEMENT" means the registration statement of the Company filed
under the 1933 Act covering this transaction.
"RELATED PARTY" shall have the meaning specified in Section 5(h).
"REPURCHASE EVENT" shall have the meaning specified in Section 2(p).
"REPURCHASE OPTION" shall have the meaning specified in Section 2(p).
"RESOLUTION" shall have the meaning specified in Section 8(f).
"SEC" shall mean the Securities & Exchange Commission.
"SEC DOCUMENTS" shall have the meaning specified in Section 4(f).
"SECURITIES" shall mean the shares of common stock and warrants issued pursuant
to the terms of the Agreement.
"SHARES" shall mean the shares of Class A common stock of the Company having a
par value of $.001 per share.
"SIGNING WARRANT" shall have the meaning specified in Section 2(c)(i).
"SOLD SHARES" shall have the meaning specified in Section 6.
"SUBSIDIARIES" shall have the meaning specified in Section 4(a).
"TRADING DAY" shall mean any day on which the Principal Market for the Company's
common stock is open for trading.
"TRANSACTION DOCUMENTS" shall mean the Agreement, Registration Rights Agreement,
Escrow Agreement, Warrants and each of the other agreements entered into by the
parties hereto in connection with the Agreement.
"VALUATION EVENT" shall have the meaning specified in Section 2(k).
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"VOLUME WEIGHTED AVERAGE PRICE" on any given Trading Day shall mean the product
of that Trading Day's trading volume and that Trading Day's average trade price
of the Company's common stock on the Principal Market, which volume and average
trade price shall be as reported by Bloomberg Financial Markets ("BLOOMBERG"),
or if not available through Bloomberg because of delisting, then the average of
the bid prices of any market makers for the Company's Common Stock as reported
in the "pink sheets" by the National Quotation Bureau, Inc.
2. PURCHASE AND SALE OF COMMON STOCK
a. Purchase and Sale of Common Stock. Upon the terms and conditions set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of $5,000,000.
b. Delivery of Put Notices. Subject to the terms and conditions of the
Transaction Documents, and from time to time during the Open Period the Company
may, in its sole discretion, deliver a Put Notice to the Investor which states
the Dollar Amount of Shares which the Company intends to sell to the Investor
during the Purchase Period. In addition, the Dollar Amount designated by the
Company in a Put Notice shall be in increments of not less than $50,000 and not
more $2,000,000, subject to a waiver of such minimum and maximum amounts as
mutually agreed upon by the Company and the Investor. Once the Put Notice is
received by the Investor the Put Notice shall not be terminated, withdrawn or
otherwise revoked by the Company. During the Open Period, the Company shall not
be entitled to submit a Put Notice until after the previous closing has been
completed. The Company shall not be entitled to issue a Put Notice to Investor
for more than the Maximum Put Amount. The amount that the Company is able to
draw down can be increased or decreased if mutually agreed upon by both parties
in writing. The Purchase Price shall be 92% of the average of the lowest three
(3) closing bid prices of the Common Stock during the Purchase Period.
Within ten (10) calendar days after the commencement of each calendar
quarter occurring subsequent to the commencement of the Open Period, the Company
undertakes to notify Investor as to its reasonable expectations as to the Dollar
Amount it intends to raise during such calendar quarter, if any, through the
issuance of Put Notices. Such notification shall constitute only the Company's
good faith estimate with respect to such calendar quarter and shall in no way
obligate the Company to raise such amount during such calendar quarter or
otherwise limit its ability to deliver Put Notices during such calendar quarter.
The failure by the Company to comply with this provision can be cured by the
Company's notifying Investor at any time as to its reasonable expectations with
respect to the current calendar quarter.
c. Warrants.
(i) Signing Warrant.On the Execution Date, the Company shall
issue to the Investor, or its designee, a three year warrant
("SIGNING
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WARRANT") to purchase 450,000 Shares with an exercise price equal
to the lesser of (x) 115% of the average closing bid price for
the thirty (30) Trading Days immediately preceding the Execution
Date or (y) the closing bid price on the 180th calendar day
following the Execution Date (or the next Trading Day if such
date is not a Trading Day) or (z) the closing bid price on the
360th calendar day following the Execution Date (or the next
Trading Day if such date is not a Trading Day). The Signing
Warrant will be immediately exercisable on a cash or cashless
basis, at the Investor's option.
(ii) Minimum Draw Down. If the Company does not draw down a
minimum of $500,000 within 180 calendar days of the Execution
Date, then the Company shall pay Investor in cash or free-trading
common stock, at the Company's option, an amount equal to five
percent (5%)of the undrawn minimum amount.
If the Company fails to pay to the Investor such amount or
deliver the free-trading common stock when due, the Company shall
pay to the Investor in cash, interest at the rate of twenty-four
percent (24%) per annum, as liquidated damages, (or if such rate
is in excess of the highest rate allowed by applicable law, the
highest allowable rate), which amount shall accrue on the unpaid
amount until paid in full..
If the Company sells any Common Stock or securities convertible into
Common Stock during the Open Period, other than Common Stock being issued
pursuant to this Agreement, at a price lower than the exercise price of the
Signing Warrant, the exercise price of the Signing Warrant, shall be adjusted
downward accordingly.
The Company acknowledges that its failure to issue the Signing Warrant
and make payment to the investor when due will cause the Investor to suffer
damages in an amount that will be difficult to ascertain. Accordingly, the
parties agree that it is appropriate to include in this Agreement a provision
for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to quantify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Signing Warrant pursuant to the terms of this Agreement.
It is the intention of the parties that interest payable under this
Agreement shall not exceed the maximum amount permitted under any applicable
law. If a law, which applies to this Agreement which sets the maximum interest
amount, is finally interpreted so that the interest in connection with this
Agreement exceeds the permitted limits, then: (1) any such interest shall be
reduced by the amount necessary to reduce the interest to the permitted limit;
and (2) any sums already collected (if any) from the Company which exceed the
permitted limits will be refunded to the Company. The Investor may choose to
make this refund by reducing the amount that the Company owes under this
Agreement or by making a direct payment to the Company. If a refund
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reduces the amount that the Company owes the Investor, the reduction will be
treated as a partial payment. In case any provision of this Agreement is held by
a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Agreement will
not in any way be affected or impaired thereby.
d. Investor's Obligation to Purchase Shares. Subject to the conditions
set forth in this Agreement, following the Investor's receipt of a validly
delivered Put Notice, the Investor shall be required to purchase from the
Company during the related Purchase Period that number of Shares having an
aggregate Purchase Price equal to the lesser of (i) the Dollar Amount set forth
in the Put Notice (subject to reduction during the Purchase Period as may be
provided pursuant to the terms of this Agreement), and (ii) 15% of the total
Volume Weighted Average Price during the applicable Purchase Period, but only if
said Shares bear no restrictive legend, are not subject to stop transfer
instructions and are being held in escrow, pursuant to Section 2(h), prior to
the applicable Closing Date.
e. Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the Investor be required to purchase, and the Company shall in no event sell to
the Investor, that number of Shares, which when added to the sum of the number
of Shares beneficially owned, (as such term is defined under Section 13(d) and
Rule 13d-3 of the Securities Exchange Act of 1934, as may be amended, (the "1934
ACT")), by the Investor, would exceed 4.99% of the number of Shares outstanding
on the Put Notice Date for such Purchase Period, as determined in accordance
with Rule 13d-1(j) under the 1934 Act. In no event shall the Investor purchase
Shares of the Common Stock other than pursuant to this Agreement until such date
as this Agreement is terminated. Each Put Notice shall include a representation
of the Company as to the number of Shares of Common Stock outstanding on the
related Put Notice Date as determined in accordance with Section 13(d) of the
1934 Act. In the event that the number of Shares of Common Stock outstanding as
determined in accordance with Section 13(d) of the 1934 Act is different on any
date during a Purchase Period than on the Put Notice Date associated with such
Purchase Period, then the number of Shares of Common Stock outstanding on such
date during such Purchase Period shall govern for purposes of determining
whether the Investor would be acquiring beneficial ownership of more than 4.99%
of the number of Shares of Common Stock outstanding during such period.
f. Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the Company shall
not be entitled to deliver a Put Notice and require the Investor to purchase any
Shares at a Closing (as defined in Section 2(h)) unless each of the following
conditions are satisfied:
(i) a Registration Statement shall have been declared effective
and shall remain effective and available for the resale of all
the Registrable Securities (as defined in the Registration Rights
Agreement) at all times during the Purchase Period;
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(ii) at all times during the period beginning on the related Put
Notice Date and ending on and including the related Closing Date,
the Common Stock shall have been listed on The American Stock
Exchange, Inc. or The New York Stock Exchange, Inc. or designated
on the Nasdaq National Market, The Nasdaq SmallCap Market, or if
mutually agreed upon by the Company and Investor, the National
Association of Securities Dealer's, Inc. OTC electronic bulletin
board (the "PRINCIPAL MARKET") and shall not have been suspended
from trading thereon for a period of five (5) consecutive Trading
Days during the Open Period and the Company shall not have been
notified of any pending or threatened proceeding or other action
to delist or suspend the Common Stock;
(iii) the Company has complied with its obligations and is
otherwise not in breach of a material provision, or in default
under, this Agreement, the Registration Rights Agreement or any
other agreement executed in connection herewith which has not
been corrected prior to delivery of the Put Notice Date;
(iv) no injunction shall have been issued, or action commenced by
a governmental authority, prohibiting the purchase or the
issuance of the Common Stock; and
(v) the issuance of the Common Stock will not violate the
shareholder approval requirements of Nasdaq.
If any of the events described in clauses (i) through (v) above
occurs during a Purchase Period, then the Investor shall have no
obligation to purchase the Dollar Amount of Common Stock set
forth in the applicable Put Notice.
g. For purposes of this Agreement, a "MAJOR TRANSACTION" shall be deemed
to have occurred at the closing of any of the following events: (i) the
consolidation, merger or other business combination of the Company with or into
another person (other than pursuant to a migratory merger effected solely for
the purposes of changing the jurisdiction of incorporation of the Company) (ii)
the sale or transfer of all or substantially all of the Company's assets; or
(iii) the consummation of a purchase, tender or exchange offer made to, and
accepted by, the holders of more than 30% of the economic interest in, or the
combined voting power of all classes of voting stock of, the Company.
h. Mechanics of Purchase of Shares by Investor. Subject to the
satisfaction of the conditions set forth in Sections 2(f), 7 and 8, the closing
of the purchase by the Investor of Shares (a "CLOSING") shall occur on the date
which is five (5) Trading Days following the expiration of the related Purchase
Period (or such other time or later date as is mutually agreed to by the Company
and the Investor) (a "CLOSING DATE"). Prior to
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each Closing Date, (i) the Company shall deliver to the Escrow Agent pursuant to
the Escrow Agreement, annexed hereto as Exhibit F, certificates representing the
Shares to be issued to the Investor on such date and registered in the name of
the Investor, or in street name as may be requested by Investor, or deposit such
Shares into the account(s) (with the Investor receiving confirmation that the
Shares are in such account(s)) designated by the Investor for the benefit of the
Investor and (ii) the Investor shall deliver to the Escrow Agent the Purchase
Price to be paid for such Shares (after receipt of confirmation of delivery of
such Shares), determined as aforesaid, by wire transfer. In the alternative to
physical delivery of certificates for Common Stock to the Escrow Agent, if
delivery of the Shares may be effectuated by electronic book-entry through The
Depository Trust Company ("DTC"), then delivery of the Shares pursuant to such
purchase shall, unless requested otherwise by such Investor (or holder of such
Shares), settle by book-entry transfer through DTC by the Closing Date. The
parties agree to coordinate with DTC to accomplish this objective. In addition,
each of the Company and the Investor shall deliver all documents, instruments
and writings required to be delivered by either of them to the Escrow Agent
pursuant to this Agreement at or prior to each Closing.
The number of Shares to be delivered to the Escrow Agent shall be the
result of the following formula:
The Dollar Amount of the Put Notice_____________
-------------------------------------------------------------
92% of the average of the lowest three (3) closing bid prices of the
Company's common stock during the specified Purchase Period
i. As provided in the Escrow Agreement, after Investor's receipt of a
Put Notice, but prior to the related Closing Date, the Investor, at its sole
option, may authorize the Escrow Agent to release, every three (3) Trading Days,
a portion of the Purchase Amount from escrow to the Company in exchange for a
fixed number of Shares, subject to the following conditions:
(i) The Investor shall fill out and sign a Partial Release of
Purchase Amount and Shares from Escrow (the "Partial
Release Form"). The Partial Release Form shall set forth
the number of Shares to be released to Investor and the
dollar amount the Escrow Agent shall wire to the Company.
(ii) The Partial Release Form shall be filled out and signed by
the Investor and faxed to the Company and the Escrow Agent
prior to 12:00 p.m. New York City time.
The number of Shares stated in the Partial Release Form shall be equal
to the dollar amount to be released divided by 92% of the average of the three
(3) lowest closing bid prices during that number of Trading Days in the Purchase
Period that have expired, but if less than three Trading Days have expired prior
to receipt by the Company of the Partial Release Form, then the lowest closing
bid price for that number of days shall be used.
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The Company and Investor agree that on the related Closing Date, an
adjustment shall be made so that the terms set forth in the Investment Agreement
shall be honored with the balance of the Purchase Price being released to the
Company and the balance of Shares owed to Investor being released to Investor.
j. Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, if the Company is no longer listed on the OTC
electronic bulletin board, the number of Shares issuable by the Company and
purchasable by the Investor including the shares of Common Stock issuable in
connection with the Signing Warrant issuable hereunder, shall not exceed 19.99%
of the shares of Common Stock outstanding as of the date hereof, subject to
appropriate adjustment for stock splits, stock dividends, combinations or other
similar recapitalization affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of Shares, including any Common Stock to be
issued in connection with Signing Warrant that may be issuable hereunder, in
excess of the Maximum Common Stock Issuance shall first be approved by the
Company's shareholders in accordance with applicable law and the By-laws and
Articles of Incorporation of the Company, if such issuance of shares of Common
Stock could cause a delisting on the Principal Market. Without limiting the
generality of the foregoing, such shareholders' approval must duly authorize the
issuance by the Company of shares of Common Stock totaling 19.99% or more of the
shares of Common Stock outstanding on the date hereof. The parties understand
and agree that the Company's failure to seek or obtain such shareholder approval
shall in no way adversely affect the validity and due authorization of the
issuance and sale of Shares hereunder or the Investor's obligation in accordance
with the terms and conditions hereof to purchase a number of Shares in the
aggregate up to the Maximum Common Stock Issuance limitation, and that such
approval pertains only to the applicability of the Maximum Common Stock Issuance
limitation provided in this Section 2(j).
