SUBSCRIPTION AGREEMENT
DATED AS OF DECEMBER 10, 1998
BY AND BETWEEN
ROCKY MOUNTAIN INTERNET, INC.
AND
ADVANTAGE FUND II LTD.
--------------------
SERIES B CONVERTIBLE PREFERRED STOCK
AND
COMMON STOCK PURCHASE WARRANTS
SUBSCRIPTION AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK
AND
COMMON STOCK PURCHASE WARRANTS
ROCKY MOUNTAIN INTERNET, INC.
PAGE
1. AGREEMENT TO SUBSCRIBE 1
(a) Subscription 1
(b) Form of Payment 1
(c) Method of Payment 2
2. BUYER REPRESENTATIONS, WARRANTIES, ETC. 2
(a) Purchase for Investment 2
(b) Accredited Investor 2
(c) Reoffers and Resales 2
(d) Company Reliance 2
(e) Information Provided 3
(f) Absence of Approvals 3
(g) Subscription Agreement 3
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC. 3
(a) Organization and Authority 3
(b) Capitalization 3
(c) Concerning the Shares and the Common Stock 4
(d) Subscription Agreement and Other Transaction Documents 5
(e) Non-contravention 5
(f) Approvals 5
(g) Information Provided 6
(h) Absence of Certain Changes 6
(i) Absence of Certain Proceedings 6
(j) Properties 6
(k) Labor Relations 7
(l) SEC Filings 7
(m) Absence of Brokers, Finders, Etc. 7
(n) No Solicitation 8
(o) Certain Issuances of Securities 8
(p) Absence of Rights Agreement 8
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS 8
(a) Transfer Restrictions 8
(b) Restrictive Legend 8
(c) Registration Rights Agreement 10
(d) Form D 10
(e) Authorization for Trading 10
(f) Use of Proceeds 10
(g) Blue Sky Laws 10
(h) Certain Expenses 10
(i) Certain Issuances of Securities 11
(j) Stockholder Approval 12
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(k) Certain Trading Restrictions 12
(l) Restriction on Conversions 12
(m) Restriction on Beneficial Ownership 13
(n) Best Efforts 13
5. TRANSFER AGENT AGREEMENT 13
(a) Transfer Agent Agreement 13
(b) Conversion Procedure 13
6. CLOSING DATE 14
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE 14
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE 14
9. MISCELLANEOUS 15
(a) Governing Law 15
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(b) Counterparts 15
(c) Headings, etc. 15
(d) Severability 15
(e) Amendments 15
(f) Waivers 15
(g) Notices 16
(h) Assignment 16
(i) Survival of Representations and Warranties 16
(j) Entire Agreement 16
(k) Termination 16
(l) Further Assurances 17
(m) Public Statements, Press Releases, Etc. 17
(n) Construction 17
SCHEDULES
Schedule 3(a)-1 Subsidiaries
Schedule 3(b)-1 Antidilution Adjustments
Schedule 3(b)-2 Registration Rights
Schedule 3(c)-1 Nasdaq Notification
Schedule 3(i)-1 Confidential Treatment Requests
Schedule 3(j)-1 Company Proprietary Rights
ANNEXES
Annex I Form of Certificate of Designations
Annex II Form of Common Stock Purchase Warrant
Annex III Joint Escrow Instructions
Annex IV Form of Registration Rights Agreement
Annex V Form of Transfer Agent Agreement
Annex VI Form of Notice of Conversion of Series B Convertible
Preferred Stock
Annex VII Form of Opinion of Counsel to Be Delivered on Closing Date
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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of December 10, 1998, by and
between ROCKY MOUNTAIN INTERNET, INC., a Delaware corporation (the "Company"),
with headquarters located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and ADVANTAGE FUND II LTD., a British Virgin Islands corporation (the
"Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of non-voting, convertible preferred
stock of the Company which will be convertible into shares of Common Stock,
$.001 par value (the "Common Stock"), of the Company and in connection therewith
the Company is to issue to the Buyer warrants to purchase shares of Common Stock
as provided in this Agreement; and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) SUBSCRIPTION. The Buyer hereby agrees to purchase from the
Company the number of shares (the "Preferred Shares") of Series B Convertible
Preferred Stock, $.001 par value (the "Preferred Stock"), of the Company set
forth on the signature page of this Agreement, having the terms and conditions
as set forth in the form of the Certificate of Designations of the Series B
Convertible Preferred Stock attached hereto as ANNEX I (the "Certificate of
Designations") at the price per share and for the aggregate purchase price set
forth on the signature page of this Agreement (the "Purchase Price"). The
Purchase Price shall be payable in United States dollars. In connection with
the purchase of the Preferred Shares by the Buyer, the Company shall issue to
the Buyer, at the closing on the Closing Date (as defined herein), Common Stock
Purchase Warrants in the form attached hereto as ANNEX II (the "Warrants") to
purchase the number of shares
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of Common Stock set forth therein (subject to adjustment as provided in the
Warrants). The shares of Preferred Stock issuable pursuant to Section 5 of the
Certificate of Designations as dividends on the Preferred Shares are referred to
herein as the "Dividend Shares." The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "Warrant Shares." The
Warrant Shares and the shares of Common Stock issuable upon conversion of the
Preferred Shares and upon conversion of the Dividend Shares are referred to
herein collectively as the "Common Shares." The Common Shares, the Preferred
Shares and the Dividend Shares are referred to herein collectively as the
"Shares." The Shares and the Warrants are referred to herein collectively as
the "Securities."
