EXHIBIT 10.23
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BY AND AMONG
CERTAIN INVESTORS
AND
ADVANCED AERODYNAMICS & STRUCTURES, INC
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DATED AS OF AUGUST 15, 2000
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This PRIVATE EQUITY LINE OF CREDIT AGREEMENT is entered into as of the
15/th/ day of August, 2000 (this "Agreement"), by and between the various
investors identified on Schedule A hereto (each an "Investor" or "Investors"),
and Advanced Aerodynamics & Structures, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to each Investor,
from time to time as provided herein, and each Investor shall purchase his
Proportionate Share of up to $20,000,000 of the Common Stock (as defined below);
and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Average Daily Price" shall be the price based on the
VWAP.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg Financial) of the Common Stock on the Principal Market.
Section 1.3 "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of earnings and assets of
the Company.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing Date" shall mean, with respect to a Closing at
the election of the Investor made from time to time either the eighth Trading
Day following the Optional Purchase Date related to such Closing and/or the
second Trading Day following the Valuation Period, provided all conditions to
such Closing have been satisfied on or before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the $20,000,000 up to
which the Investors have agreed to provide to the Company in order to purchase
Put Shares pursuant to the terms and conditions of this Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on
the earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investors shall have purchased
Put Shares pursuant to this Agreement for an aggregate Purchase Price of
$20,000,000, (y) the date this Agreement is terminated pursuant to Section 2.5,
or (z) the date occurring twenty-four (24) months from the date of commencement
of the Commitment Period.
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Section 1.8 "Common Stock" shall mean the Company's Class A common stock,
$.001 par value per share.
Section 1.9 "Common Stock Equivalents" shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
Section 1.10 "Condition Satisfaction Date" See Section 7.2.
Section 1.11 "Legend" See Section 9.1.
Section 1.12 "Damages" shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.13 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the regulations promulgated thereunder.
Section 1.15 "Finder" shall mean the persons described in Section 13.2 hereof.
Section 1.16 "Floor Price" shall mean eighty-five cents ($0.85) per share.
Section 1.17 "Investment Amount" shall mean the dollar amount (within the
range specified in Section 2.2) to be invested by the Investor to purchase Put
Shares with respect to any Optional Purchase Date as notified by the Company to
the Investor in accordance with Section 2.2 hereof.
Section 1.18 "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with the ability of the Company to enter into and perform its obligations under
any of (a) this Agreement and (b) the Registration Rights Agreement.
Section 1.19 "Maximum Put Amount" shall mean the amounts set forth in the
following table:
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VWAP Average Daily Average Daily Average Daily Average Daily
Trading Volume of Trading Volume of Trading Volume of Trading Volume of
20,000-50,000 50,001-75,000 75,001-100,000 100,001 or more
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1.00-2.00 $200,000 $ 300,000 $ 500,000 $ 650,000
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2.01-3.00 $300,000 $ 500,000 $ 650,000 $ 750,000
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3.01-4.00 $400,000 $ 600,000 $ 750,000 $ 850,000
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4.01-5.00 $600,000 $ 750,000 $ 850,000 $1,000,000
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5.01-6.00 $750,000 $ 900,000 $1,000,000 $1,000,000
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Above 6.01 $800,000 $1,000,000 $1,250,000 $1,500,000
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"Average Daily Trading Volume" shall mean the average daily volume of shares of
Common Stock traded on Trading Days during the preceding thirty (30) calendar
days. The Maximum Put Amount represents the aggregate of all Proportionate
Shares of all Investors.
Section 1.20 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.21 "Optional Purchase Date" shall mean any Trading Day during the
Commitment Period that an Optional Purchase Notice to sell Common Stock to the
Investor is deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.22 "Optional Purchase Notice" shall mean a written notice to the
Investor setting forth the Investment Amount that the Company intends to sell to
the Investor.
Section 1.23 "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.24 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.25 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.26 "Proportionate Share" shall mean the proportion of the
Commitment Amount agreed to be purchased by each Investor as set forth on
Schedule A.
Section 1.27 "Purchase Price" as used in this Agreement shall mean the
following: For each Trading Day during a Valuation Period (or such other date on
which the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement) (i) the VWAP is more than $6.00, then the Purchase
Price shall be 93% of the VWAP; and (ii) if the VWAP is $6.00 or less, then the
Purchase Price shall be 92% of the VWAP. Each of the foregoing percentages is a
"Purchase Price Percentage."
Section 1.28 "Put" shall mean each occasion the Company elects to exercise
its right to tender an Optional Purchase Notice requiring the Investor to
purchase a discretionary amount of the Company's Common Stock, subject to the
terms of this Agreement which tender must be given to each Investor for such
Investor's Proportionate Share.
Section 1.29 "Put Shares" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has occurred or may occur in accordance with the
terms and conditions of this Agreement.
Section 1.30 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC and all Put Shares and Warrant Shares have been disposed of pursuant
to the Registration Statement, (ii) all Put Shares and Warrant Shares have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, (iii) all Put Shares and Warrant Shares have been otherwise
transferred to holders who may trade such shares without restriction
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under the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive legend
or (iv) such time as, in the opinion of counsel to the Company, which counsel
shall be reasonably acceptable to the Investor, all Put Shares and Warrant
Shares may be sold without any time, volume or manner limitations pursuant to
Rule 144(k) (or any similar provision then in effect) under the Securities Act.
Section 1.31 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investors as of
the Subscription Date.
