EXHIBIT 10.13
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of December 10, 2001 by
and among XxxxxxXxxxxxx.xxx Corp., a Texas corporation (the "COMPANY"), and the
undersigned investors (the "INVESTOR").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $10,000,000 to
purchase the Company's common stock, $.0001 par value per share (the "COMMON
STOCK");
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) under the Securities Act of 1933, as amended (the "1933 ACT"), Rule
506 of Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the 1933
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder.
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 or indicated, 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.
"BRING DOWN COLD COMFORT LETTER" shall have the meaning specified in Section
2(n).
"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).
"CLOSING DATE" shall mean, as defined in Section 2(h), the date which is
thirteen (13) Trading Days following the Put Notice Date.
"COMMON STOCK" shall mean the Common Stock 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.
"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 First Union National Bank.
"ESCROW AGREEMENT" shall mean the Escrow Agreement entered into between the
Company, Investor and Escrow Agent and attached as Exhibit C.
"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.
"INVESTOR" shall mean the undersigned investors.
"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).
"MAXIMUM COMMON STOCK ISSUANCE" shall have the meaning specified in Section
2(j).
"MINIMUM ACCEPTABLE PRICE" with respect to any Put Date shall mean 75% of the
Volume Weighted Average Price for the fifteen (15) Trading Day period
immediately preceding such Put Notice Date.
"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 forty-eight (48) months from the Effective Date and (ii)
termination of the Agreement in accordance with Section 9.
"PAYMENT AMOUNT" shall have the meaning specified in Section 2(p).
"PARTIAL RELEASE FORM" shall have the meaning specified in Section 2(i).
"PRICING 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.
"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 total amount being paid by both Investors on a
particular Closing Date to purchase the Shares.
"PURCHASE PRICE" shall mean 94% of the average of the three (3) lowest closing
bid prices of the Company's Common Stock during ten (10) Trading Day Pricing
Period.
"PUT AMOUNT" shall mean, with respect to any single Put Notice, one hundred
seventy-five percent (175%) of the average daily volume (U.S. market only) for
the forty (40) Trading Days prior to the applicable Put Notice Date multiplied
by the average of the three (3) daily closing bid prices immediately preceding
the Put Date, but in no event more than $1,000,000.
"PUT NOTICE" shall mean a written notice sent to the Investor by the Company
stating the Put 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.
"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).
"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 issued pursuant to the terms
of the Agreement.
"SHARES" shall mean the shares of common stock of the Company having a par value
of $.0001 per share.
"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 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).
"VOLUME WEIGHTED AVERAGE 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 $10,000,000.
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 Put Amount of Shares which the Company intends to sell to the
Investor during the Pricing Period. In addition, the Put Amount designated by
the Company in a Put Notice shall be equal to one hundred seventy-five percent
(175%) of the average daily volume (U.S. market only) for the forty (40) Trading
Days prior to the applicable Put Notice Date multiplied by the average of the
three (3) daily closing bid prices immediately preceding the Put Date, but in no
event more than $1,000,000. Once the Put Notice is received by the Investor the
Put Notice shall not be terminated, withdrawn or otherwise revoked by the
Company except as set forth in this Agreement. During the Open Period, the
Company shall not be entitled to submit a Put Notice until after the previous
closing has been completed. The Purchase Price shall be equal to 94% of the
average of the three (3) lowest closing bid prices of the Company's Common Stock
during the ten (10) Trading Day Pricing Period.