k. "VALUATION EVENT" shall mean an event in which the Company at any
time during a "Purchase Period" takes any of the following actions:
(i) subdivides or combines its Common Stock;
(ii) pays a dividend in Common Stock or makes any other
distribution of its Common Stock, except for dividends
paid with respect to the Preferred Stock;
(iii) issues any options or other rights to subscribe for or
purchase Common Stock and the price per share for which
Common Stock may at any time thereafter be issuable
pursuant to such options or other rights shall be less
than the Bid Price in effect immediately prior to such
issuance, except for stock options issued to employees
under the Company's stock option plan;
(iv) issues any securities convertible into or exchangeable for
Common Stock and the consideration per share for which
shares of Common Stock may at any time thereafter be
issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than
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the Bid Price in effect immediately prior to such
issuance;
(v) issues shares of Common Stock otherwise than as provided
in the foregoing subsections (i) through (iv), at a price
per share less, or for other consideration lower, than the
Bid Price in effect immediately prior to such issuance, or
without consideration;
(vi) makes a distribution of its assets or evidences of
indebtedness to the holders of Common Stock as a dividend
in liquidation or by way of return of capital or other
than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or
any distribution to such holders made in respect of the
sale of all or substantially all of the Company's assets
(other than under the circumstances provided for in the
foregoing subsections (i) through (v); or
(vii) takes any action affecting the number of shares of Common
Stock outstanding, other than an action described in any
of the foregoing subsections (i) through (vi) hereof,
inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a
materially adverse effect upon the rights of Investor at
the time of a Put Notice is delivered to Investor.
l. The Company agrees that it shall not take any action that would
result in a Valuation Event occuring during a Purchase Period.
m. Accountant's Letter and Registration Opinion. The Company shall cause
to be delivered to the Investor, (i) whenever required by Section 2(h) or by
Section 2(o), and (ii) on or prior to each Registration Opinion Deadline, an
opinion of the Company's independent counsel, (the "REGISTRATION OPINION"),
addressed to the Investor stating, inter alia, that no facts ("MATERIAL FACTS")
have come to such counsel's attention that have caused it to believe that the
Registration Statement is subject to an Ineffective Period or to believe that
the Registration Statement, any supplemental Registration Statement (as each may
be amended, if applicable), and any related prospectuses, contain an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. If a Registration Opinion cannot be delivered by the
Company's independent counsel to the Investor on the Registration Opinion
Deadline due to the existence of Material Facts or an Ineffective Period, the
Company shall promptly notify the Investor and as promptly as possible amend
each of the Registration Statement and any supplemental Registration Statements,
as applicable, and any related prospectus or cause such Ineffective Period to
terminate, as the case may be, and deliver such Registration Opinion and updated
prospectus as soon as possible thereafter. If at any time after a Put Notice
shall have been delivered to Investor but before the related Closing Date, the
Company acquires knowledge of such Material Facts or any Ineffective Period
occurs, the Company shall promptly notify the Investor and Investor, at
Investor's sole option, shall be entitled to cancel that entire Put Notice by
facsimile notice to the Company on or before the related Closing Period.
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n. (i) The Company shall engage its independent auditors to perform the
procedures in accordance with the provisions of Statement on Auditing Standards
No. 71, as amended, as agreed to by the parties hereto, and reports thereon (the
"BRING DOWN COLD COMFORT LETTERS") as shall have been reasonably requested by
the Investor with respect to certain financial information contained in the
Registration Statement and shall have delivered to the Investor such a report
addressed to the Investor, on or prior to each Registration Opinion Deadline;
(ii) in the event that the Investor shall have requested delivery
of an Agreed Upon Procedures Report pursuant to Section 2(o), the Company shall
engage its independent auditors to perform certain agreed upon procedures and
report thereon as shall have been reasonably requested by the Investor with
respect to certain financial information of the Company and the Company shall
deliver to the Investor a copy of such report addressed to the Investor. In the
event that the report required by this Section 2(n) cannot be delivered by the
Company's independent auditors, the Company shall, if necessary, promptly revise
the Registration Statement and the Company shall not deliver a Put Notice to
Investor until such report is delivered.
o. Procedure if Material Facts are Reasonably believed to be untrue or
are omitted. In the event after such consultation the Investor or the Investor's
counsel reasonably believes that the Registration Statement contains an untrue
statement or a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading,
(i) the Company shall file with the SEC an amendment to the Registration
Statement responsive to such alleged untrue statement or omission and provide
the Investor, as promptly as practicable, with copies of the Registration
Statement and related Prospectus, as so amended, or (ii) if the Company disputes
the existence of any such material misstatement or omission, (x) the Company's
independent counsel shall provide the Investor's counsel with a Registration
Opinion and (y) in the event the dispute relates to the adequacy of financial
disclosure and the Investor shall reasonably request, the Company's independent
auditors shall provide to the Company a letter ("Agreed Upon Procedures Report")
outlining the performance of such "agreed upon procedures" as shall be
reasonably requested by the Investor and the Company shall provide the Investor
with a copy of such letter.
p. Delisting; Suspension. If at any time during the Open Period or
within thirty (30) calendar days after the end of the Open Period, (i) the
Registration Statement, after it has been declared effective, shall not remain
effective and available for sale of all the Registrable Securities, (ii) the
Common Stock shall not be listed on the Principal Market or shall have been
suspended from trading thereon (excluding suspensions of not more than one
trading day resulting from business announcements by the Company) or the Company
shall have been notified of any pending or threatened proceeding or other action
to delist or suspend the Common Stock, (iii) there shall have occurred a Major
Transaction (as defined in Section 2(g)) or the public announcement of a pending
Major Transaction which has not been abandoned or terminated, or (iv) the
Registration Statement is no longer effective or stale for a period of more than
five (5) Trading Days
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as a result of the Company to timely file its financials, the Investor shall
have the right (the "REPURCHASE OPTION"), as partial relief for the damages to
the Investor by reason of the occurrence of the events listed in clauses (i),
(ii), (iii) or (iv)above (which remedy shall not be exclusive of any other
remedies available at law or equity), in its sole discretion, which right shall
be exercised within thirty (30) calendar days of such event or occurrence (a
"REPURCHASE EVENT"), to sell to the Company, and the Company agrees to buy,
promptly upon the exercise of such right by the Investor, but in any event
within ten (10) calendar days of the exercise of such right, and subject to the
limitations imposed by applicable federal and state law, all or any part of the
Shares issued to the Investor within the sixty (60) Trading Days preceding the
Investor's exercise of the Repurchase Option and then held by the Investor at a
price per Share equal to the highest Volume Weighted Average Price during the
period beginning on the date of the Repurchase Event and ending on and including
the date on which the Investor exercises its Repurchase Option (the "PAYMENT
AMOUNT"). If the Company fails to pay to the Investor the full aggregate Payment
Amount within ten (10) calendar days of the Investor's exercise of the
Repurchase Option hereunder, the Company shall pay to the Investor, on the first
Trading Day following such tenth (10th) calendar day, in addition to and not in
lieu of the Payment Amount payable by the Company to the Investor upon exercise
of the Repurchase Option, an amount equal to 2% of the aggregate Payment Amount
then due and payable to the Investor, in cash by wire transfer, plus compounded
annual interest of 18% on such Payment Amount during the period, beginning on
the day following such tenth calendar day, during which such Payment Amount, or
any portion thereof, is outstanding.
3. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants to the Company that:
a. Sophisticated Investor. The Investor has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities.
b. Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies..
c. Section 9 of the 1934 Act. During the Open Period, the Investor will
comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
d. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the Articles of
13
Incorporation or the By-laws or (ii) conflict with, or constitute a material
default (or an event which with notice or lapse of time or both would become a
material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract, indenture
mortgage, indebtedness or instrument to which the Investor or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree applicable to the Investor or any of its Subsidiaries
or by which any property or asset of the Investor or any of its Subsidiaries is
bound or affected. The business of the Investor and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, statute,
ordinance, rule, order or regulation of any governmental authority or agency,
regulatory or self-regulatory agency, or court, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, the Company
represents and warrants to the Investor that:
a. Organization and Qualification. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest) (a complete list of which is set forth in Schedule 4(a)) are
corporations duly organized and validly existing in good standing under the laws
of the respective jurisdictions of their incorporation, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations, financial condition or prospects of the
Company and its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined in Section 1 and
4(b)below).
b. Authorization; Enforcement; Compliance with Other Instruments. (i)
The Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the Escrow Agreement,
the Signing Warrant, and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue the Shares
and the Signing Warrant in accordance with the terms hereof and thereof, (ii)
the execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance and the issuance of
the Shares and the Signing Warrant pursuant to this Agreement, have been duly
and validly authorized by the Company's Board of Directors
14
and no further consent or authorization is required by the Company, its Board of
Directors, or its shareholders, (iii) the Transaction Documents have been duly
and validly executed and delivered by the Company, and (iv) the Transaction
Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 150,000,000 shares of Class A Common Stock, of
which as of the date hereof, 110,236,548 shares are issued and outstanding,
700,000 shares of Class B Common Stock, of which as of the date hereof, 364,400
shares are issued and outstanding, -0- shares of Preferred Stock and
approximately 13,681,176 (as of April 3, 2001) shares of Common Stock are
issuable upon the exercise of options, warrants and conversion rights. All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except as disclosed in Schedule 4(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding shares of capital stock, 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 any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries 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 or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement),
(v) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement, (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement and (viii) there is no dispute as to
the class of any shares of the Company's capital stock. The Company has
furnished to the Investor, or the Investor has had access through XXXXX to, true
and correct copies of the Company's Articles of Incorporation, as in effect on
the date hereof (the "ARTICLES OF INCORPORATION"), and the Company's By-laws, as
in effect on the date hereof (the "BY-LAWS `), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
15
d. Issuance of Shares. A sufficient number of Shares issuable pursuant
to this Agreement, but not more than 19.99% of the shares of Common Stock
outstanding as of the date hereof, to the extent that the provisions of Section
2(j) are applicable hereunder, has been duly authorized and reserved for
issuance (subject to adjustment pursuant to the Company's covenant set forth in
Section 5(f) below) pursuant to this Agreement. Upon issuance in accordance with
this Agreement, the Securities will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof. In the event the Company cannot register a sufficient number of
Shares, due to the remaining number of authorized shares of Common Stock being
insufficient, the Company will use its best efforts to register the maximum
number of shares it can based on the remaining balance of authorized shares and
will use its best efforts to increase the number of its authorized shares as
soon as reasonably practicable.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including United States federal and state securities laws and
regulations and the rules and regulations of the Principal Market or principal
securities exchange or trading market on which the Common Stock is traded or
listed) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 4(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, the Articles
of Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or their
organizational charter or by-laws, respectively, or any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not individually or in
the aggregate have a Material Adverse Effect. The business of the Company and
its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or self-regulatory agency, or
court, except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act, the Company is not required to obtain any consent, authorization,
permit or order of, or make any filing or registration (except the filing of a
registration statement) with, any court, governmental authority or agency,
regulatory or self-regulatory agency or other third party in order for it to
execute, deliver or perform any of its obligations under, or contemplated by,
the Transaction Documents in accordance with the terms
16
hereof or thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal Market as in
effect on the date hereof and on each of the Closing Dates and is not aware of
any facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since February 1999, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
1934 Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Investor or its representatives,
or they have had access through XXXXX, true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, 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 exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 4(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Investor
with any material, nonpublic information which was not publicly disclosed prior
to the date hereof and any material, nonpublic information provided to the
Investor by the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by the
Company prior to such Closing Date.
17
g. Absence of Certain Changes. Except as disclosed in Schedule 4(g) or
the SEC Documents filed at least five (5) days prior to the date hereof, since
June 1, 2000, there has been no change or development in the business,
properties, assets, operations, financial condition, results of operations or
prospects of the Company or its Subsidiaries which has had or reasonably could
have a Material Adverse Effect. 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 or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in Schedule 4(h), there is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
i. Acknowledgment Regarding Investor's Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investor's purchase of the Securities. The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or Circumstances. No
event, liability, development or circumstance has occurred or exists, or to its
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
k. Employee Relations. Neither the Company nor any of its Subsidiaries
is involved in any union labor dispute nor, to the knowledge of the Company or
any of its Subsidiaries, is any such dispute threatened. Neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the 0000 Xxx) has
notified the Company that such officer
18
intends to leave the Company's employ or otherwise terminate such officer's
employment with the Company.
l. Intellectual Property Rights. The Company and its Subsidiaries own or
possess 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 authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth on Schedule 4(l), 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
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two years
from the date of this Agreement. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule 4(l), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
m. Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
n. Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 4(n) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the
19
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.
o. Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
p. Regulatory Permits. The Company and its Subsidiaries have in full
force and effect all certificates, approvals, authorizations and permits from
the appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
q. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls 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.
r. No Materially Adverse Contracts, Etc. Neither the Company nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
s. Tax Status. The Company and each of its Subsidiaries has made or
filed all United States federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount,
20
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and has set aside on its books provision
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.
t. Certain Transactions. Except as set forth on Schedule 4(t) and in the
SEC Documents filed at least ten days prior to the date hereof 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 disclosed on
Schedule 4(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(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.
u. Dilutive Effect. The Company understands and acknowledges that the
number of shares of Common Stock issuable upon purchases pursuant to this
Agreement will increase 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 Open
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, subject to such limitations as are expressly set forth in the
Transaction Documents, its obligation to issue shares of Common Stock upon
purchases pursuant to this Agreement is absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interests of
other shareholders of the Company.
5. COVENANTS OF THE COMPANY
a. Best Efforts. The Company shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Section 7 of
this Agreement.
b. Blue Sky. The Company shall, at its sole cost and expense, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Investor at each of the Closings
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
such states of the United States, as specified by Investor,
21
and shall provide evidence of any such action so taken to the Investor on or
prior to the Closing Date. The Company shall, at its sole cost and expense, make
all filings and reports relating to the offer and sale of the Securities
required under the applicable securities or "Blue Sky" laws of such states of
the United States following each of the Closing Dates.
c. Reporting Status. Until the earlier of (i) the first date which is
after the date this Agreement is terminated pursuant to Section 9 and on which
the Holders (as that term is defined in the Registration Rights Agreement) may
sell all of the Securities acquired pursuant to this Agreement without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Holders shall have sold all the
Securities issuable hereunder and (B) this Agreement has been terminated
pursuant to Section 9 (the "REGISTRATION PERIOD"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as a reporting company under the 1934
Act.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Shares (excluding amounts paid by the Company for legal fees,
finder's fees and escrow fees) for general corporate and working capital
purposes.