(b) FORM OF PAYMENT. The Buyer shall pay the Purchase Price for the
Preferred Shares by delivering good funds in United States Dollars to the escrow
agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached
hereto as ANNEX III (the "Joint Escrow Instructions"). Such delivery of funds
shall be made against delivery by the Company of the certificates for the
Preferred Shares and the Warrants registered in the name of the Buyer or its
nominee. Promptly following payment by the Buyer to the Escrow Agent of the
Purchase Price, but in any event prior to the Closing Date, the Company shall
deliver certificates for the Preferred Shares and the Warrants, registered in
the name of the Buyer or its nominee, to the Escrow Agent. The certificates for
the Preferred Shares shall be delivered by the Company to the Escrow Agent on a
delivery against payment basis at the closing. By signing this Agreement, the
Buyer and the Company each agrees to all of the terms and conditions of, and
becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
(c) METHOD OF PAYMENT. Payment of the Purchase Price for the
Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
For credit to A/C#37179446
For credit to the account of ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attorney Escrow Account
Reference: Advantage/Rocky
Not later than 4:00 p.m., New York City time, on the date which is one Business
Day after
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the Company shall have accepted this Agreement and returned a signed counterpart
of this Agreement to the Buyer or its legal counsel, the Buyer shall deposit
with the Escrow Agent an amount equal to the Purchase Price. As used in this
Agreement, the term "Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred
Shares and acquiring the Warrants, and will acquire all other Securities, for
its own account for investment only and not with a view towards the public sale
or distribution thereof, except as contemplated by the Registration Rights
Agreement (as defined herein);
(b) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as
that term is defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3);
(c) REOFFERS AND RESALES. All subsequent offers and sales of the
Securities by the Buyer shall be made pursuant to registration of the Securities
being offered and sold under the 1933 Act or pursuant to an exemption from
registration;
(d) COMPANY RELIANCE. The Buyer understands that the Preferred
Shares are being offered and sold, the Warrants are being issued, and the Common
Shares are being offered, in each case to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Preferred Shares and the Warrants and to receive an offer of the
Common Shares;
(e) INFORMATION PROVIDED. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Shares and the issuance of the Warrants and the offer of the Common
Shares which have been requested by the Buyer; the Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received satisfactory answers to any such inquiries;
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without limiting the generality of the foregoing, the Buyer has had the
opportunity to obtain and to review the Company's (1) Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997 (the "1997 10-K"), (2)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1998 (as
amended on Form 10-QSB/A), June 30, 1998 and September 30, 1998, (3) definitive
proxy statement for the Company's 1998 Annual Meeting of Shareholders held on
March 12, 1998 and (4) Current Reports on Form 8-K and 8-K/A filed June 11,
1998, July 14, 1998, August 19, 1998, August 24, 1998 and December 7, 1998, in
each case as filed with the SEC (collectively, the "SEC Reports"); and the Buyer
understands that its investment in the Shares involves a high degree of risk;
(f) ABSENCE OF APPROVALS. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares; and
(g) SUBSCRIPTION AGREEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that:
(a) ORGANIZATION AND AUTHORITY. Each of the Company and its
subsidiaries listed on SCHEDULE 3(a)-1 attached hereto (the "Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all requisite corporate power and
authority to (i) own, lease and operate its properties and to carry on its
business as now being conducted, and (ii) to execute, deliver and perform its
obligations under this Agreement, the Certificate of Designations, the Warrants,
the Registration Rights Agreement, the form of which is attached hereto as ANNEX
IV (the "Registration Rights Agreement"), the Transfer Agent Agreement, the form
of which is attached hereto as ANNEX V (the "Transfer Agent Agreement"), and the
other agreements to be executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby and thereby.
Each of the Company and the Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and where failure so to qualify could have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or
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prospects of the Company and the Subsidiaries, taken as a whole (a "Company
Material Adverse Effect"). The Company has no subsidiaries or equity investment
in any person other than the Subsidiaries.
(b) CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 25,000,000 shares of Common Stock of which 9,193,649 shares were
outstanding on December 9, 1998, all of which are fully paid and nonassessable;
and (b) 750,000 shares of Preferred Stock, $.001 par value, none of which are
outstanding, and 9,600 shares of which will be designated as Series B
Convertible Preferred Stock, of which 8,000 shares will be issued pursuant to
this Agreement and the other subscription agreement for the purchase of shares
of Preferred Stock and the acquisition of common stock purchase warrants being
entered into in connection herewith (the "Other Subscription Agreement"); and on
the Closing Date there will be (x) no material increase from December 9, 1998 in
the number of shares of Common Stock outstanding and (y) no issuances of
preferred stock except as issued pursuant to this Agreement and the Other
Subscription Agreement. No shares of the Company's former Series A Preferred
Stock, $.001 par value, are outstanding and such series was retired on April 30,
1998. As of December 9, 1998, the Company had outstanding options, warrants and
similar rights entitling the holders to purchase 8,193,026 shares of Common
Stock. Other than as set forth in the preceding sentence, the Company does not
have outstanding any material amount of securities (or obligations to issue any
such securities) convertible into, exchangeable for or otherwise entitling the
holders thereof to acquire shares of Common Stock, except as disclosed in the
SEC Reports. The Company has duly reserved from its authorized and unissued
shares of Common Stock the full number of shares required for (a) all options,
warrants, convertible securities and other rights to acquire shares of Common
Stock which are outstanding and (b) all shares of Common Stock and options and
other rights to acquire shares of Common Stock which may be issued or granted
under the stock option and similar plans which have been adopted by the Company
or any of the Subsidiaries. Each outstanding class or series of securities for
which any antidilution or similar adjustment arising by reason of the issuance
or conversion of the Preferred Shares and the Dividend Shares or the issuance or
exercise of the Warrants or the issuance or conversion of the shares of
Preferred Stock and the issuance or exercise of the warrants to be issued
pursuant to the Other Subscription Agreement will occur is identified on
SCHEDULE 3(b)-1 attached hereto, together with the amount of such antidilution
adjustment. The outstanding shares of Common Stock and outstanding options,
warrants and other securities convertible into, exchangeable for or otherwise
entitling the holder thereof to acquire shares of Common Stock have been duly
authorized and validly issued. None of such outstanding shares of Common Stock,
options, warrants and other securities has been issued in violation of the
preemptive rights of any securityholder of the Company.