The Company shall, in its sole discretion, be entitled to terminate the
balance of the current Put Notice, if the closing bid price during the
applicable Pricing Period with respect to that Put Notice is less than
seventy-five percent (75%) of the Volume Weighted Average Price of the Common
Stock for the fifteen (15) Trading Days prior to the Put Notice Date ("MINIMUM
ACCEPTABLE PRICE"). In the event that the closing bid price for the applicable
Pricing Period is less than the Minimum Acceptable Price, the Company may elect,
by sending written notice to the Investors via facsimile, to cancel that portion
of the Put Notice remaining for that number of Trading Days remaining after the
written cancellation notice is deemed received by the Investors. The written
---------------
notice shall be deemed received by the Investors on (i) the Trading Day it is
---------------
received by facsimile or otherwise by the Investors if such notice is received
on or prior to 12:00 noon New York time, or (ii) the immediately succeeding
Trading Day if it is received by facsimile after 12:00 noon New York time on a
Trading Day or at anytime on a day which is not a Trading Day. The Company
shall still be responsible however, for delivering that number of shares of
Common Stock to the Escrow Agent that were sold by the Investors through and
including the end of the Trading Day the written cancellation notice is deemed
------
received by the Investors.
-------
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 Put
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. Interest. It is the intention of the parties that only interest
--------
that may be 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 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 Pricing Period that number of Shares having an aggregate Purchase
Price equal to the lesser of (i) the Put Amount set forth in the Put Notice, and
(ii) 15% of the aggregate trading volume during the applicable Pricing Period
times (x) the average of the three (3) lowest closing bid prices of the
Company's Common Stock during the specified Pricing 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. The Company acknowledges that there are two entities that will
sign as Investor and that each Put Notice will be divided between them equally.
PLJ Limited, LLC, a Delaware limited liability company, shall be obligated to
provide fifty percent (50%) of the Put Amount of each Put Notice and Dutchess
Private Equities Fund, L.P., a Delaware limited partnership shall be obligated
to provide fifty percent (50%) of the Put Amount of each Put Notice.
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 Pricing 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 Pricing Period than on the Put Notice Date associated with such
Pricing Period, then the number of Shares of Common Stock outstanding on such
date during such Pricing 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 Pricing
Period;
(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 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
Pricing Period, then the Investor shall have no obligation to purchase the Put
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 thirteen (13) Trading Days following the Put Notice Date (a "CLOSING
DATE"). Prior to each Closing Date, (i) the Company shall deliver to the Escrow
Agent pursuant to the Escrow Agreement, annexed hereto as Exhibit C,
certificates representing the Shares to be issued to the Investor on such date
and registered in the name of the 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 lieu of delivering physical
certificates representing the Common Stock and provided that the Transfer Agent
then is participating in The Depository Trust Company ("DTC") Fast Automated
---
Securities Transfer ("FAST") program, upon request of the Investor, the Company
----
shall use its commercially reasonable efforts to cause the Transfer Agent to
electronically transmit the shares of Common Stock by crediting the account of
each Investors' prime broker (which shall be specified by that Investor a
reasonably sufficient time in advance) with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system, and provide proof satisfactory to the Escrow
----
Agent of such delivery.
The Company understands that a delay in the issuance of Shares beyond the
Closing Date could result in economic loss to the Investor. After the Effective
Date, as compensation to the Investor for such loss, the Company agrees to pay
late payments to the Investor for late issuance of Shares in accordance with the
following schedule (where "No. of Days Late" is defined as the number of days
beyond the Closing Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
------------------- --------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
Over 10 $1,000 + $200 for each
Business Day late beyond 10
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Investor's right to
pursue actual damages for the Company's failure to issue and deliver the Shares
to the Investor, except to the extent that such late payments shall constitute
payment for and offset any such actual damages alleged by the Investor, and any
Buy In Adjustment Amount.
i. Partial Release of Shares. After Investor has received a Put
---------------------------
Notice, but prior to the related Closing Date, the Investor, may authorize the
Escrow Agent to release, every five (5) 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 (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
appropriate Investor and faxed to the Company 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 94% of the lowest closing bid price
during that number of Trading Days of the Pricing Period that have expired.