e. Financial Information. The Company agrees to make available to the
Investor via XXXXX or other electronic means the following to the Investor
during the Registration Period: (i) within five (5) Trading Days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
Registration Statements or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries, (iii) copies of any notices
and other information made available or given to the shareholders of the Company
generally, contemporaneously with the making available or giving thereof to the
shareholders and (iv) within two (2) calendar days of filing or delivery
thereof, copies of all documents filed with, and all correspondence sent to, the
Principal Market, any securities exchange or market, or the National Association
of Securities Dealers, INC.
f. Reservation of Shares. Subject to the following sentence, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the issuance of the Securities hereunder. In the event that the
Company determines that it does not have a sufficient number of authorized
shares of Common Stock to reserve and keep available for issuance as described
in this Section 5(f), the Company shall use its best efforts to increase the
number of authorized shares of Common Stock by seeking shareholder approval for
the authorization of such additional shares.
g. Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
the Principal Market and each other national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official
22
notice of issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Registrable Securities from time
to time issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock's authorization for quotation on the Principal Market,
unless the Investor and the Company agree otherwise. Neither the Company nor any
of its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market (excluding suspensions of not more than one trading day resulting from
business announcements by the Company). The Company shall promptly provide to
the Investor copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 5(g).
h. Transactions With Affiliates. The Company shall not, and shall cause
each of its Subsidiaries not to, enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two years, shareholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "RELATED PARTY"),
except for (i) customary employment arrangements and benefit programs on
reasonable terms, (ii) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (iii) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company, or (iv) loans made by Xxxxxx Xxxxxxx,
Chief Executive Officer of the Company, to the Company for working capital
needs. For purposes hereof, any director who is also an officer of the Company
or any Subsidiary of the Company shall not be a disinterested director with
respect to any such agreement, transaction, commitment or arrangement.
"AFFILIATE" for purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a 5% or more
equity interest in that person or entity, (ii) has 5% or more common ownership
with that person or entity, (iii) controls that person or entity, or (iv) shares
common control with that person or entity. "CONTROL" or "CONTROLS" for purposes
hereof means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
i. Filing of Form 8-K. On or before the date which is three (3) Trading
Days after the Execution Date, the Company shall file a Current Report on Form
8-K with the SEC describing the terms of the transaction contemplated by the
Transaction Documents in the form required by the 1934 Act, if such filing is
required.
j. Corporate Existence. The Company shall use its best efforts to
preserve and continue the corporate existence of the Company.
23
k. Notice of Certain Events Affecting Registration; Suspension of Right
to Make a Put. The Company shall promptly notify Investor upon the occurrence of
any of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Shares: (i) receipt of any request
for additional information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or related prospectus;
(ii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate, and the Company
shall promptly make available to Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events.
l. Reimbursement. If (i) Investor, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, or (ii) Investor, other
than by reason of its 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 Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Investor 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 Investor is a named party, the Company will pay to
Investor the charges, as reasonably determined by Investor, for the time of any
officers or employees of Investor 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.
24
The reimbursement obligations of the Company under this section 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 Investor that are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees, attorneys, accountants, auditors and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors, heirs and
personal representatives of the Company, Investor and any such affiliate and any
such person.
6. Cover. If, the number of Shares represented by any Put Notices become
restricted or are no longer freely trading for any reason, and after the
applicable Closing Date, the Investor purchases, in an open market transaction
or otherwise, the Company's Common Stock (the "Covering Shares") in order to
make delivery in satisfaction of a sale of Common Stock by the Investor (the
"Sold Shares"), which delivery such Investor anticipated to make using the
Shares represented by the Put Notice (a "Buy-In") so long as the shares issuable
pursuant to the Put Notice were freely trading at the time of conversion,, the
Company shall pay to the Investor, in lieu of the Repurchase Option, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (a) the Investor's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (b) the
net proceeds (after brokerage commissions, if any) received by the Investor from
the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount
to the Investor in immediately available funds immediately upon demand by the
Investor. By way of illustration and not in limitation of the foregoing, if the
Investor purchases Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to the Common
Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which
the Company will be required to pay to the Investor will be $1,000.
7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the Shares to
the Investor is further subject to the satisfaction, at or before each Closing
Date, of each of the following conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
a. The Investor shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. The Investor shall have delivered to the Company the Purchase Price
for the Shares being purchased by the Investor at the Closing (after receipt of
confirmation of delivery of such Shares) by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
c. The representations and warranties of the Investor shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that
25
time (except for representations and warranties that speak as of a specific
date), and the Investor shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Investor at or prior to such
Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
e. No Valuation Event shall have occurred since the applicable Put
Notice Date.
8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, on or before each Closing Date, of each of the following
conditions set forth below. These conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion.
a. The Company shall have executed each of the Transaction Documents and
delivered the same to the Investor.
b. The Common Stock shall be authorized for quotation on the Principal
Market and trading in the Common Stock shall not have been suspended by the
Principal Market or the SEC, at any time beginning on the date hereof and
through and including the respective Closing Date (excluding suspensions of not
more than one Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
c. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that time (except for (i) representations and warranties that speak as
of a specific date and (ii) with respect to the representations made in Sections
4(g), (h) and (j) and the third sentence of Section 4(k) hereof, events which
occur on or after the date of this Agreement and are disclosed in SEC filings
made by the Company at least ten (10) Trading Days prior to the applicable Put
Notice Date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company on or before such
Closing Date. The Investor shall have received a certificate, executed by the
Chief Executive Officer and Chief Financial Officer of the Company, dated as of
the applicable Closing Date, in the form of Exhibit C attached hereto, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Investor including, without limitation, an update as of such Closing Date
regarding the representation contained in Section 4(c) above.
26
d. Investor shall have received an opinion letter of the Company's
counsel on or before the Execution Date, or a blanket opinion letter covering
all Shares to be issued pursuant to the terms of this Agreement, in the form of
Exhibit D attached hereto and if required by the Company's transfer agent any
additional opinion letters after the Effective Date so as to allow for the
issuance of Securities to Investor as may be required pursuant to the
Transaction Documents.
e. The Company shall have executed and delivered to the Escrow Agent or
Investor the certificates representing, or have executed electronic book-entry
transfer of, the Shares and the Warrants, if applicable, (in such denominations
as such Investor shall request) being purchased by the Investor at such Closing.
f. The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4(b)(ii) above and in a form reasonably acceptable to
the Investor (the "RESOLUTIONS") and such Resolutions shall not have been
amended or rescinded prior to such Closing Date.
g. If requested by the Investor, the Investor shall receive a letter of
the type, in the form and with the substance of the letter described in Section
3(s) of the Registration Rights Agreement from the Company's auditors.
h. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
i. The Registration Statement shall be effective on each Closing Date
and no stop order suspending the effectiveness of the Registration statement
shall be in effect or shall be pending or threatened. Furthermore, on each
Closing Date (i) neither the Company nor Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action),and (ii) no other suspension of the
use or withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.
j. At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or which would require public
disclosure or an update supplement to the prospectus.