Section 1.32 "Registration Statement" shall mean a registration statement
on Form SB-2 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor and Finder of the Registrable Securities under the
Securities Act.
Section 1.33 "Regulation D" shall mean Regulation D of the Securities Act.
Section 1.34 "SEC" shall mean the Securities and Exchange Commission.
Section 1.35 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.36 "Securities Act" shall have the definition ascribed to it in
the recitals of this Agreement.
Section 1.37 "SEC Documents" shall mean the Company's latest Form 10-K as
of the time in question, all Forms 10-Q and 8-K filed thereafter, and the Proxy
Statement for its latest fiscal year as of the time in question until such time
the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.38 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.39 "Trading Cushion" shall mean, at any time, the mandatory
thirty (30) calendar days between Optional Purchase Dates.
Section 1.40 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.41 "Valuation Event" shall mean an event in which the Company at
any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares;
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(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a)
and (b) above, 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;
(d) issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares and the price per share
for which Additional Capital Shares may at any time thereafter be
issuable pursuant to such warrants, options or other rights shall be
less than the Bid Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional
Capital Shares 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;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares 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 (a) through (e); or
(g) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing
Subsections (a) through (f) 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 the Investor at the
time of a Put.
Section 1.42 "Valuation Period" shall mean the period of fourteen (14)
Trading Days during which the Purchase Price of the Common Stock is determined,
which period shall be with respect to the Purchase Prices on any Optional
Purchase Date, the fourteen (14) Trading Days following the Trading Day on which
an Optional Purchase Notice is deemed to be delivered, provided, however, that
if a Valuation Event occurs during any Valuation Period, at the election of the
Investor, a new Valuation Period shall begin on the Trading Day immediately
after the occurrence of such Valuation Event and end on the fifth Trading Day
thereafter.
Section 1.43 "VWAP" shall mean the daily volume weighted average price of
the Common Stock on the Principal Market as reported by Bloomberg Financial
using the AQR function.
Section 1.44 "Warrants" shall mean the common stock purchase warrants of
the Company described in Section 13.2, a form of which is annexed hereto as
Exhibit E.
Section 1.45 "Warrant Shares" shall mean the Common Stock issuable upon
exercise of the Warrants.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
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(a) Puts. Upon the terms and conditions set forth herein
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(including, without limitation, the provisions of Article III hereof), on any
Optional Purchase Date the Company may exercise a Put by the delivery of an
Optional Purchase Notice. The number of Put Shares that the Investor shall
receive pursuant to such Put shall be determined by dividing the relevant
portions of the Investment Amount specified in the Optional Purchase Notice by
the corresponding Purchase Prices for each Trading Day during the Valuation
Period.
(b) Maximum Amount of Put Shares. Unless the Company obtains
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the requisite approval of its shareholders in accordance with the corporate laws
of Delaware and the applicable rules of the Principal Market, no more than
3,200,000 shares of Common Stock may be issued and sold pursuant to Puts.
Section 2.2 Mechanics.
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(a) Optional Purchase Notice. At any time during the
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Commitment Period, the Company may deliver an Optional Purchase Notice to the
Investor, subject to the conditions set forth in Section 7.2; provided, however,
the Investment Amount for each Put as designated by the Company in the
applicable Optional Purchase Notices shall be neither less than $200,000 in the
aggregate to all Investors nor more than the Maximum Put Amount.
(b) Date of Delivery of Optional Purchase Notice. An Optional
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Purchase Notice shall be deemed delivered on (i) the Trading Day it is received
by facsimile or otherwise by the Investor if such notice is received prior to
12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it
is received by facsimile or otherwise after 12:00 noon New York time on a
Trading Day or at any time on a day which is not a Trading Day. No Optional
Purchase Notice may be deemed delivered, on a day that is not a Trading Day.
(c) Determination of Put Shares Issuable. The Purchase Price
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shall be based on the Average Daily Price on each separate Trading Day during
the Valuation Period. The number of Put Shares to be purchased by each Investor
with respect to such Investor's Proportionate Share shall be determined on a
daily basis during each Valuation Period and settled on the Closing Date. The
portion of Investment Amount for which Put Shares may be issued for each Trading
Day during the Valuation Period may not exceed one-fourteenth (1/14/th/) of the
Investment Amount.
(d) Floor Price Limitation. If the Average Daily Price on any
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Trading Day during the Valuation Period is less than the Floor Price, the
Company shall not sell and the Investor shall not purchase the Put Shares
otherwise to be purchased for such Trading Day. In such case, one-fourteenth
(1/14/th/) of the Investment Amount shall be withdrawn from the Investment
Amount for each such Trading Day.
(e) Maximum Optional Purchase Notices/Amount. There shall be a
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maximum of twenty-four (24) Option Purchase Notices given during the term of
Agreement this Agreement. The Company shall have the right to issue each
Optional Purchase Notice for an Investment Amount up to the Maximum Put Amount.