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The offers and sales of the outstanding shares of Common Stock and such options,
warrants and other securities were at all relevant times either registered under
the 1933 Act and applicable state securities laws or exempt from such
requirements. Except as set forth on SCHEDULE 3(b)-2 hereto, no holder of any
of the Company's securities has any rights, "demand," "piggy-back" or otherwise,
to have such securities registered by reason of the intention to file, filing or
effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement).
(c) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares have
been duly authorized. The Preferred Shares, when issued and paid for in
accordance with this Agreement, the Dividend Shares, when issued as dividends
on the outstanding shares of Preferred Stock, and the Common Shares, when
issued upon conversion of the Preferred Shares or the Dividend Shares or upon
exercise of the Warrants, as the case may be, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof
to personal liability by reason of being such holder. There are no
preemptive or similar rights of any stockholder of the Company or any other
person to acquire any of the Shares. The Company has duly reserved 1,838,700
shares of Common Stock for conversion of the shares of Preferred Stock and
exercise of the Warrants and the warrants issuable in connection with the
Other Subscription Agreement, and such shares shall remain so reserved
(subject to reduction from time to time for shares of Common Stock issued
upon conversion of shares of Preferred Stock or redemption or other permitted
retirement of shares of Preferred Stock), and the Company shall from time to
time reserve such additional shares of Common Stock as shall be required to
be reserved pursuant to the Certificate of Designations, as long as the
Preferred Stock is convertible, and pursuant to the Warrants, as long as the
Warrants are exercisable. The Common Stock is listed for trading on the
Nasdaq SmallCap Market ("Nasdaq") and (1) the Company and the Common Stock
meet the criteria for continued listing and trading on Nasdaq; (2) except as
set forth on SCHEDULE 3(c)-1 attached hereto, the Company has not been
notified since January 1, 1996 by Nasdaq of any failure or potential failure
to meet the criteria for continued listing and trading on Nasdaq and (3) no
suspension of trading in the Common Stock is in effect. The Company knows of
no reason that the Common Shares will not be eligible for listing on Nasdaq.
(d) SUBSCRIPTION AGREEMENT AND OTHER TRANSACTION DOCUMENTS. This
Agreement, the Certificate of Designations, the Registration Rights Agreement,
the Warrants and the Transfer Agent Agreement and the other agreements and
instruments contemplated hereby and thereby have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Registration Rights Agreement, the
Warrants and the Transfer Agent Agreement
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and such other agreements, when executed and delivered by the Company, will be,
valid and binding obligations of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
(e) NON-CONTRAVENTION. The execution and delivery by the Company of
this Agreement and the other documents contemplated by this Agreement and the
consummation by the Company of the issuance of the Preferred Shares and the
Warrants as contemplated by this Agreement, and the other transactions
contemplated by this Agreement, the Certificate of Designations, the
Registration Rights Agreement, the Warrants and the Transfer Agent Agreement do
not and will not, with or without the giving of notice or the lapse of time, or
both (i) result in any violation of any terms of the Certificate of
Incorporation, as amended, or By-laws of the Company or any Subsidiary, (ii)
conflict with or result in a breach by the Company or any Subsidiary of any of
the terms or provisions of, or constitute a default under, or result in the
modification, amendment, termination or cancellation of, result in the
acceleration of any obligation of the Company or any Subsidiary under, or result
in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any
Subsidiary pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets is bound or affected, (iii) violate or contravene any applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any Subsidiary or any
of their respective properties or assets or (iv) have any Company Material
Adverse Effect on any permit, certification, registration, approval, consent,
license or franchise necessary for the Company or any Subsidiary to own or lease
and operate any of their respective properties or to conduct any of their
respective businesses or the ability of the Company or any Subsidiary to make
use thereof.
(f) APPROVALS. No authorization, approval or consent of, or filing
with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company for (1) the execution, delivery
and performance by the Company of this Agreement, the Registration Rights
Agreement, the Warrants, the Transfer Agent Agreement and the other agreements
and instruments contemplated hereby and thereby, (2) the execution, filing and
performance by the Company of the Certificate of Designations, (3) the issuance
and sale of the Preferred Shares and the Dividend Shares
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and the issuance of the Warrants as contemplated by this Agreement and (4) the
issuance of Common Shares on conversion of the Preferred Shares or the Dividend
Shares or upon the exercise of the Warrants or the issuance of Dividend Shares
as dividends on shares of Preferred Stock, other than (w) the filing of the
Certificate of Designations with the Secretary of State of the State of
Delaware, (x) registration of the resale of the Common Shares under the 1933 Act
as contemplated by the Registration Rights Agreement, (y) as may be required
under applicable state securities or "blue sky" laws and (z) filing of one or
more Forms D with respect to the Securities as required under Regulation D.