27
k. There shall have been no filing of a petition in bankruptcy, either
voluntarily or involuntarily, with respect to the Company and there shall not
have been commenced any proceedings under any bankruptcy or insolvency laws, or
any laws relating to the relief of debtors, readjustment of indebtedness or
reorganization of debtors, and there shall have been no calling of a meeting of
creditors of the Company or appointment of a committee of creditors or
liquidating agents or offering of a composition or extension to creditors by,
for, with or without the consent or acquiescence of the Company.
l. If applicable, the shareholders of the Company shall have approved
the issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2(j).
m. The conditions to such Closing set forth in Section 2(f) shall have
been satisfied on or before such Closing Date.
n. The Company shall have certified to the Investor the number of shares
of Common Stock outstanding as of a date within five (5) Trading Days prior to
such Closing Date.
o. The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by this Agreement as such
Investor or its counsel may reasonably request upon reasonable advance notice.
p. The Company's transfer agent agrees to accept one blanket
representation letter from the Investor or its broker (as the transfer agent may
designate) after the Effective Date, which representation letter shall state
that all sales of the Registrable Securities will be made in compliance with the
prospectus delivery requirements of the Registration Statement, so that any
Shares being purchased after a Put Notice Date will bear no legend and not be
subject to stop transfer instructions.
9. TERMINATION.
a. Optional Termination. This Agreement may be terminated at any time by
the mutual written consent of the Company and the Investor. The representations,
warranties and covenants contained in or incorporated into this Agreement,
insofar as applicable to the transactions consummated hereunder prior to such
termination, shall survive its termination for the period of any applicable
statute of limitations.
b. Termination. This Agreement shall terminate upon written notice sent
by facsimile transmission or overnight delivery by the Investor to the Company
of any of the following events, and in the Investor's sole discretion:
(i) when the Investor has purchased an aggregate of $5,000,000 in
the Common Stock of the Company pursuant to this Agreement;
provided that the representations, warranties and covenants
contained in this Agreement
28
insofar as applicable to the transactions consummated hereunder
prior to such termination, shall survive the termination of this
Agreement for the period of any applicable statute of
limitations,
(ii) on the date which is eighteen (18) months after the
Effective Date;
(iii) if the Company shall file or consent by answer or otherwise
to the entry of an order for relief or approving a petition for
relief, reorganization or arrangement or any other petition in
bankruptcy for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or shall make an
assignment for the benefit of its creditors, or shall consent to
the appointment of a custodian, receiver, trustee or other
officer with similar powers of itself or of any substantial part
of its property, or shall be adjudicated a bankrupt or insolvent,
or shall take corporate action for the purpose of any of the
foregoing, or if a court or governmental authority of competent
jurisdiction shall enter an order appointing a custodian,
receiver, trustee or other officer with similar powers with
respect to the Company or any substantial part of its property or
an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency
law, or an order for the dissolution, winding up or liquidation
of the Company, or if any such petition shall be filed against
the Company;
(iv) if the Company shall issue or sell any equity securities or
securities convertible into, or exchangeable for, equity
securities or enter into an equity financing facility during the
Open Period ;
(v) the trading of the Common Stock is suspended by the SEC, the
Principal Market or the NASD for a period of five (5) consecutive
Trading Days;
(vi) the Company shall not have filed with the SEC the initial
Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the
initial Registration Rights Agreement within sixty (60) calendar
days of the date hereof or the Registration Statement has not
been declared effective within one hundred eighty (180) calendar
days of the date hereof; or
(vii) the Common Stock ceases to be registered under the 0000
Xxx.
(viii) The Securities cease to be registered under the 1934 Act
or listed or traded on the Nasdaq National Market, American Stock
Exchange or Nasdaq Small Cap Market (or the OTC Bulletin Board,
if mutually agreed upon by the Company and the Investor); or
29
(ix) The Company requires shareholder approval under Nasdaq rules
to issue additional shares and such approval is not obtained
within 60 days from the date when the Company has issued its
19.9% maximum allowable shares.
Upon the occurrence of one of the above-described events, the Company shall send
written notice of such event to the Investor, who shall have sixty (60) calendar
days to terminate by sending written notice by facsimile transmission or
overnight delivery to the Company. Failure of the Investor to send the Company
written notice within sixty (60) calendar days pursuant to the terms of this
Section 9 shall be deemed a waiver by the Investor to terminate as to the
occurrence of such event, but not a waiver to terminate upon the occurrence of
any other event enumerated above.
c. Notwithstanding anything herein to the contrary, the Company may
issue, without the consent of the Investor, any form of security or a debt
instrument that is convertible into the common stock of the Company, so long as
the purpose and the use of this equity or debt funding is strategic in nature to
consummate the purchase of assets and/or a merger or acquisition and the Company
agrees that it shall not grant demand or piggy-back registration rights as part
of such funding. Additionally, the Company may terminate this Agreement at any
time and need only pay the Investor a fee as calculated in the section
2(c)(iii), dealing with minimum draw down requirements, and the amounts due to
the Investor and its attorney, which fees must be paid prior to the Company
sending notice of termination.
10. INDEMNIFICATION. In consideration of the Investor's execution and
delivery of the this Agreement and the Registration Rights Agreement and
acquiring the Shares hereunder and in addition to all of the Company's other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless the Investor and all of their shareholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES'), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby
(ii) any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (iii) any cause of action, suit or
claim brought or made against such Indemnitee by a third party and arising out
of or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (iv) any transaction financed or to be financed
in whole or in part, directly or
30
indirectly, with the proceeds of the issuance of the Shares or (v) the status of
the Investor or holder of the Shares as an investor in the Company, except
insofar as any such misrepresentation, breach or any untrue statement, alleged
untrue statement, omission or alleged omission is made in reliance upon and in
conformity with written information furnished to the Company by the Investor
which is specifically intended by the Investor for use in the preparation of any
such Registration Statement, preliminary prospectus or prospectus. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The indemnity provisions contained herein shall be in addition
to any cause of action or similar rights the Investor may have, and any
liabilities the Investor may be subject to.
11. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
b. Fees and Expenses.
(i) As a further inducement to the Investor to enter into this
Agreement and in addition to the fees and expenses set forth
elsewhere herein, the Company agrees to reimburse the Investor,
or its designees, for due diligence and reasonable expenses
(including legal expenses) relating to the negotiation and
execution of the Transaction Documents and any Closings hereunder
the amount of $25,000, $12,500 of which shall be payable on the
Execution Date and $12,500 of which shall be payable upon the
Registration Statement being declared effective.
31
(ii) As a further inducement to the Investor to enter into this
Agreement, on each Closing Date the Company shall pay to the
Investor or its designee, an amount equal to 6% of the Purchase
Amount, which amount the Investor may, at its sole option, deduct
against the Purchase Amount.
(iii) The Company shall pay Investor's counsel, Xxxxxx X.
XxXxxxx, Esq., the sum of $5,000 which shall be payable upon the
Registration Statement being declared effective. On each Closing
Date, the Company shall pay the Escrow Agent the sum of $1,000
for each Put Notice, which amount the Escrow Agent may deduct
from the proceeds received in escrow from the Investor.
(iv) Except as otherwise set forth herein, each party shall pay
the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. Any attorneys' fees
and expenses incurred by either the Company or by the Investor in
connection with the preparation, negotiation, execution and
delivery of any amendments to this Agreement or relating to the
enforcement of the rights of any party, after the occurrence of
any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions
contemplated hereunder, shall be paid on demand by the party
which breached the Agreement and/or defaulted, as the case may
be. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of any Securities issued
pursuant hereto.
c. Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
d. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
f. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this
32
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
g. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
xXxxxx.xxx, Inc.
000 Xxxxxxx 00
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Meritz & Xxxxx, LLP.