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Section 2.3 Closings. On each Closing Date for a Put the Company shall
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deliver to the Investor one or more certificates, at the Investor's option,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, after the Optional Purchase Date and on or prior to the Closing
Date, registered in the name of the Investor or, at the Investor's option,
deposit such certificate(s) into such account or accounts previously designated
by the Investor (including by electronic transfer if such Shares are DTC
eligible) and the Investor shall deliver to escrow the Investment Amount
specified in the Optional Purchase Notice by wire transfer of immediately
available funds to an account designated by the Company on or before the Closing
Date. In addition, on or prior to the Closing Date, each of the Company and the
Investor shall deliver all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Payment
of funds to the Company and delivery of the certificates to the Investor shall
occur out of escrow in accordance with the escrow agreement referred to in
Section 7.2(p) following (x) the Company's deposit into escrow of the
certificates representing the Put Shares and (y) the Investor's deposit into
escrow of the Investment Amount; provided, however, that to the extent the
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 13.1, the amount of such fees, expenses and
disbursements shall be paid in immediately available funds drawn out of the
deposited funds, at the direction of the Investor, to Investor's counsel with no
reduction in the number of Put Shares issuable to the Investor on such Closing
Date.
Section 2.4 Liquidated Damages. In the event the Put Shares are not
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timely delivered by the Company on a Closing Date, the Company will pay the
Investor, as liquidated damages for such failure to deliver and not as a
penalty, one percent (1%) of the applicable Investment Amount for each seven (7)
day period, or part thereof following such failure, in cash, until such Put
Shares have been delivered. The Escrow Agent shall be directed to pay such
liquidated damages to the Investor out of the Investment Amount delivered by the
Investor to the Escrow Agent.
Section 2.5 Termination of Investment Obligation. The obligation of the
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Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for a consecutive ten day calendar
period or for an aggregate of thirty (30) Trading Days during the Commitment
Period, for any reason, or (ii) the Company shall at any time fail to comply
with the requirements of Section 6.2, 6.3, 6.4, 6.5 or 6.6.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its
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own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
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investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock and has the capacity to
protect its own interests in
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connection with the transactions. The Investor acknowledges that an investment
in the Common Stock is speculative and involves a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
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validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer, director
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or to Investor's good faith belief, an "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of this
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Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.6 Disclosure; Access to Information. Investor has received all
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documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. The Company is
subject to the periodic reporting requirements of the Exchange Act, and Investor
has had access to copies of any such reports that have been requested by it.
Section 3.7 Manner of Sale. At no time was Investor presented with or
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solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 Organization of the Company. The Company is a corporation
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duly organized and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. Except as set forth in the SEC
Documents, the Company does not have any subsidiaries. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
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and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and to issue the Put Shares; (ii) the
execution, issuance and delivery of this Agreement and the Registration Rights
Agreement and the consummation by it of the transactions contemplated hereby
have been duly
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authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required; and (iii) this Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
Section 4.3 Capitalization. As of June 30, 2000 the authorized capital
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stock of the Company consists of 60,000,000 shares of Class A Common Stock, of
which 7,008,162 shares were issued and outstanding;10,000,000 shares of Class B
Common Stock, of which 1,900,324 shares were issued and outstanding; 4,000,000
shares of Class E-1 Common Stock of which 4,000,000 shares were issued and
outstanding; 4,000,000 shares of ClassE-2 Common Stock, of which 4,000,000
shares were issued and outstanding; and 5,000,000shares of Preferred Stock, of
which 100,000 shares were designated as Series A 5% Cumulative Preferred Stock,
of which 74,750 such shares were issued and outstanding. Except as set forth in
the SEC Documents, there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
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pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company presently
satisfies all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq National
Market.
Section 4.5 SEC Documents. The Company has delivered or made available to
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the Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.6 Valid Issuances. The Put Shares may and will be properly
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issued pursuant to Section 4(2), Regulation D and/or any applicable state law.
When issued, the Put Shares shall be duly and validly issued, fully paid, and
nonassessable. Neither the sales of the Put Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement or the
Registration Rights Agreement
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will (i) result in the creation or imposition of any liens, charges, claims or
other encumbrances upon the Put Shares or any of the assets of the Company, or
(ii) entitle the holders of Outstanding Capital Shares to preemptive or other
rights to subscribe to or acquire the Capital Shares or other securities of the
Company. The Put Shares shall not subject the Investor to personal liability by
reason of the possession thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
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Transaction. Neither the Company nor any of its affiliates nor any distributor
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or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
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available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including, without limitation, the issuance of Common Stock
do not and will not (i) result in a violation of the Company's Articles of
Incorporation or By-Laws or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party, or (iii) result in a violation of any federal, state, local
or foreign law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (iii), such representations and warranties
are made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of the Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, NASD or state securities filings that may be required to be
made by the Company subsequent to any Closing, any registration statement that
may be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Nasdaq National Market
referenced in Section 5.1); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Investor herein.
Section 4.10 No Material Adverse Change. Since December 31, 1999, no
--------------------------
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
11
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
--------------------------
or obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
incurred in the ordinary course of the Company's business since December 31,
1999 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. Since December 31,
--------------------------------------
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as may be set forth
--------------------------------
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which might have a Material Adverse Effect. Except as set
forth in the SEC Documents, no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which might result in a Material
Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company and any
-------------------------------------
Person representing the Company, in connection with the transactions
contemplated by this Agreement, have not made, at any time, any oral
communication in connection with the offer or sale of the same which contained
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
Section 4.16 Material Non-Public Information. The Company is not in
-------------------------------
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with
-------------------
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.
Section 5.2 No Short Sales. The Investor and its affiliates shall not
--------------
engage in short sales of the Company's Common Stock at a per share price less
than $10.00; provided, however, that the Investor may enter into any short sale
or other hedging or similar arrangement it deems appropriate with respect to Put
Shares after it receives an Optional Purchase Notice with respect to such Put
Shares so long as such
12
sales or arrangements do not involve more than the number of such Put Shares
(determined as of the date of such Optional Purchase Notice).