(g) INFORMATION PROVIDED. The information provided by or on behalf
of the Company to the Buyer in connection with the transactions contemplated by
this Agreement, including, without limitation, the information referred to in
Section 2(e) of this Agreement, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, it being understood that, for purposes of this Section 3(g), any
statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 3(g) to the extent that a statement in
any document included in such information which was prepared or filed with the
SEC on a later date modifies or replaces such statement, whether or not such
later prepared or filed statement so states. The Company has not filed any
reports with the SEC under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), since December 31, 1997 other than the SEC Reports.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, there has
been no change and no development which could have a Company Material Adverse
Effect, except as disclosed in the SEC Reports. Except as and to the extent
disclosed, reflected or reserved against in the financial statements of the
Company and the notes thereto included in the SEC Reports, neither the Company
nor any Subsidiary has any material (individually or in the aggregate)
liabilities, debts or obligations whether accrued, absolute, contingent or
otherwise, and whether due or to become due. Subsequent to December 31, 1997,
neither the Company nor any Subsidiary has incurred any liabilities, debts or
obligations of any nature whatsoever which are individually or in the aggregate
material to the Company and the Subsidiaries taken as a whole, other than those
incurred in the ordinary course of their respective businesses or disclosed in
the SEC Reports.
(i) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, arbitrator, public board or body or governmental agency
(collectively, an "Action") pending or, to the knowledge of the Company or any
Subsidiary, threatened against the Company or any Subsidiary, in any such case
wherein an unfavorable decision, ruling or finding
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would have a Company Material Adverse Effect or a material adverse effect on the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents; neither the Company or any Subsidiary
nor any director or officer thereof is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty; except as set forth on SCHEDULE
3(i)-1 attached hereto, the Company does not have pending before the SEC any
request for confidential treatment of information and to the best of the
Company's knowledge no such request will be made by the Company prior to the
time the Registration Statement relating to the Common Shares which is
contemplated by the Registration Rights Agreement is first ordered effective by
the SEC; and there has not been, and to the best of the Company's knowledge
there is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the Company.
(j) PROPERTIES. The Company and the Subsidiaries have good title to
or leasehold interests in all property real and personal (tangible and
intangible) and other assets owned by them, free and clear of all security
interests, charges, mortgages, liens or other encumbrances, except with respect
to capital lease obligations and protective filings by lessors and except such
as are described in the SEC Reports or such as do not materially interfere with
the use of such property made, or proposed to be made, by the Company or any
Subsidiary. The leases, licenses or other contracts or instruments under which
the Company and the Subsidiaries lease, hold or are entitled to use any
property, real or personal, are valid, subsisting and enforceable with only such
exceptions as do not materially interfere with the use of such property made, or
proposed to be made, by the Company or any Subsidiary. Neither the Company nor
any Subsidiary has received notice of any material violation of any applicable
law, ordinance, regulation, order or requirement relating to its owned or leased
properties. Except as set forth on SCHEDULE 3(j)-1 attached hereto, the Company
does not have any knowledge of, and the Company has not given or received any
notice of, any pending conflicts with or infringement of the rights of others
with respect to any Company Proprietary Rights (as defined herein) or with
respect to any license of Company Proprietary Rights. No action, suit,
arbitration, or legal, administrative or other proceeding or investigation is
pending, or, to the best knowledge of the Company, threatened, which involves
any Company Proprietary Rights. Neither the Company nor any Subsidiary is
subject to any judgment, order, writ, injunction or decree of any court or any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
arbitrator, or has entered into or is a party to any contract which restricts or
impairs the use of any such Company Proprietary Rights in a manner which would
have a material
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adverse effect on the use by the Company or any Subsidiary of any of the Company
Proprietary Rights. To the best knowledge of the Company, no Company
Proprietary Rights and no services or products sold by the Company or any
Subsidiary, conflict with or infringe upon any proprietary rights available to
any third party. Neither the Company nor any Subsidiary has received written
notice of any pending conflict with or infringement upon such third-party
proprietary rights. Neither the Company nor any Subsidiary has entered into any
consent, indemnification, forbearance to ▇▇▇ or settlement agreement with
respect to Company Proprietary Rights other than in the ordinary course of
business. Except as set forth on SCHEDULE 3(j)-1 attached hereto, no claims
have been asserted by any person with respect to the validity of the Company's
or any Subsidiary's ownership or right to use the Company Proprietary Rights
and, to the best knowledge of the Company, there is no reasonable basis for any
such claim to be successful. To the best knowledge of the Company, the Company
Proprietary Rights are valid and enforceable. No registration relating to the
Company Proprietary Rights has lapsed, expired or been abandoned or canceled or
is the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and are in good standing, except for such
lapses, expirations, abandonments, cancellations, adversarial proceedings or
failures to be in good standing which would not, singly or in the aggregate,
have a Company Material Adverse Effect. The Company and the Subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Company Proprietary Rights used
pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Company Proprietary Rights. As used herein, the
term "Company Proprietary Rights" means all patents, patent applications,
inventions, trademarks, trade names, applications for registration of
trademarks, service marks, service ▇▇▇▇ applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets which are material to the
businesses of the Company and the Subsidiaries as now conducted, as proposed to
be conducted or as described in this Agreement.
(k) LABOR RELATIONS. No material labor problem exists or, to the
knowledge of the Company or any Subsidiary, is imminent with respect to any of
the employees of the Company or any Subsidiary.
(l) SEC FILINGS. The Company has timely filed all required forms,
reports and other documents required to be filed by the Company with the SEC
under the 1934 Act. All of such forms, reports and other documents complied,
when filed, in all material respects, with all applicable requirements of the
1933 Act and the 1934 Act.
(m) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or
similar person is entitled to any commission, fee or other compensation by
reason of the
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transactions contemplated by this Agreement other than as disclosed in writing
by the Company to the Buyer with respect to certain persons prior to the date of
execution and delivery of this Agreement by the Buyer, and the Company shall
pay, and indemnify and hold harmless the Buyer from, any claim made against the
Buyer by such persons or any other person for any such commission, fee or other
compensation.