Three Xxxxxx Place
Xxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Investor:
[Investor's Name]
x/x Xxxxxx X. XxXxxxx, Xxx.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
33
h. Successors and Assigns. This Agreement shall not be assigned by the
Investor.
i. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
j. Survival. The representations and warranties of the Company and the
Investor contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4 and 5, and the indemnification provisions set forth in Section 10,
shall survive each of the Closings. The Investor shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
k. Publicity. The Company and Investor 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 Investor without
the prior written consent of such Investor, except to the extent required by
law. Investor acknowledges that this Agreement and all or part of the
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 1933 Act or the 1934 Act. Investor 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.
l. Further Assurances. Except as set forth herein, each party shall do
and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
m. Placement Agent. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other person or entity, with respect to the
transactions contemplated by the Transaction Documents. The Investor shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other persons or entities for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by the
Transaction Documents. The Company shall indemnify and hold harmless the
Investor, their employees, officers, directors, agents, and partners, and their
respective affiliates, from and against all claims, losses, damages,
34
costs (including the costs of preparation and attorney's fees) and expenses
incurred in respect of any such claimed or existing fees, as such fees and
expenses are incurred.
n. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
o. Remedies. The Investor and each holder of the Shares shall have all
rights and remedies set forth in this Agreement and the Registration Rights
Agreement and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any default
or breach of any provision of this Agreement, including the recovery of
reasonable attorneys fees and costs, and to exercise all other rights granted by
law.
p. Payment Set Aside. To the extent that the Company makes a payment or
payments to the Investor hereunder or the Registration Rights Agreement or the
Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
[Balance of this page intentionally left blank.]
35
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Investment Agreement to be duly executed as of the date and year first above
written.
COMPANY: xXxxxx.xxx, Inc.,
By: ____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: CEO
By: ____________________________________
Name:
Title:
36
LIST OF SCHEDULES
-----------------
Schedule 4(a) Subsidiaries
Schedule 4(c) Capitalization
Schedule 4(e) Conflicts
Schedule 4(g) Material Changes
Schedule 4(h) Litigation
Schedule 4(l) Intellectual Property
Schedule 4(n) Liens
Schedule 4(t) Certain Transactions
37
LIST OF EXHIBITS
-----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Form of Warrant
EXHIBIT C Officers' Certificate
EXHIBIT D Opinion of Company's Counsel
EXHIBIT E Secretary's Certificate
EXHIBIT F Escrow Agreement
EXHIBIT G Broker Representation Letter
EXHIBIT H Board Resolution
EXHIBIT I Put Notice
38
Schedule 4(a) - Subsidiaries
None.
39
Schedule 4(c) - Capitalization
(c) Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 150,000,000 shares of Class A Common
Stock authorized, of which as of April 1, 2001, 110,236,548 shares
are issued and outstanding, (ii) 700,000 shares of Class B Common
Stock authorized, of which as of April 1, 2001, 364,000 are issued
and outstanding, (iii) no shares of Preferred Stock are authorized.
All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable.
Note: One share of Class B Common Stock is convertible into one hundred shares
of Class A Common Stock.
It is anticipated that the Company will increase the authorized number of Class
A Common Stock shares to 600 million shares and revise the par value of the
Class A stock from $.01 to $.001. Immediately following the execution of this
Agreement, the Company will file an Information Statement with the Securities
Exchange Commission. Ten days thereafter, the majority of shareholders of the
Company will approve an Amendment to the Certificate of Incorporation increasing
the number of authorized Class A Common Stock shares and revising the par value
of the Class A common stock.
As of April 1, 2001, the Company had 110,236,548 Class A shares issued and
outstanding and 364,000 Class B shares issued and outstanding. Class B shares
hold voting power of 100 shares of Class A stock. Therefore, the outstanding
Class B shares hold a total of 36,400,000 votes.
Xxxxxx Xxxxxxx, President and Chief Executive Officer of the Company holds
voting control of:
39,150,000 Class A votes
36,400,000 Class B votes
------------------------
75,550,000 votes
Total votes at a meeting of shareholders equals:
110,236,548 Class A votes
36,400,000 Class B votes
------------------------
146,636,548 Total Votes
Xxxxx Xxxxxxx holds 51.52% of the votes to authorize an increase in the
authorized Class A shares to 600 million shares and a revision of the par value.
Convertible Debentures.
These debentures are convertible into shares of the Company's Class A
Common Stock at the option of the holder by dividing the outstanding principal
and interest by the
40
conversion price which shall equal 50% of the average bid price during the 20
trading days before the conversion date. As of April 23, 2001, $287,000 remained
outstanding.
The Company has been advised by one of the debenture holders that the
Company was in breach of some of the terms of the debentures. The Company has
reached settlement terms with this one previous holder of $50,000 in debentures
regarding the interest and penalties that have been demanded by this former
holder whereby the Company will issue 450,000 shares to this former holder in
full settlement of the former debenture holder's claim.
Due to Related Party
During the period from June 2000 to date, Xxxxxx X. Xxxxxxx, President
and Chief Executive Officer of the Company, sold Common Stock Shares of the
Company and has loaned proceeds of these sales to the Company to fund its
working capital requirements. The Company has executed a promissory note and
Security Agreement in favor of Xx. Xxxxxxx. As of April 23, 2001, the
outstanding loan balance including monies loaned from the proceeds of stock
sales, unpaid compensation, income taxes incurred from the sale of stock and
unreimbursed expenses, totaled $1,568,327.
Under the terms of the loan agreements, the note holder may elect
prepayment of the principal and interest owed pursuant to this Note by issuing
Xxxxxx Xxxxxxx, or his assigns, one Class B common stock share of xXxxxx.xxx,
Inc., no par value, for each dollar owed.
41
Schedule 4(e) - Conflicts
It is anticipated that the Company will increase the authorized number of Class
A Common Stock shares to 600 million shares. Immediately following the execution
of this Agreement, the Company will file an Information Statement with the
Securities Exchange Commission. Ten days thereafter, the majority of
shareholders of the Company will approve an Amendment to the Certificate of
Incorporation increasing the number of authorized Class A Common Stock shares.
42
Schedule 4(g) - Material Changes
None.
43
Schedule 4(h) Litigation
Communication Research, Inc. vs. xXxxxx.xxx, Inc.
Filed April 0000
Xxxxxxxx Xxxxx xx Xxx Xxxxxx
Chancery Division
Bergen County
This suit brought by a subtenant against the Company seeking equitable relief
and damages in connection with its tenancy, as well as, conversion of office
furniture and equipment, wrongful eviction, interference of economic relations
and quantum merit.
The law firm Ferrara, Turitz, Xxxxxxx & Xxxxxxxx, 000 Xxxx Xxxxxx, Xxxxxxxxxx,
XX 00000, is defending this action. The Company believes that this action is
without merit and intends to vigorously defend this suit.
Lorelei Personnel, Inc. vs. xXxxxx.xxx, Inc.
Filed February 12, 0000
Xxxxxxxx Xxxxx xx Xxx Xxxxxx
Xxxxxxxxx Xxxxxx
This action is for consulting\employee placement services allegedly rendered by
Lorelei. The payment terms that Lorelei claims, were never agreed to by iVoice.
Furthermore, the employee referred by Lorelei was terminated within 30 days of
hire for failure to perform in an adequate manner. The plaintiff is seeking
damages of $6,000, plus interest, legal fees and court costs. The Company
believes that this action is without merit and intends to vigorously defend this
suit.
This action is being defended by the law firm Xxxx Xxxxxxx, P.C.,158 Xxxxxxxxxx,
Xxx., Xxx Xxxxxxxxx, XX 00000. The Company believes that this action is without
merit and intends to vigorously defend this suit.