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 Amount being released to the
Company and the balance of the Shares owed to Investor being released to
Investor.
j. Overall Limit on Common Stock Issuable. Notwithstanding anything
------------------------------------------
contained herein to the contrary, if during the Open Period the Company becomes
listed on an exchange that limits the number of shares of Common Stock that may
be issued without shareholder approval, then the number of Shares issuable by
the Company and purchasable by the Investor, including the shares of Common
Stock issuable to the Investors pursuant to Section 11(b), shall not exceed that
number of the shares of Common Stock that may be issuable without shareholder
approval, 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 to the Investors pursuant to Section 11(b), 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. 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 "Pricing 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;
(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
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 occurring during a Pricing Period.
m. Accountant's Letter and Registration Opinion. Whenever reasonably
------------------------------------------------
requested by Investor, the Company shall cause to be delivered to the Investor,
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.
n. (i) Whenever reasonably requested by Investor, 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 as a result of the Company to timely file its financials,
the Company shall repurchase within thirty (30) calendar days of the occurrence
of one of the events listed in clauses (i), (ii), (iii) or (iv)above (each a
"REPURCHASE EVENT") 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 occurrence of the Repurchase Event 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 is paid by the
Company for the repurchase of the Shares (the "PAYMENT AMOUNT"). If the Company
fails to pay to the Investor the full aggregate Payment Amount within ten (10)
calendar days of the occurrence of a Repurchase Event, 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 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. Accredited Investor. Investor is an "Accredited Investor" as that
---------------------
term is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
e. 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 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
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 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 pursuant to this Agreement, have
been duly and validly authorized by the Company's Board of Directors 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) 100,000,000 shares of Common Stock, of which a s
of December 10, 2001 14,890,872 shares are issued and outstanding, 0 shares of
Preferred Stock and approximately 1,301,232 shares of Common Stock are issuable
upon the exercise of options, warrants and conversion rights. All outstanding
warrants have an expiration date of no later than December 1, 2004. 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) which is
attached hereto and made a part hereof, (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.
d. Issuance of Shares. A sufficient number of Shares issuable
--------------------
pursuant to this Agreement 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 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.
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 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 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, 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.
v. Right of First Refusal. The Company shall not, directly or indirectly,
----------------------
without the prior written consent of Investor offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its Common Stock or securities
convertible into Common Stock at a price that is less than the market price of
the Common Stock at the time of issuance of such security or investment (a
"SUBSEQUENT FINANCING") for a period of one year after the Effective Date,
except (i) the granting of options or warrants to employees, officers, directors
and consultants, and the issuance of shares upon exercise of options granted,
under any stock option plan heretofore or hereinafter duly adopted by the
Company, (ii) shares issued upon exercise of any currently outstanding warrants
or options and upon conversion of any currently outstanding convertible
debenture or convertible preferred stock, in each case disclosed pursuant to
Section 4(c), (iii) securities issued in connection with the capitalization or
creation of a joint venture with a strategic partner, (iv) shares issued to pay
part or all of the purchase price for the acquisition by the Company of another
entity (which, for purposes of this clause (iv), shall not include an individual
or group of individuals), and (v) shares issued in a bona fide public offering
by the Company of its securities, unless (A) the Company delivers to Investor a
------
written notice (the "SUBSEQUENT FINANCING NOTICE") of its intention to effect
such Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, the person with whom such Subsequent
Financing shall be effected, and attached to which shall be a term sheet or
similar document relating thereto and (B) Investor shall not have notified the
Company by 5:00 p.m. (New York time) on the fifth (5th) Trading Day after its
receipt of the Subsequent Financing Notice of its willingness to provide,
subject to completion of mutually acceptable documentation, financing to the
Company on substantially the terms set forth in the Subsequent Financing Notice.
If Investor shall fail to notify the Company of its intention to enter into such
negotiations within such time period, then the Company may effect the Subsequent
Financing substantially upon the terms set forth in the Subsequent Financing
Notice; PROVIDED THAT the Company shall provide Investor with a second
Subsequent Financing Notice, and Investor shall again have the right of first
refusal set forth above in this Section, if the Subsequent Financing subject to
the initial Subsequent Financing Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Financing Notice within thirty
(30) Trading Days after the date of the initial Subsequent Financing Notice. The
rights granted to Investor in this Section are not subject to any prior right of
first refusal given to any other person except as disclosed on Schedule 4(c).
w. Lock-up. The Company agrees to use its best efforts to have its officers,
-------
directors and affiliates refrain from selling Common Stock during each Pricing
Period.
x. No General Solicitation. Neither the Company, nor any of its affitilates,
--------------------------
nor any person acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Common Stock offered hereby.