(n) NO SOLICITATION. No form of general solicitation or general
advertising was used by the Company or, to the best of its knowledge, any other
person acting on behalf of the Company, in respect of or in connection with the
offer and sale of the Securities. Neither the Company nor, to its knowledge,
any person acting on behalf of the Company has, either directly or indirectly,
sold or offered for sale to any person any of the Preferred Shares or the
Warrants or, within the six months prior to the date hereof, any other similar
security of the Company except as contemplated by this Agreement and the Other
Subscription Agreement; and neither the Company nor any person authorized to act
on its behalf will sell or offer for sale any shares of Preferred Stock or
shares of Common Stock or Warrants, or solicit any offers to buy any shares of
Preferred Stock or shares of Common Stock or Warrants, so as thereby to cause
the issuance or sale of any of the Shares or the issuance of the Warrants to be
in violation of Section 5 of the 1933 Act.
(o) CERTAIN ISSUANCES OF SECURITIES. The Company has not issued any
shares of Common Stock or shares of any series of preferred stock or other
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire shares of Common Stock which are subject to Rule 4310(c)(25)(H) of
the Nasdaq as in effect from time to time or any successor, replacement or
similar provision thereof or of any other market on which the Common Stock is
listed for trading (the "Stockholder Approval Rule") and which would be
integrated with the sale of the Preferred Shares to the Buyer or the issuance of
Common Shares upon conversion thereof or upon exercise of the Warrants or the
Dividend Shares in payment of dividends thereon for purposes of the Stockholder
Approval Rule.
(p) ABSENCE OF RIGHTS AGREEMENT. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Company and the Buyer acknowledge and
agree that (1) the Preferred Shares and the Warrants have not been and are not
being registered under the provisions of the 1933 Act and, except as provided in
the Registration
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Rights Agreement with respect to the resale of the Common Shares, the Common
Shares have not been and are not being registered for resale under the 1933 Act,
and the Securities may not be transferred unless (A) subsequently registered for
resale thereunder or (B) the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; (2) any resale
of the Securities made in reliance on Rule 144 promulgated under the 1933 Act
may be made only in accordance with the terms of said Rule and further, if said
Rule is not applicable, any such resale of Securities under circumstances in
which the seller, or the person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder (other than pursuant to Section 4(d) hereof and
pursuant to the Registration Rights Agreement).
(b) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees that
the Preferred Shares shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
Preferred Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in the
absence of an effective registration statement for the securities under the
Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
The number of shares constituting the portion of the Maximum Share Amount,
as defined in the Certificate of Designations of the Series B Convertible
Preferred Stock (the "Certificate of Designations"), allocated to the
shares represented by this certificate for purposes of conversion thereof
is 1,149,188.
Section 10(b)(3)(A) of the Certificate of Designations permits a holder of
the securities represented by this certificate to convert such securities
in accordance with the Certificate of Designations without being required
to surrender this certificate to the Company unless all of the securities
represented hereby are so converted. Consequently, following conversion of
any of the securities represented by this certificate, the number of shares
represented by this certificate may be less
-16-
than the number of shares stated hereon. Upon request of any proposed
transferee of this certificate, the Company will provide confirmation of
the number of shares evidenced by this certificate.
(2) The Buyer further acknowledges and agrees that the Warrants shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Warrants):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
(3) The Buyer further acknowledges and agrees that until such time as
the Common Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Common Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the certificates
for the Common Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned in
the absence of an effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
(4) Once the Registration Statement required to be filed by the
Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for any
Common Shares issued prior to the date such Registration Statement is declared
effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days (as defined in the Certificate of Designations) after
surrender of such certificates by the Buyer and (2) the Company shall not place
any restrictive legend on certificates for Common Shares issued on conversion of
or as dividends on the Preferred Shares or upon exercise of the Warrants or
impose any stop-transfer restriction thereon.
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(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement in the form attached hereto as ANNEX IV
on or before the Closing Date.
(d) FORM D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Buyer promptly after such filing. The Buyer agrees to cooperate with the
Company in connection with such filing and, upon request of the Company, to
provide all information relating to the Buyer reasonably required for such
filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the
Closing Date, the Company shall file a notification for listing of additional
shares with the Nasdaq relating to the Common Shares and shall provide evidence
of such filing to the Buyer. So long as the Buyer beneficially owns any of the
Preferred Shares, the Dividend Shares, the Warrants or the Common Shares, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
(f) USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System ("margin stock"). The proceeds of sale of the Preferred Shares will be
used for general working capital purposes and in the operation of the Company's
business. None of such proceeds will be used, directly or indirectly (1) to
make any loan to or investment in any other person (other than financing the
Company's subsidiaries in the ordinary course of business or in connection with
an acquisition of another corporation or business or assets of another
corporation or business) or (2) for the purpose, whether immediate, incidental
or ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute the transactions contemplated by this Agreement a
"purpose credit" within the meaning of such Regulation G. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the transactions contemplated hereby to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the 1934 Act, in each case as in effect
now or as the same may hereafter be in effect.
(g) BLUE SKY LAWS. On or before the Closing Date, the Company shall
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take such action as shall be necessary to qualify, or to obtain an exemption
for, the Preferred Shares for sale to the Buyer and the Warrants for issuance to
the Buyer pursuant to this Agreement and the Common Shares for issuance to the
Buyer on conversion of the Preferred Shares under such of the securities or
"blue sky" laws of jurisdictions as shall be applicable to the sale of the
Preferred Shares and the issuance of the Warrants pursuant to this Agreement and
the issuance to the Buyer of Common Shares on conversion of the Preferred Shares
and exercise of the Warrants. The Company shall furnish copies of all filings,
applications, orders and grants or confirmations of exemptions relating to such
securities or "blue sky" laws on or prior to the Closing Date.