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
-------------------
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof. Failure to obtain timely
effectiveness of the Registration Statement within the time period set forth in
the Registration Rights Agreement shall terminate the Company's right to give
Optional Purchase Notices.
Section 6.2 Reservation of Common Stock. Prior to the delivery of any
---------------------------
Optional Put Notice, the Company will have reserved and the Company shall
continue to reserve and keep available at all times, thereafter, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue the Put Shares; such amount of shares
of Common Stock to be reserved shall be calculated based upon the minimum
Purchase Price therefor under the terms of this Agreement.
Section 6.3 Listing of Common Stock. The Company shall maintain the
-----------------------
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) to list
the Put Shares. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such application
the Put Shares, and shall take such other action as is necessary or desirable in
the opinion of the Investor to cause the Common Stock to be listed on such other
Principal Market as promptly as possible. The Company shall take all action
necessary to continue the listing and trading of its Common Stock on the
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and the
Principal Market.
Section 6.4 Exchange Act Registration. The Company shall (i) cause its
-------------------------
Common Stock to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act. The Company will take all action to continue the
listing and trading of its Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
-------
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth in Article IX.
Section 6.6 Corporate Existence. The Company will take all steps
-------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company will deliver to the
------------------------
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
13
Section 6.8 Blackout Period. The Company will immediately notify the
---------------
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
Registrable Securities; (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 the 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 Registrable Securities 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 the 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 will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Optional Purchase Notice during
the continuation of any of the foregoing events.
Section 6.9 Expectations Regarding Optional Purchase Notices. Within ten
------------------------------------------------
(10) Trading Days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the Company undertakes
to notify the Investor as to its reasonable expectations as to the dollar amount
it intends to raise during such calendar quarter, if any, through the issuance
of Optional Purchase Notices. Such notification shall constitute only the
Company's good faith estimate and shall in no way obligate the Company to raise
such amount, or any amount, or otherwise limit its ability to deliver Optional
Purchase Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.10 Disclosure of Material Information. In the event that any
----------------------------------
or all of the information set forth on Schedule 8.2(a) hereto becomes material,
the Company shall make full and complete public disclosure in accordance with
all applicable law.
Section 6.11 Consolidation; Merger. The Company shall not, at any time
---------------------
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.12 Issuance of Put Shares. The sale and issuance of the Put
----------------------
Shares shall be made in accordance with the provisions and requirements of
Regulation D and any applicable state law.
14
ARTICLE VII
CONDITIONS TO DELIVERY OF OPTIONAL
PURCHASE NOTICES AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue
--------------------------------------------------------------
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
---------------------
the Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties.The
--------------------------------------------------------
representations and warranties of the Investor shall be true and
correct in all material respects as of the date of this Agreement and
as of the date of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have
---------------------------
performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to such
Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver an
--------------------------------------------------------------
Optional Purchase Notice and the Obligation of the Investor to Purchase Put
---------------------------------------------------------------------------
Shares. The right of the Company to deliver an Optional Purchase Notice and the
------
obligation of the Investor hereunder to acquire and pay for the Put Shares
incident to a Closing is subject to the satisfaction, on (i) the date of
delivery of such Optional Purchase Notice and (ii) the applicable Closing Date
(each a "Condition Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. As set forth
---------------------------------------------
in the Registration Rights Agreement, the Company shall have filed
with the SEC a Registration Statement with respect to the resale of
the Registrable Securities that shall have been declared effective by
the SEC prior to the first Optional Purchase Date, but in no event
later than ninety (90) days after Subscription Date.
(b) Effective Registration Statement. As set forth in the
--------------------------------
Registration Rights Agreement, the Registration Statement shall have
previously become effective and shall remain effective on each
Condition Satisfaction Date and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened to do so, and (ii) no other
suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist.
(c) Accuracy of the Company's Representations and Warranties. The
--------------------------------------------------------
representations and warranties of the Company shall be true and
correct in all material respects as of each Condition Satisfaction
Date as though made at each such time (except for representations and
warranties specifically made as of a particular date) with respect to
all periods, and as to all events and circumstances occurring or
existing to and including each Condition Satisfaction Date, except
for any conditions which have temporarily caused any representations
or warranties herein to be incorrect and which have been corrected
with no continuing impairment to the Company or the Investor.
15
(d) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and
the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to each Condition
Satisfaction Date.
(e) No Injunction. 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 that prohibits or directly and adversely
affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of
prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's
---------------
most recent SEC Document, no event that had or is reasonably likely to
have a Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock.
--------------------------------------------------------
The trading of the Common Stock (including without limitation the Put
Shares) shall not have been suspended by the SEC, the Principal Market
or the NASD and the Common Stock (including without limitation the Put
Shares) shall have been approved for listing or quotation on and shall
not have been delisted from the Principal Market. The issuance of
shares of Common Stock with respect to the applicable Closing, if any,
shall not violate the shareholder approval requirements of the
Principal Market.