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, 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 fees as set forth in the
Transaction Documents) 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 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. 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, or (iii) any
agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. 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.
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 gross
-------------
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 gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if 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. 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 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"), the Company shall pay to the
Investor 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 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.
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 may request an update as of such Closing Date
regarding the representation contained in Section 4(c) above.
d. Investor shall have received an opinion letter of the Company's
counsel on or before the Execution Date.
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, (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.
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.
9. TERMINATION. This Agreement shall terminate upon any of the
following events:
(i) when the Investor has purchased an aggregate of $10,000,000 in the Common
Stock of the Company pursuant to this Agreement; provided that the Company's
representations, warranties and covenants contained in this Agreement 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 forty-eight (48) 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 (other than the current
convertible debenture offering) or enter into any other equity financing
facility during the Open Period, other than in compliance with Section 4(v);
(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 during the
Open Period;
(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 1934 Act or listed or
traded on the Principal Market; or
(viii) 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.
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 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 Texas 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. Commitment Fees; Placement Agent Fees; Advisory Fees; Legal Fees; and
-------------------------------------------------------------------------
Escrow Fees.
----------
(i) As an inducement to Dutchess Private Equities, L.P. to enter into this
Agreement, the Company has agreed to issue to Dutchess Private Equities, L.P. as
a commitment fee that number of shares of Common Stock equal to $37,500 divided
by the closing bid price of the Company's Common Stock on the Execution Date.
These shares will be registered in the current offering and one-half of the
shares shall be issued to Dutchess Private Equities, L.P. in certificate form no
later than two (2) Trading Days after the Execution Date and one-half of the
shares shall be issued to Dutchess Private Equities, L.P. in certificate form no
later than sixty (60) calendar days after the Execution Date.
(ii) The Company has agreed to issue to May Xxxxx Group, Inc., as
part of its placement fee, that number of shares of Common Stock equal to
$150,000 divided by the closing bid price of the Company's Common Stock on the
Execution Date. These shares will be registered in the current offering and
one-half of the shares shall issuable to May Xxxxx Group, Inc. in certificate
form no later than two (2) Trading Days following the Execution Date and
one-half of the shares shall be issued to May Xxxxx Group, Inc. in certificate
form no later than sixty (60) calendar days after the Execution Date.
Additionally, on each Closing Date the Company shall pay to May Xxxxx Group,
Inc., as part of its placement fee an amount equal to 5.0% of the Purchase
Amount being paid by PLJ Limited, LLC, which amount shall be deducted from the
Purchase Amount by the Escrow Agent and paid directly to May Xxxxx Group, Inc.
(iii) Dutchess Advisors, Ltd. is acting in an advisory capacity to one of the
Investors, Dutchess Private Equities Fund, L.P., and the Company has agreed to
pay an amount in cash and Common Stock for the advisory services being rendered
to that Investor. On each Closing Date the Company shall pay to Dutchess
Advisors, Ltd., as part of its advisory fee, an amount equal to 5.0% of the
Purchase Amount being paid by Dutchess Private Equities Fund, L.P., which amount
shall be deducted from the Purchase Amount by the Escrow Agent and paid directly
to Dutchess Advisors, Ltd. The Company shall also issue to Dutchess Advisors,
Ltd., as part of its advisory fee, that number of shares of Common Stock equal
to $112,500 divided by the closing bid price of the Company's Common Stock on
the Execution Date. These shares will be registered in the current offering and
one-half of the shares shall be issued to Dutchess Advisors, Ltd. in certificate
form no later than two (2) Trading Days after the Execution Date and one-half of
the shares shall be issued to Dutchess Advisors, Ltd. in certificate form no
later than sixty (60) calendar days after the Execution Date.