(h) CERTAIN EXPENSES. If the closing occurs, the Company shall pay
or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer and the Buyer's due
diligence expenses) not in excess of $30,000 incurred by the Buyer in connection
with this Agreement and the transactions contemplated hereby and the buyer under
the Other Subscription Agreement. In addition, the Company or the Buyer, as the
case may be, shall pay on demand all expenses incurred by the other party,
including reasonable attorneys' fees and expenses, as a consequence of, or in
connection with (1) the negotiation, preparation or execution of any amendment,
modification or waiver of this Agreement, the Certificate of Designations, the
Registration Rights Agreement, the Warrants, the Transfer Agent Agreement and
the other agreements and instruments contemplated hereby and thereby requested
by the requesting party, (2) any default or breach of any of the defaulting or
breaching party's obligations set forth in any of such agreements or instruments
and (3) the enforcement or restructuring of any right of, including the
collection of any payments due, the other party under any of such agreements or
instruments, including any action or proceeding relating to such enforcement, or
any order, injunction or other process seeking to restrain a party from paying
any amount due the other party, in which the other party prevails.
(i) CERTAIN ISSUANCES OF SECURITIES. (1) Unless the Company obtains
the Stockholder Approval (as defined in the Certificate of Designations) or a
waiver thereof from the Nasdaq, the Company will not issue any shares of Common
Stock or shares of any other series of preferred stock or other securities
convertible into, exchangeable for, or otherwise entitling the holder to
acquire, shares of Common Stock which would be subject to the requirements of
the Stockholder Approval Rule and which would be integrated with the sale of the
Preferred Shares and issuance of the Warrants to the Buyer or the issuance of
Common Shares upon conversion of the Preferred Shares or Dividend Shares or upon
exercise of the Warrants for purposes of the Stockholder Approval Rule.
(2) During the period from the date of this Agreement to the date on
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which the Registration Statement (as defined in the Registration Rights
Agreement) shall have been effective with the SEC for 180 consecutive days, the
Company shall not offer, sell, contract to sell or issue (or engage any person
to assist the Company in taking any such action) (A) any security (whether debt
or equity) with conversion or exchange terms similar in nature to the conversion
rights of the Preferred Stock or (B) any equity securities or securities
convertible into, exchangeable for or otherwise entitling the holder to acquire,
any Common Stock at a price below the market price of the Common Stock on the
date of such issuance (or below an average market price for a reasonable period
prior to such issuance) or the date of conversion, exchange or other exercise
thereof (collectively, "Equity Securities"); PROVIDED, HOWEVER, that nothing in
this Section 4(i)(2) shall prohibit the Company from issuing securities (w)
pursuant to compensation plans for employees, directors, officers, advisers or
consultants of the Company and in accordance with the terms of such plans as in
effect as of the date of this Agreement, (x) upon exercise of conversion,
exchange, purchase or similar rights issued, granted or given by the Company and
outstanding as of the date of this Agreement and disclosed in the SEC Reports or
this Agreement, (y) pursuant to a public offering underwritten on a firm
commitment basis registered under the 1933 Act or (z) as part of a transaction
involving a strategic alliance, acquisition of stock or assets, merger,
collaboration, joint venture, partnership or other similar arrangement of the
Company with another corporation, partnership or other business entity which is
engaged in a business similar to or related to the business of the Company, so
long as in the case of this clause (z) the Board of Directors by resolution duly
adopted (and a copy of which shall be furnished to the Buyer promptly after
adoption) determines that such issuance is fair to the holders of each class and
series of capital stock of the Company and to the Buyer in respect of its equity
interest in the Company that is represented by the Preferred Shares, the
Dividend Shares, if any, and the Warrants.
(3) Subject to the restrictions in Section 4(i)(1), during the period
from the date of execution and delivery of this Agreement to the date which is
one year after the Closing Date, the Company shall not offer, sell, contract to
sell or issue (or engage any person to assist the Company in taking any such
action) any Equity Securities without giving the Buyer the first right to
acquire the Equity Securities on the same terms as the Equity Securities are to
be offered to other investors; PROVIDED, HOWEVER, that this Section 4(i)(3)
shall not apply to the offer or sale of Equity Securities by the Company in the
transactions, and subject to the conditions, set forth in clauses (w), (x), (y)
and (z) of the proviso to the first sentence of Section 4(i)(2) above. The
Company shall give notice to the Buyer of the detailed terms of the Equity
Securities proposed to be issued and, promptly after requested by the Buyer,
such other information as requested by the Buyer. The Buyer may, by notice to
the Company, exercise such right of first refusal at any time until the later of
(x) 15 Business Days after such notice from the Company to the Buyer
-20-
and (y) five Business Days after the Company provides such additional
information as shall have been requested by the Buyer.
(j) STOCKHOLDER APPROVAL. The Company shall seek and use its best
efforts to obtain at the Company's next regularly scheduled Annual Meeting of
Stockholders, Stockholder Approval of the issuance of all shares of Preferred
Stock issuable pursuant to the Certificate of Designations and all shares of
Common Stock issuable upon conversion of the Preferred Stock. The Company shall
prepare and file with the SEC within 30 days prior to the scheduled mailing of
notice of such Annual Meeting preliminary proxy materials which set forth a
proposal to seek such Stockholder Approval. The Company shall provide the Buyer
an opportunity to consult with the Company regarding the content of such proxy
materials insofar as it relates to the Stockholder Approval by providing copies
of such preliminary proxy materials and any revised preliminary proxy materials
to the Buyer a reasonable period of time prior to their filing with the SEC.