(h) Legal Opinions. The Company shall have caused to be
--------------
delivered to the Investor and Finders, within five (5) Trading Days of
the effective date of the Registration Statement, an opinion of the
Company's independent counsel in the form of Exhibit B hereto,
addressed to the Investor and Finders; provided, however, that in the
event that such an opinion cannot be delivered by the Company's
independent counsel to the Investor, the Company shall promptly revise
the Registration Statement and shall not deliver an Optional Purchase
Notice. If an Optional Purchase Notice shall have been delivered in
good faith without knowledge by the Company that an opinion of
independent counsel can not be delivered as required, then such
Closing may be cancelled at the option of the Investor. Liquidated
damages determined pursuant to Section 2.4 shall be calculated and
payable on the Closing Date. The Company's independent counsel shall
also deliver to the Investor and Finders upon execution of this
Agreement an opinion in form and substance reasonably satisfactory to
the Investor and Finders addressing, among other things, corporate
matters and the exemption from registration under the Securities Act
of the issuance of the Registrable Securities by the Company to the
Investor and Finders under this Agreement.
(i) Due Diligence. No dispute between the Company and the
-------------
Investor shall exist pursuant to Section 8.2(c) as to the adequacy of
the disclosure contained in the Registration Statement.
(j) Ten Percent Limitation. On each Closing Date, the number of
----------------------
Put Shares then to be purchased by the Investor shall not exceed the
number of such shares that, when aggregated with all other shares of
Common Stock then owned by the Investor beneficially or deemed
beneficially owned by the Investor, would result in the Investor
owning more than 9.9% of all of such Common Stock as would be
outstanding on such
16
Closing Date, as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder. For purposes
of this Section 3.2(k), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder is greater on
a Closing Date than on the date upon which the Optional Purchase
Notice associated with such Closing Date is given, the amount of
Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether the Investor, when aggregating all
purchases of Common Stock made pursuant to this Agreement and, if any,
Shares, would own more than 9.9% of the Common Stock following such
Closing Date.
(k) Cross Default. The Company shall not be in default of a
--------------
material term, covenant, warranty or undertaking of any other
agreement to which the Company and Investor are parties, nor shall
there have occurred an event of default under any such other agreement
(l) Minimum Average Trading Volume. The average trading volume
------------------------------
for the Common Stock over the previous thirty (30) Trading Days equals
or exceeds 20,000 shares per Trading Day.
(m) No Knowledge. The Company shall have no knowledge of any
------------
event more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective (which
event is more likely than not to occur within the fifteen Trading Days
following the Trading Day on which such Notice is deemed delivered).
(n) Trading Cushion. The Trading Cushion shall have elapsed
---------------
since the immediately preceding Optional Purchase Date.
(o) Shareholder Vote. The issuance of shares of Common Stock
----------------
with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(p) Escrow Agreement. The parties hereto shall have entered
----------------
into a mutually acceptable escrow agreement for the Purchase Prices
due hereunder.
(q) Other. On each Condition Satisfaction Date, the Investor
-----
shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by
the Investor in order for the Investor to confirm the Company's
satisfaction of the conditions set forth in this Section 7.2.,
including, without limitation, a certificate in substantially the form
and substance of Exhibit C hereto, executed in either case by an
executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of
each such certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 Due Diligence Review. The Company shall make available for
--------------------
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in
17
any disposition of the Registrable Securities on behalf of the Investor pursuant
to the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
----------------------------------------
(a) Except as set forth on Schedule 8.2(a) hereof, the Company
represents and warrants that the Company and its officers, directors, employees
and agents have not disclosed any non-public information to the Investor or
advisors to or representatives of the Investor. The Company covenants and agrees
that it shall refrain from disclosing, and shall cause its officers, directors,
employees and agents to refrain from disclosing, (including, without limitation,
in connection with the giving of the Adjustment Period Notice pursuant to
Section 2.4), unless prior to disclosure of such information the Company
identifies such information as being non-public information and provides the
Investor, such advisors and representatives with the opportunity to accept or
refuse to accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
(b) The Company acknowledges and understands that the Investor
is entering into this Agreement and the Registration Rights Agreement at the
request of the Company and in good faith reliance on (i) the Company's
representation set forth in Section 4.16 that neither it nor its agents have
disclosed to the Investor any material non-public information; and (ii) the
Company's covenant set forth in Section 6.10 that if all or any portion of the
information set forth on Schedule 8.2(a) becomes material, the Company shall
timely make full and complete public disclosure of all or such portion of such
information that shall have become material in accordance with all applicable
law.
(c) Nothing herein shall require the Company to disclose non-
public information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate non-public information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence
18
by such persons or entities, that the Registration Statement contains
an untrue statement of 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.
ARTICLE IX
LEGENDS
Section 9.1 Legends. Unless otherwise provided below, each certificate
-------
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE
HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF
CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A
PRIVATE EQUITY LINE OF CREDIT AGREEMENT AMONG ADVANCED
AERODYNAMICS & STRUCTURES, INC. AND CERTAIN INVESTORS
DATED AUGUST 15, 2000. A COPY OF THE PORTION OF THE
AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit D hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one
or more certificates evidencing Common Stock that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates
free of the Legend to replace those surrendered; provided that (i) the
Registration Statement shall then be effective; (ii) the Investor confirms
to
19
the transfer agent that it has sold, pledged or otherwise transferred or
agreed to sell, pledge or otherwise transfer such Common Stock in a bona
fide transaction to a third party that is not an affiliate of the Company;
and (iii) the Investor confirms to the transfer agent that the Investor has
complied with the prospectus delivery requirement; and
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of
the Legend to replace those surrendered and containing representations that
(i) the Investor is permitted to dispose of such Registrable Securities
without limitation as to amount or manner of sale pursuant to Rule 144(k)
under the Securities Act or (ii) the Investor has sold, pledged or
otherwise transferred or agreed to sell, pledge or otherwise transfer such
Registrable Securities in a manner other than pursuant to an effective
registration statement, to a transferee who will upon such transfer be
entitled to freely tradeable securities. Any of the notices referred to
above in this Section 9.1 may be sent by facsimile to the Company's
transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
----------------------------------------------
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article IX shall
---------------------
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW/VENUE
Section 10.1 Choice of Law/Venue. This Agreement and the Registration
-------------------
Rights Agreement shall be governed by and construed in accordance with the laws
of the State of New York without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the transactions
contemplated by this Agreement or the Registration Rights Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this
Agreement and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
----------
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of
20
any of the Common Stock purchased or acquired by the Investor hereunder with
respect to the Common Stock held by such person, and (b) the Investor's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any affiliate of the Investor) effective upon
written notice to the Company. The Company shall have the right to require any
assignee to execute a counterpart of this Agreement.