(iv) The Company shall issue to Investors' counsel, Xxxxxx X. XxXxxxx,
Esq., 200% of that number of shares of Common Stock equal to $20,000 divided by
the closing bid price of the Company's Common Stock on the Execution Date.
These shares will be registered in the current offering and issued to Xxxxxx X
XxXxxxx no later than two (2) Trading Days after the Execution Date.
(v) The Company shall also pay the Escrow Agent for escrow services
pursuant to a separate escrow agreement.
(vi) 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; Singular/Plural. The headings of this Agreement are for
---------------------------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.
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 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 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:
XxxxxxXxxxxxx.xxx Corp.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, CEO
Telephone: 000-000-0000
Facsimile:
And
Xxxxxxx Xxxxxxx, Esq.
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Investor:
At the address listed in the Questionnaire
With a copy to:
Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telephone No.: 000-000-0000
Telecopier No.: 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.
h. No Assignment. This Agreement may not be assigned.
--------------
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. 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. Except as set forth in this Agreement, 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, 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.
q. The Company agrees that the Investors shall be severally and not
jointly liable for the representations, covenants and warranties made in this
Agreement. Also the Company agrees that the Investors shall be severally and
not jointly liable for any breaches of this Agreement, so that each Investor
shall bear its own liability based on which Investor caused such breach.
[Balance of this page intentionally left blank.]
XXXXXXXXXXXXX.XXX CORP.
QUESTIONNAIRE
The information contained in this Questionnaire is being furnished in order
to determine whether the undersigned's subscription to purchase the Shares
described in this Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned understands, however, that the Company may
present this Questionnaire to such parties as it deems appropriate if called
upon to establish that the proposed offer and sale of the Securities is exempt
from registration under the 1933 Act, as amended. Further, the undersigned
understands that the offering may be required to be reported to the Securities
and Exchange Commission, NASDAQ and to various state securities and "blue sky"
regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE COMPANY, THE
UNDERSIGNED MUST COMPLETE FORM W-9.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.
1. The undersigned: (a) has total assets in excess of $5,000,000;
(b) was not formed for the specific purpose of acquiring the securities and (c)
has its principal place of business in ___________.
2. The undersigned is a natural person whose individual net worth* or
joint net worth with his or her spouse exceeds $1,000,000.
3. The undersigned is a natural person who had an individual income* in
excess of $200,000 in each of the two most recent years and who reasonably
expects an individual income in excess of $200,000 in the current year. Such
income is solely that of the undersigned and excludes the income of the
undersigned's spouse.
4. The undersigned is a natural person who, together with his or her
spouse, has had a joint income* in excess of $300,000 in each of the two most
recent years and who reasonably expects a joint income in excess of $300,000 in
the current year.
* For purposes of this Questionnaire, the term "net worth" means the excess
of total assets over total liabilities. In determining "income", an investor
should add to his or her adjusted gross income any amounts attributable to
tax-exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to XXX or Xxxxx
retirement plan, alimony payments and any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income.
5. The undersigned is:
(a) a bank as defined in Section 3(a)(2) of the 1933 Act; or
(b) a savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the 1933 Act whether acting in its individual or fiduciary
capacity; or
(c) a broker or dealer registered pursuant to Section 15 of the 1934
Act; or
(d) an insurance company as defined in Section 2(13) of the 1933 Act;
or
(e) An investment company registered under the Investment Company Act
of 1940 or a business development company as defined in Section 2(a)(48) of the
Investment Company Act of 1940; or
(f) a small business investment company licensed by the U.S. Small
Business Administration under Section 301 (c) or (d) of the Small Business
Investment Act of 1958; or
6. The undersigned is an entity in which all of the equity owners are
"accredited investors", as that term is defined in Rule 501(a)(3) of Regulation
D of the 1933 Act.