Such consultation shall occur within five Business Days after the Buyer's
receipt of each proposed draft of such materials. The Company shall furnish to
the Buyer and its counsel a copy of its definitive proxy materials for such
Annual Meeting and any amendments or supplements thereto promptly after the same
are mailed to stockholders or filed with the SEC.
(k) CERTAIN TRADING RESTRICTIONS. The Buyer agrees that on the
Closing Date it will have no short position in the Common Stock. So long as (i)
the Company is in compliance in all material respects with its obligations to
the Buyer under this Agreement, the Certificate of Designations, the Warrants
and the Registration Rights Agreement or (ii) any noncompliance with such
obligations is cured within ten Business Days of the Company's receipt of notice
thereof from the Buyer, the Buyer agrees on its behalf and on behalf of its
Affiliates (as defined in the Certificate of Designations) that it will not
engage in any short sales or other hedging transactions relating to the Common
Stock; PROVIDED, HOWEVER, that for purposes of this Agreement any such
transaction involving a number of shares of Common Stock which does not exceed
the number of shares for which a Conversion Notice (as defined in Section 5(b))
has been submitted to the Transfer Agent (as defined in Section 5(a)) and the
Company shall not be deemed to be a short sale or hedging transaction.
(l) RESTRICTION ON CONVERSIONS. So long as the Company is in
compliance in all material respects with its obligations to the Buyer under this
Agreement, the Certificate of Designations, the Warrants and the Registration
Rights Agreement, the aggregate number of Limitation Shares (as defined below)
in any period of 30 consecutive days through November 30, 1999 shall not exceed
20% of the number of Preferred Shares purchased by the Buyer on the Closing
Date. For purposes of this Agreement, "Limitation
-21-
Shares" means, for each conversion of Preferred Shares pursuant to the
Certificate of Designations, the number of Preferred Shares converted into
Common Stock when the Volume-Weighted Trading Price (as defined below) of the
Common Stock on the Conversion Date for such conversion is less than 110% of the
Conversion Price (as defined in the Certificate of Designations) applicable to
such conversion; and "Volume-Weighted Trading Price" for any security for any
period means the quotient obtained by dividing (A) the sum for all trades
(regular way) of such security between 9:15 a.m. and 4:30 p.m., Eastern Time, on
each Trading Day during such period on the principal securities market for such
security of the product of (x) the number of shares of such security traded in
each trade TIMES (y) the price at which such security was traded in such trade
BY (B) the sum of the number of shares of such security traded in all such
trades, as reported by Bloomberg, L.P. in its AQR function for such security.
(m) RESTRICTION ON BENEFICIAL OWNERSHIP. So long as the Company is
in compliance in all material respects with its obligations to the Buyer under
this Agreement, the Certificate of Designations, the Warrants and the
Registration Rights Agreement, the Buyer agrees to (i) comply with the
restrictions on beneficial ownership of Common Stock set forth in the proviso to
the second sentence of Section 10(a) of the Certificate of Designations as if
the reference to "4.9%" therein were reduced to 3.0625% and (ii) require any
transferee of the Preferred Shares or the Warrants to agree in writing with the
Company to be bound by this Section 4(m).
(n) BEST EFFORTS. Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Preferred Shares set forth in Section 7 or 8, as the case
may be, of this Agreement on or before the Closing Date.
5. TRANSFER AGENT AGREEMENT; CONVERSION PROCEDURE.
(a) TRANSFER AGENT AGREEMENT. Prior to the Closing Date, the Company
will (1) execute and deliver the Transfer Agent Agreement in the form attached
hereto as ANNEX V and thereby irrevocably instruct, American Securities Transfer
& Trust, Inc., as Transfer Agent and Registrar (the "Transfer Agent"), to issue
certificates for the Common Shares from time to time upon conversion of the
Preferred Shares and the Dividend Shares and exercise of the Warrants in such
amounts as specified from time to time to the Transfer Agent in the Notices of
Conversion surrendered in connection with such conversions and referred to in
Section 5(b) of this Agreement and the Form of Subscription in the form attached
to the Warrants and (2) appoint the Transfer Agent the conversion agent for the
Preferred Stock and the exercise agent for the Warrants. The certificates for
the Common Shares may bear the restrictive legend specified in Section
-22-
4(b) of this Agreement prior to registration of the resale of the Common Shares
under the 1933 Act. The certificates for the Common Shares shall be registered
in the name of the Buyer or its designee and in such denominations to be
specified by the Buyer in connection with each conversion of Preferred Shares or
Dividend Shares or exercise of the Warrants. The Company warrants that no
instruction other than (x) such instructions referred to in this Section 5, (y)
stop transfer instructions to give effect to Section 4(a) prior to registration
of the resale of the Common Shares under the 1933 Act and (z) the instructions
required by Section 3(n) of the Registration Rights Agreement will be given by
the Company to the Transfer Agent and that the Common Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement. Nothing in this Section 5(a) shall limit in any way
the Buyer's obligations and agreement to comply with the registration
requirements of the 1933 Act upon resale of the Common Shares. If the Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company and its legal counsel, that
registration of a resale by the Buyer of ny of the Securities is not required
under the 1933 Act, the Company shall permit the transfer of such Securities
and, in the case of the Common Shares, in accordance with clause (1)(B) of
Section 4(a) of this Agreement, promptly instruct the Transfer Agent to issue
upon transfer one or more share certificates in such name and in such
denominations as specified by the Buyer within three Business Days after receipt
of such opinion. Nothing in this Section 5(a) shall limit the obligations of
the Company under Section 3(n) of the Registration Rights Agreement.