Section 11.2 Termination. This Agreement shall terminate twenty-four (24)
-----------
months after the commencement of the Commitment Period; provided, however, that
the provisions of Articles VI, VII, VIII, X, XI, and XII shall survive the
termination of this Agreement.
Section 11.3 Entire Agreement, Amendment. This Agreement and the
---------------------------
Registration Rights Agreement constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth in
this Agreement or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by both parties hereto.
ARTICLE XII
NOTICES; INDEMNIFICATION
Section 12.1 Notices. All notices, demands, requests, consents,
-------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to Advanced Aerodynamics & Structures, Inc.:
Advanced Aerodynamics & Structures, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which communication shall not constitute notice):
▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇, Forward, ▇▇▇▇▇▇▇▇ & Scripps, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
21
If to the Investor:
To the address and telecopier number set forth on Schedule A hereto
with a copy to (which communication shall not constitute notice):
Grushko & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 12.2 Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the
Investor, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any Damages, joint or several,
and any action in respect thereof to which the Investor, its partners,
Affiliates, officers, directors, employees, and duly authorized agents, and any
such Controlling Person becomes subject to, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Company contained in
this Agreement in any event as such Damages are incurred.
(b) The Investor agrees to indemnify and hold harmless the
Company, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any Damages, joint or several,
and any action in respect thereof to which the Company, its partners,
Affiliates, officers, directors, employees, and duly authorized agents, and any
such Controlling Person becomes subject to, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Investor contained
in this Agreement in an aggregate amount not to exceed one-tenth of each such
Investor's Proportionate Share.
Section 12.3 Method of Asserting Indemnification Claims. All claims for
------------------------------------------
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 12.2 (an
"Indemnified Party") might seek indemnity under Section 12.2 is asserted against
or sought to be collected from such Indemnified Party by a person other than the
Company, the Investor or any affiliate of the Company or (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of Section 12.2 against any person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable
22
promptness to the Indemnifying Party. If the Indemnified Party fails to provide
the Claim Notice with reasonable promptness after the Indemnified Party receives
notice of such Third Party Claim, the Indemnifying Party will not be obligated
to indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been irreparably
prejudiced by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the period ending
thirty (30) calendar days following receipt by the Indemnifying Party of either
a Claim Notice or an Indemnity Notice (as defined below) (the "Dispute Period")
whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party under Section 12.2 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
1. If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to this Section 12.3(a),
then the Indemnifying Party will have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party will not be indemnified in
full pursuant to Section 12.2). The Indemnifying Party will have full control of
such defense and proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
clause (i), and except as provided in the preceding sentence, the Indemnified
Party will bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take over the control
of the defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 12.2 with respect to
such Third Party Claim.
2. If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to Section 12.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions
of this clause (2), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party
23
in the manner provided in clause (3) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this clause (2) or of the Indemnifying Party's participation therein
at the Indemnified Party's request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this clause (2), and the Indemnifying Party will
bear its own costs and expenses with respect to such participation.
3. If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the Indemnified
Party with respect to the Third Party Claim under Section 12.2 or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes its liability or the amount of its liability to the Indemnified
Party with respect to such Third Party Claim, the Loss in the amount specified
in the Claim Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 12.2 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (c) of this Section 12.3.
(b) In the event any Indemnified Party should have a claim under
Section 12.2 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim for
indemnity under Section 12.2 specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an "Indemnity Notice") with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that the Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the Loss in the
amount specified in the Indemnity Notice will be conclusively deemed a liability
of the Indemnifying Party under Section 12.2 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Resolution Period, such dispute
shall be resolved by arbitration in accordance with paragraph (c) of this
Section 12.3.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Fees and Expenses. Each of the Company and the Investor
-----------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of the Investor's counsel in an amount not to exceed $15,000, of
which $7,500 shall be payable upon the execution of this Agreement and not less
than $2,500 per Closing.
Section 13.2 Brokerage. Each of the parties hereto represents that it
---------
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party
except as described on Schedule 13.2("Finder"). The Company agrees to pay to
the Finder a fee equal to two percent (2%) ("Finder's Fee") of the Investment
Amount received
24
by the Company as set forth on Schedule 13.2 hereto. Said sum shall be paid out
of the escrow account established for deposit of Investment Amounts. The Finder
shall also receive the Warrants in the aggregate amount set forth on Schedule
13.2 hereto. A form of Warrant is annexed hereto as Exhibit E. The Warrants
shall be issued upon the execution of this Agreement. The per share purchase
price of the Warrants is set forth on Schedule 13.2 hereto. The Finders are
granted the registration rights set forth in the Registration Rights Agreement
with respect to the Warrant Shares. The Company's obligations to the Finders is
binding even if the Registration Rights Agreement is not signed by the Finders.