II. INVESTOR INFORMATION.
(A) IF THE UNDERSIGNED IS AN INDIVIDUAL:
Name _________________________________________
Street Address __________________________________
City, State, Zip Code _____________________________
Phone ____________________ Fax _________________
Social Security Number ___________________________
Send Correspondence to:
_______________________________________________
_______________________________________________
_______________________________________________
(B) IF THE UNDERSIGNED IS NOT AN INDIVIDUAL:
Name of Entity __________________________________
Person's Name ___________________ Title___________
State of Organization ______________________________
Principal Business Address _________________________
City, State, Zip Code ______________________________
Taxpayer Identification Number _____________________
Phone ____________________ Fax _________________
Send Correspondence to:
_______________________________________________
_______________________________________________
_______________________________________________
XXXXXXXXXXXXX.XXX CORP.
SIGNATURE PAGE
--------------
Your signature on this Signature Page evidences your agreement to be bound
by the Questionnaire, Subscription Agreement and Registration Rights Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the undersigned will
notify XxxxxxXxxxxxx.xxx Corp. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned's subscription and
will promptly send XxxxxxXxxxxxx.xxx Corp. written confirmation of such change.
2. The undersigned signatory hereby certifies that he/she has read and
understands the Investment Agreement and Questionnaire, and the representations
made by the undersigned in this Investment Agreement and Questionnaire are true
and accurate.
PLJ LIMITED, LLC
____________________________ By:____________________________________
Date Name: Xxxxxx Xxxxxxxxx
Title: A Managing Member
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
____________________________ By:__________________________________
Date Name:
Title: A Managing Member
COMPANY ACCEPTANCE PAGE
-----------------------
This Subscription Agreement accepted and agreed
to this ____ day of December, 2001.
XXXXXXXXXXXXX.XXX CORP.
By__________________________________
Xxxx Xxxxxx, its CEO
LIST OF EXHIBITS
-----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Opinion of Company's Counsel
EXHIBIT C Escrow Agreement
EXHIBIT D Broker Representation Letter
EXHIBIT E Board Resolution
EXHIBIT F Put Notice
EXHIBITG Partial Release of Put Amount and Shares
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
EXHIBIT B
LAW OFFICES OF
Xxxxxxx Xxxxxxx
phone (000) 000-0000
00000 Xxxxxxxxx Xxxxxx Xxxxx 000 fax (000) 000-0000
Xxxxxxxxxx Xxxxx XX 00000
December 10, 2001
To: The Purchasers of XxxxxxXxxxxxx.xxx Corp.
re: XxxxxxXxxxxxx.xxx Corp.
Dear Ladies and Gentlemen:
We have acted as counsel to XxxxxxXxxxxxx.xxx Corp., a corporation
incorporated under the laws of the State of Texas ("MKCT"), in connection with
the proposed issuance and sale of common stock pursuant to that certain
Investment Agreement (including all Exhibits and Appendices thereto,
collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, MKCT's Certificate of Incorporation, and its
Bylaws, as amended to date, the proceedings of MKCT's Board of Directors taken
in connection with entering into the Agreements, and such other documents,
agreements and records as we deemed necessary to render the opinions set forth
below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than MKCT, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than MKCT, enforceable against such party or parties in accordance with
the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. MKCT has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Texas, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where MKCT owns or leases properties, maintains employees or
conducts business, except for jurisdictions in which the failure to so qualify
would not have a material adverse effect on MKCT, and has all requisite
corporate power and authority to own its properties and conduct its business.
2. The authorized capital stock of MKCT consists of 100,000,000 shares
of Common Stock, $0.0001 par value per share, each Common Voting Equity Stock,
such shares to carry the short title "Common"; and no other class of stock.