(b) CONVERSION PROCEDURE. In connection with the exercise of
conversion rights relating to the Preferred Shares and the Dividend Shares, the
Buyer or any subsequent holder of the Preferred Shares shall complete, sign and
furnish to the Transfer Agent and the Company a Notice of Conversion of Series B
Convertible Preferred Stock in the form attached hereto as ANNEX VI (a
"Conversion Notice"), which shall be deemed to satisfy all requirements of the
Certificate of Designations.
6. CLOSING DATE.
Subject to the satisfaction or waiver of the conditions set forth in
Sections 7 and 8, the date and time of the issuance and sale of the Preferred
Shares and the issuance of the Warrants (the "Closing Date") shall be 12:00
noon, New York City time, on or before the date which is one Business Day after
the date the Buyer has deposited the Purchase Price with the Escrow Agent in
accordance with Section 1(b), or such other mutually agreed to time. The
closing shall occur on the Closing Date at the Law Offices of ▇▇▇▇▇ ▇ ▇▇▇▇▇,
Penthouse Suite, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND
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ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares and issue the Warrants to the Buyer pursuant to this Agreement
is conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred
Shares in accordance with Section 1(b) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares and acquire the Warrants on the Closing Date is conditioned
upon the satisfaction of the following conditions precedent on or before the
Closing Date (any or all of which may be waived by the Buyer in its sole
discretion):
(a) Delivery by the Company to the Escrow Agent of the certificates
for the Preferred Shares and the Warrants in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date, and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer of the Company confirming such matters and
such other matters as the Buyer may reasonably request;
(c) The receipt by the Buyer of confirmation of the filing with the
Secretary of State of the State of Delaware of the Certificate of Designations;
-24-
(d) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation, as amended, and By-Laws of the Company as in effect on the
Closing Date and (2) all resolutions of the Board of Directors (and committees
thereof) of the Company relating to this Agreement and the transactions
contemplated hereby;
(e) The Transfer Agent shall have executed and delivered the Transfer
Agent Agreement in the form attached hereto as ANNEX V; and
(f) Receipt by the Buyer on the Closing Date of an opinion of ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLC, counsel for the Company, dated the Closing
Date, in form, scope and substance reasonably satisfactory to the Buyer, to the
effect set forth in ANNEX VII attached hereto.
9. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado.
(b) COUNTERPARTS. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party. Although this Agreement is dated as of the date first
set forth above, the actual date of execution and delivery of this Agreement by
each party is the date set forth below such party's signature on the signature
page hereof. Any reference in this Agreement or in any of the documents
executed and delivered by the parties hereto in connection herewith to (1) the
date of execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement or the date of execution and delivery of this
Agreement by the Buyer and the Company shall be deemed a reference to the later
of the dates set forth below the signatures of the parties on the signature page
hereof.
(c) HEADINGS, ETC. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or
-25-
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) AMENDMENTS. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) WAIVERS. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be delivered personally (which shall include
telephone line facsimile transmission with answer back confirmation) or by
courier and shall be effective upon receipt, in the case of the Company
addressed to the Company at its address shown in the introductory paragraph of
this Agreement, Attention: Chief Executive Officer (telephone line facsimile
transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or, in the case of the Buyer, at its address
or telephone line facsimile transmission number shown on the signature page of
this Agreement, with a copy to Genesee International, Inc., ▇▇▇▇▇ ▇.▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (telephone line facsimile
transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or such other address or telephone line
facsimile transmission number as a party shall have provided by notice to the
other party in accordance with this provision. The Buyer hereby designates as
its address for any notice required or permitted to be given to the Buyer
pursuant to the Certificate of Designations the address shown on the signature
page of this Agreement, with a copy to: Advantage Fund II Ltd., c/o Genesee
International, Inc., 10500 ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (facsimile number (▇▇▇) ▇▇▇-▇▇▇▇), until the Buyer shall designate
another address for such purpose.
(h) ASSIGNMENT. Prior to the Closing Date, the Buyer may not assign
its rights and obligations under this Agreement. Any transfer of the Preferred
Shares or the Warrants by the Buyer after the Closing Date shall be made in
accordance with Section 4(a). After the Closing Date, the Buyer shall have the
right to assign its rights and
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obligations under this Agreement in connection with any transfer of the Buyer's
rights under the Registration Rights Agreement by compliance with the provisions
of Section 9 of the Registration Rights Agreement and Section 4(m) of this
Agreement.
(i) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of and
payment for the Preferred Shares and shall remain in full force and effect
regardless of any investigation made by or on behalf of them or any person
controlling or advising any of them.
(j) ENTIRE AGREEMENT. This Agreement and its Schedules and Annexes
set forth the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, with respect thereto.
(k) TERMINATION. The Buyer shall have the right to terminate this
Agreement by giving notice to the Company at any time at or prior to the Closing
Date if:
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any of
its obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before December 15, 1998, other than solely by reason of a breach of this
Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(l) FURTHER ASSURANCES. Each party to this Agreement will perform
any and all acts and execute any and all documents as may be necessary and
proper under the circumstances in order to accomplish the intents and purposes
of this Agreement and to carry out its provisions.
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(m) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the
Buyer shall have the right to approve before issuance any press releases or any
other public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law or Nasdaq
regulation (although the Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
(n) 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.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
and the Company by their respective officers or other representatives thereunto
duly authorized on the respective dates set forth below.
NUMBER OF SHARES:
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE:
ADVANTAGE FUND II LTD.
By:
▇.▇. ▇▇▇▇▇
President
Date:
Address: ▇/▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ Antilles
Facsimile No.: 011-599-9732-2008
ROCKY MOUNTAIN INTERNET, INC.
By:
Name:
Title:
Date:
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