Lighthouse Technical Consulting, Inc. vs. xXxxxx.xxx, Inc.
Filed March, 0000
Xxxxxxxx Xxxxx xx Xxx Xxxxxx
Xxxxxxxx Xxxxxx
This action is for failure to pay for consulting\employee placement services
rendered by Lighthouse. IVoice is making monthly payments in the amount of $500
and does not deny that the liability exists.
This action is being defended by the law firm Xxxx Xxxxxxx, P.C.,158 Xxxxxxxxxx,
Xxx., Xxx Xxxxxxxxx, XX 00000. The Company believes that this action is without
merit and intends to vigorously defend this suit.
44
Schedule 4(l) - Intellectual Property
None.
45
Schedule 4(n) Liens
SECURITY AGREEMENT
This SECURITY AGREEMENT dated March 20, 2001, between Xxxxxx Xxxxxxx, an
individual with offices at c/o xXxxxx.xxx, Inc. 000 Xxxxxxx 00, Xxxxxxx, Xxx
Xxxxxx 00000 (the "Secured Party") and xXxxxx.xxx, Inc., a Delaware corporation,
with offices at 000 Xxxxxxx 00, Xxxxxxx, Xxx Xxxxxx 00000 (the "Debtor").
1. Obligation to Pay. The Debtor concurrently with the execution and delivery of
this AGREEMENT, has borrowed One Million and Five Hundred Thousand and
Sixty-eight Dollars and 0/100 Cents ($1,568,327), from the Secured Party, which
borrowing is evidenced by the Debtor's promissory note., and in consideration
therefor, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Debtor hereby grants the
Secured Party a security interest as set forth in Paragraph 2 herein.
2. Collateral. The Debtor desires to enter into this AGREEMENT for the purpose
of creating a security interest in favor of the Secured Party in the assets
annexed as Exhibit I hereto, in all additions and accessions thereto,
substitutions therefore and all proceeds of their sale or disposition (all
hereinafter referred to collectively as "Assets").
3. Creation of security interest. The Debtor, in order to secure payment of the
debt evidenced by the promissory note originally for the sum of $1,568,327,,
including accrued interest, renewals, extensions thereof and additional
borrowings that shall be evidenced by additional promissory notes; and all costs
and expenses incurred in collection of the hereby grants to the Secured Party a
security interest in the Assets.
4. Debtor's warranties and agreements. The Debtor warrants and agrees that:
(a) Transfer. The Debtor will not: (a) sell or exchange the Assets outside of
the ordinary course of business, (b) lease, encumber or pledge the Assets, (c)
create any security interest therein except that created by this AGREEMENT,
without the prior written consent of the Secured Party.
(b) Filings The Debtor will pay all costs of filing any financing, continuation,
or termination statements with respect to the security interest created by this
Agreement. The Secured Party is hereby appointed the Debtor's attorney-in-fact
to do all acts and things which the Secured Party may deem necessary to perfect
and continue perfected the security interest created by this Agreement and to
protect the goods. A reproduction of this Agreement, or any financing statement
signed by the Debtor, is sufficient as a financing statement.
(c) Place of business The Debtor will promptly notify the Secured Party of any
change in the location of any place of business and of the establishment of any
new place of business.
46
5. Default and remedies. In the event of default in the payment of the debts
referred to in paragraph 1, or any past or future advances, expenditures, or
liabilities hereby secured, or in the due observance or performance or any of
the other conditions or agreements hereof; or if any of the warranties of the
Debtor shall prove to be false or misleading; or if the Debtor shall become
insolvent or shall be adjudicated a bankrupt, or if bankruptcy, insolvency,
reorganization, arrangement, debt adjustment, or liquidation proceedings, or
receivership proceedings in which the Debtor is alleged to be insolvent or
unable to pay his debts as they mature, shall be instituted by or against the
Debtor, and the Debtor shall consent to the same or admit in writing the
material allegations of the petition filed in such proceedings, or such
proceedings shall not be dismissed within 30 days after their institution; then,
upon the occurrence of any of the above events, the Secured Party may declare
the unpaid balance of the debt and all advances, expenditures, and liabilities
immediately due and payable without demand or notice, and the Secured Party may
enter judgment on such note or otherwise reduce such debt, advances,
expenditures, and liabilities to judgment, and in addition proceed to exercise
one or more of the rights accorded by the Uniform Commercial Code in force in
the State of Nevada at the date of this Agreement. It is understood and agreed
that this Agreement has been made and entered into pursuant to the Uniform
Commercial Code and that the Secured Party has all rights and remedies accorded
thereby. If any provisions of the Agreement shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained in this Agreement.
6. Benefit. The rights and privileges of the Secured Party under this Agreement
shall inure to the benefit of its successors and assigns. All covenants,
warranties, and agreements of the Debtor contained in this Agreement are joint
and several and shall bind personal representatives, heirs, successors and
assigns.
Xxxxxx Xxxxxxx
By: _____________________ Date: ______________
xXxxxx.xxx, Inc.
By: _____________________ Date: ______________
Name: ____________________ Title: _____________________
EXHIBIT I
All assets of the Debtor including by not limited to intellectual property,
patents, trademarks, software, artwork, copyrighted materials, accounts
receivable and all proceeds, cash, inventory, office equipment, telephones,
furniture, and motor vehicles. Additionally, all proceeds payable to the Debtor
under the Key Man life insurance policy issued by Massachusetts Mutual Policy
Number 11073319.
47
Schedule 4(t) - Certain Transactions
See Schedule 4(n)
48
EXHIBIT G
[BROKER'S LETTERHEAD]
Date
Via Facsimile
Attention:
_______________________
_______________________
_______________________
Re: xXxxxx.xxx, Inc.
Dear __________________:
It is our understanding that the Form______ Registration Statement bearing SEC
File Number ( ___-______) filed by xXxxxx.xxx, Inc. on Form _____ on __________,
2001 was declared effective on _________, 2001.
This letter shall confirm that ______________ shares of the common stock of
xXxxxx.xxx, Inc. are being sold on behalf of __________________ and that we
shall comply with the prospectus delivery requirements set forth in that
Registration Statement by filing the same with the purchaser.
If you have any questions please do not hesitate to call.
Sincerely,
________________________
cc: Xxxxxx X. XxXxxxx, Esq.
49
EXHIBIT I
PUT NOTICE NO. ______ XXxxxx.xxx, Inc.
xXxxxx.xxx, Inc., a Delaware corporation (the "Company"), hereby elects to
exercise its right pursuant to the Investment Agreement dated as of April __,
2001, to require Investor to purchase shares of its common stock. The Company
hereby certifies that:
1. The Dollar Amount is: $_______________.
2. The Purchase Period runs from ____________________ to
____________________.
3. The current number of shares of common stock issued and outstanding as
of _____________ are __________________________.
4. 92% of the average of the three (3) lowest closing bid prices
("Average3") for the Common Stock as reported by Bloomberg Financial LP during
the Purchase Period is as follows:
Average3 x 92% = Purchase Price x (15% of Volume) = Total
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
___________ x 92% = __________ x _____________ = $__________
GRAND TOTALS _____________ $__________
50
Number of Shares being Purchased (total of 15% volume column) _______________
Aggregate Purchase Price of Shares __________________
Less Escrow Fee - __________________
Less Investor Fee - __________________
Amount to be wired to Company
=============================
The undersigned has executed this Put Notice as of this ___ day of _________,
200__.
xXxxxx.xxx, Inc.
By:_______________________________________
Name and title:
51