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and MKCT has timely
filed all the material required to be filed pursuant to Sections 13(a) or 15(d)
of such Act for a period of at least twelve months preceding the date hereof;
4. When duly countersigned by MKCT's transfer agent and registrar, and
delivered to you or upon your order against payment of the agreed consideration
therefor in accordance with the provisions of the Agreements the Common Stock
will be duly authorized and validly issued, fully paid and nonassessable;
5 MKCT has the requisite corporate power and authority to enter into
the Agreements and to sell and deliver the Common as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by MKCT to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by MKCT or the consummation of the transactions contemplated
thereby; each of the Agreements has been duly and validly executed and delivered
by and on behalf of MKCT, and is a valid and binding agreement of MKCT,
enforceable in accordance with its terms, except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws affecting creditors rights
generally, and except as to compliance with federal, state, and foreign
securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the agreements by MKCT and the performance of its
obligations thereunder do not and will not constitute a breach or violation of
any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) MKCT's Certificate of Incorporation or
By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which MKCT is party or by which it or any of its property is
bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over MKCT or any of its property.
7. The issuance of Common Stock in accordance with the Agreements will
not violate the applicable listing agreement between MKCT and any securities
exchange or market on which MKCT's securities are listed.
8. To the best of our knowledge, after due inquiry, there is no pending
or threatened litigation, investigation or other proceedings against MKCT.
9. MKCT complies with the eligibility requirements for the use of Form
SB-2, under the Securities Act of 1933, as amended.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the Corporate Laws of the State of Texas and does not include an interpretation
or statement concerning the laws of any other state or jurisdiction. Insofar as
the enforceability of the Agreements may be governed by the laws of other
states, we have assumed that such laws are identical in all respects to the laws
of the State of Texas.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
WS:zbe Xxxxxxx Xxxxxxx
See Agreements
EXHIBIT D
[BROKER'S LETTERHEAD]
Date
Via Facsimile
Attention:
______________________
______________________
______________________
Re: XXXXXXXXXXXXX.XXX CORP.
Dear __________________:
It is our understanding that the Form______ Registration Statement bearing SEC
File Number ( ___-______) filed by XXXXXXXXXXXXX.XXX CORP. on Form _____ on
__________, 2001 was declared effective on _________, 200_.
This letter shall confirm that ______________ shares of the common stock of
XXXXXXXXXXXXX.XXX CORP. 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.
EXHIBIT E
XXXXXXXXXXXXX.XXX CORP.
A TEXAS CORPORATION
MINUTES OF THE BOARD OF DIRECTORS
October 24, 2001
The Meeting was held pursuant to waiver of Notice. The Sole Officer and
Director, Xxxx Xxxxxx, was present in person or via telephone and acted as
President and Secretary of the meeting.
THE BOARD DISCUSSED Managements plan for financing and registration of
shares pursuant the Securities Act of 1933. Reference is made to that certain
Registration of Rights Agreement, by and between XxxxxxXxxxxxx.xxx Corp, and
Investors.
THE FOLLOWING ACTION WAS RESOLVED AND TAKEN: The Officers are empowered and
directed to proceed with the funding agreements, and to register and in due
course issue 65,000,000 shares of common stock, pursuant to the Securities Act
of 1933, and the Registration Agreement, for the purpose of obtaining a
$10,000,000.00 (Ten Million) equity line. The shares shall be registered on Form
SB-2.
THERE BEING NO FURTHER BUSINESS, the meeting was adjourned.
THE UNDERSIGNED DIRECTORS hereby Acknowledge or Waive Notice of this
Meeting and Approve the foregoing Minutes of the Board.
/S/
Xxxx Xxxxxx
Sole Officer and Director
EXHIBIT F
PUT NOTICE NO. ______
XXXXXXXXXXXXX.XXX CORP., a Texas corporation (the "Company"), hereby elects
to exercise its right pursuant to the Investment Agreement to require Investor
to purchase shares of its common stock. The Company hereby certifies that:
1. The Put Amount is: $_______________.
2. The Pricing Period runs from ____________________ to
____________________.
3. The current number of shares of common stock issued and outstanding as of
_____________ are __________________________.
4. 94% of the average of the three (3) lowest closing bid prices of the
Company's Common Stock during the ten (10) Trading Day Pricing Period ("3 Ave.