A default by the Company of the Company's obligations to the Finders shall be
deemed a default under the Agreement and shall terminate the Investment
Obligation. The Investment Obligation shall terminate if the Finder does not
receive the Finder's Fee or Warrants on or before a Closing Date or if the
Warrants deliverable upon execution of this Agreement are not delivered within
five (5) days of the execution of this Agreement. The Company on the one hand,
and the Investor, on the other hand, agree to indemnify the other against and
hold the other harmless from any and all liabilities to any other persons
claiming brokerage commissions or finder's fees on account of services purported
to have been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.
Section 13.3 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 13.4 Entire Agreement. This Agreement, the Exhibits hereto and
----------------
the Registration Rights Agreement set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as if fully set forth herein.
Section 13.5 Survival; Severability. The representations, warranties,
----------------------
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.6 Title and Subtitles. The titles and subtitles used in this
-------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.7 Reporting Entity for the Common Stock. The reporting entity
-------------------------------------
relied upon for the determination of the VWAP, trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent
of the Investor and the Company shall be required to employ any other reporting
entity.
25
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
ADVANCED AERODYNAMICS &
STRUCTURES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman and Chief Executive Officer
/s/ illegible
------------------------------------------------
Investor - AUSTINVEST ANSTALT BALZERS
/s/ illegible
------------------------------------------------
Investor - ESQUIRE TRADE & FINANCE, INC.
------------------------------------------------
Investor - BATTLECREAK INVESTMENTS LIMITED
/s/ First Island BA
------------------------------------------------
Investor - FERNBRIGG PARTNER, LTD.
/s/ illegible
------------------------------------------------
Investor - TALBIYA B. INVESTMENTS LTD.
/s/ illegible
------------------------------------------------
Investor - NESHER LTD.
/s/ illegible
------------------------------------------------
Investor - KESHET L.P.
/s/ illegible
------------------------------------------------
Investor - THE KESHET FUND, L.P.
/s/ illegible
------------------------------------------------
Investor - THE ENDEAVOUR CAPITAL FUND, S.A.
26
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
ADVANCED AERODYNAMICS &
STRUCTURES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman and CEO
/s/ illegible
----------------------------------------
Investor - RHOSSILI INVESTMENTS LIMITED
27
SCHEDULE A
----------
--------------------------------------------------------------------------------------
INVESTOR PROPORTIONATE SHARE
--------------------------------------------------------------------------------------
AUSTINVEST ANSTALT BALZERS 20%
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Balzers, Liechtenstein
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇
--------------------------------------------------------------------------------------
ESQUIRE TRADE & FINANCE, INC. 27%
Trident ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, B.V.I.
Fax: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------------
RHOSSILI INVESTMENTS LIMITED 15%
C/o Ultra Finanz Ltd.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------------
FERNBRIGG PARTNER, LTD. 10%
▇.▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, B.V.I.
Fax: ▇▇▇-▇▇▇-▇-▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS, LTD. 4%
Ragnall House
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇▇▇
--------------------------------------------------------------------------------------
NESHER LTD. 3%
Ragnall House
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇▇▇
--------------------------------------------------------------------------------------
KESHET L.P. 6%
Ragnall House
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇▇▇
--------------------------------------------------------------------------------------
THE KESHET FUND, L.P. 5%
Ragnall House
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇▇-▇▇▇▇▇▇
--------------------------------------------------------------------------------------
THE ENDEAVOUR CAPITAL FUND, S.A. 10%
The Maduro Building, P.O. Box 662
Wickhams, Cay, Road Town
Tortola, British Virgin Islands
Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------------
TOTAL 100%
--------------------------------------------------------------------------------------
28
EXHIBIT B
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
WITHIN 5 TRADING DAYS FOLLOWING EFFECTIVE DATE OF
REGISTRATION STATEMENT
TO:
We have acted as counsel to Advanced Aerodynamics & Structures, Inc., a
Delaware corporation (the "Company"), in connection with the Private Equity Line
of Credit Agreement between the Company and you, dated as of August 15, 2000
(the "Line of Credit Agreement"), pursuant to which the Company will issue to
you from time to time shares of Common Stock, no par value (the "Put Shares")
and the Registration Rights Agreement between you and the Company, dated August
15, 2000 (the "Registration Rights Agreement," and together with the Line of
Credit Agreement, the "Agreements"). This opinion is rendered to you pursuant
to Section 7.2(h) of the Line of Credit Agreement. Capitalized terms used
without definition in this opinion have the meanings given to them in the Line
of Credit Agreement.
In connection with this opinion, we have assumed the authenticity of all
records, documents, and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents, and instruments submitted
to us as copies. We have also assumed that there are no facts or circumstances
relating to you that might prevent you from enforcing any of the rights to which
our opinion relates. We have based our opinion upon our review of the following
records, documents and instruments:
(a) The Articles of Incorporation of the Company, as amended to date (the
"Articles"), certified by the Delaware Secretary of State as of ____________,
2000 and certified to us by an officer of the Company as being complete and in
full force and effect as of the date of this opinion;
(b) The Bylaws of the Company certified to us by an officer of the Company
as being complete and in full force and effect as of the date of this opinion
(the "Bylaws");
(c) Records certified to us by an officer of the Company as constituting
all records of proceedings and actions of the Board of Directors and the
shareholders of the Company relating to the transactions contemplated by the
Agreement;
(d) The Agreements;
(e) A certificate related to the good standing of the Company issued by the
Secretary of State of the State of Delaware dated __________, 2000;
(f) A Certificate of the Chief Executive Officer of the Company as to
certain factual matters (the "Officer's Certificate");
(g) The SEC Documents.