Lowest") is as follows:
3 Ave. Lowest x 94% = Purchase Price x (15% of Volume) =
Total
___________ x 94% = __________ x _____________ = $__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
___________ x 94% = __________ x _____________ =
$__________
GRAND TOTALS _____________* $____________**
Number of Shares being Purchased (total of 15% volume column) _____________*
Aggregate Purchase Price of Shares $__________________**
Less Escrow Fee - __________________
Less Placement Fee - ___________________
Less Advisor's Fee - ___________________
Amount to be wired to Company
The undersigned has executed this Put Notice as of this ___ day of _________,
200__.
XXXXXXXXXXXXX.XXX CORP.
By:_______________________________________
Name and title:
EXHIBIT G
PARTIAL RELEASE OF PURCHASE AMOUNT AND SHARES
To:
XxxxxxXxxxxxx.xxx Corp.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, President
Telephone: 000-000-0000
Facsimile:
With a copy to:
Xxxxxxx Xxxxxxx, Esq.
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
Pursuant to the terms of the Investment Agreement the Investor requests the
release from the Company of __________ shares of the Company's Common Stock by
overnight delivery or DWAC, if available, and the Investor, upon confirmation of
receipt of the Shares by the Escrow Agent shall wire $____________ to the
Company within two (2) Trading Days of said confirmation at which time Escrow
Agent shall wire the funds to the Company and deliver the shares to the Investor
pursuant to the instructions given to the Escrow Agent by the Investor
INVESTOR
By:
Note: The number of Shares stated in this PARTIAL RELEASE OF PUT AMOUNT AND
----
SHARES Form shall be equal to the dollar amount to be released divided by 94% of
----
the lowest closing bid price during that number of Trading Days that have
elapsed in the specified Pricing Period.
SCHEDULE 4(a) SUBSIDIARIES
In March 2001, XxxxxxXxxxxxx.xxx Corp. acquired 100% of FCOM, Inc., a
private Colorado corporation, for the issuance of 2,500,000 new investment
common shares. FCOM currently operates as a wholly-owned subsidiary of our
company.
FCOM is a digital "services and component aggregator," a new breed of
content provider that integrates digital components from multiple application
providers, partners and vendors into a single unified service distributed at the
wholesale level. Further information about FCOM can be found in our December 31,
2000 Annual Report filed on Form 10-KSB.
XxxxxxXxxxxxx.xxx Corp. has no other subsidiaries.
SCHEDULE 4(c) CAPITALIZATION
The authorized capital stock of XxxxxxXxxxxxx.xxx Corp. consists of
100,000,000 shares of Common Stock, $0.0001 par value per share, each Common
Voting Equity Stock, such shares to carry the short title "Common"; and no other
class of stock.
As of December 10, 2001 14,890,872 shares are issued and outstanding, 0
shares of Preferred Stock and approximately 1,301,232 shares of Common Stock are
issuable upon the exercise of options, warrants and conversion rights. All
outstanding warrants have an expiration date of no later than December 1, 2004.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable.
SCHEDULE 4(e) CONFLICTS
NONE
SCHEDULE 4(g) MATERIAL CHANGES
Please refer to the quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly Period ended September 30,
2001filed on November 26, 2001. As of December 10, 2001 no other material
changes have occurred.
SCHEDULE 4(h) LITIGATION
There are no legal proceedings pending against or involving us, as of
December 10, 2001, and none are threatened or suspected.
SCHEDULE 4(n) LIENS
NONE
SCHEDULE 4(t) CERTAIN TRANSACTIONS
On October 12, 2001 the Company executed a Stock Purchase Agreement with a
group of offshore investors, allowing the Company to raise up to $1.3 million
through the sale of restricted Common stock. The transaction will be completed
in accordance with Regulation S compliance conditions and appropriate rules. The
Company entered into a Stock Purchase Agreement to sell up to 8.4 million
restricted shares pursuant to a Regulation S offering. The Reg S offering will
continue until fully sold or December 31st 2001.