With your consent, we have based our opinion expressed in paragraph 1 below
as to the good standing of the Company solely upon the documents enumerated in
(e) and (f) above.
29
Where our opinion relates to our "knowledge," such knowledge is based upon
our examination of the records, documents, instruments, and certificates
enumerated or described above and the actual knowledge of attorneys in this firm
who are currently involved in substantive legal representation of the Company on
matters related to the Agreements. With your consent, we have not examined any
records of any court, administrative tribunal or other similar entity in
connection with our opinion expressed in paragraph 2 of Part III below. We have
assumed for purposes of our opinion to the effect that the Put Shares are fully
paid and nonassessable that the consideration for such Put Shares will be
received by the Company in accordance with the Line of Credit Agreement.
We express no opinion as to any anti-fraud provisions of applicable federal
or state securities laws, any tax, anti-trust, land use, export, safety,
environmental or hazardous materials laws, rules or regulations.
This opinion is limited to the federal laws of the United States of America
and the laws of the States of Delaware and New York. We disclaim any opinion as
to the laws of any other jurisdiction and we further disclaim any opinion as to
any statute, rule, regulation, ordinance, order or other promulgation of any
regional or local governmental body.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed below, it is our opinion
that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority to carry on its business and to own, lease and operate its
properties and assets as described in the SEC Documents. To our knowledge the
Company does not have any subsidiaries other than as set forth in the SEC
Documents.
2. To our knowledge, except as described in the SEC Documents, there are
no claims, actions, suits, proceedings or investigations that are pending
against the Company or its properties, or to our knowledge, any officer or
director of the Company in his or her capacity as such, nor to our knowledge has
the Company received any written threat of any such claims, actions, suits,
proceedings or investigations.
3. To our knowledge, except as described in the Company's representations
and warranties contained in Article IV of the Line of Credit Agreement, there
are no outstanding options, warrants, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understanding, or arrangements by which
the Company is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common Stock.
4. Subject to the accuracy of your representations in Article III of the
Line of Credit Agreement on the date hereof and on the date of issuance of any
Put Shares and Warrant Shares and the statement in the Officer's Certificate
that the Company has not offered or sold, and will not offer or sell, any Put
Shares by means of advertising or public solicitation, the issuance of the Put
Shares and Warrant Shares in conformity with the terms of the Line of Credit
Agreement constitutes transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended. The Put Shares and Warrant
Shares when issued in compliance with the Line of Credit Agreement, will be duly
authorized, validly issued, fully paid, and non-assessable and free of
preemptive rights set forth in the Articles, Bylaws and any agreement filed as
an exhibit to the SEC Documents, provided, however, that the Put
30
Shares and Warrant Shares may be subject to restrictions on transfer under state
and federal securities laws, but only to the extent set forth in the Line of
Credit Agreement.
5. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and to issue the Put
Shares.
Each of the Agreements has been duly authorized, executed and delivered by
the Company and the consummation by it of the transactions contemplated thereby
has been duly authorized by all necessary corporate action and no further
consent or authorization of the Company's board of directors or shareholders is
required. Each of the Agreements has been duly executed and delivered on the
part of the Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject, as to
enforcement, (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other laws of general applicability relating to or affecting
creditors' rights, (ii) to general principles of equity, whether such
enforcement is considered in a proceeding in equity or at law, and (iii) to
limitations imposed by applicable law or public policy on the enforceability of
the indemnification provisions contained in the Agreements.
6. The execution, delivery and performance of and compliance with the
respective terms of each of the Agreements, and issuance of the Put Shares and
Warrant Shares in accordance with the Line of Credit Agreement, will not violate
any provision of the Articles or Bylaws or any law applicable to the Company.
In connection with the registration of the Put Shares and Warrant Shares,
we advised the Company as to the requirements of the Securities Act and the
applicable Rules and Regulations and rendered other legal advice and assistance
in the course of preparation of the Registration Statement and Prospectus,
including review and discussion of the contents thereof. On the basis of the
information that was developed in the course of the performance of such services
considered in the light of our understanding of the Securities Act, including
the requirements of Form S-__, we have no reason to believe that (i) the
Registration Statement (other than the financial statements and related
statements and schedules, as to which we express no belief) as of its Effective
Date contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (ii) the Prospectus (other than the
financial statements and related statements and schedules, as to which we
express no belief) as of the Effective Date of the Registration Statement
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The limitations inherent in the independent verification of
factual matters and the character of determinations involved in the registration
process are such, however, that except as set forth in this opinion letter we do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the relief of debtors or the rights
and remedies of creditors generally, including without limitation the effect of
statutory or other law regarding fraudulent conveyances and preferential
transfers.
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants or
other provisions of any applicable agreement
31
and upon the availability of injunctive relief or other equitable remedies,
regardless of whether enforcement of any such agreement is considered in a
proceeding in equity or at law.
C. This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this opinion
letter should be read in conjunction therewith.
This opinion is rendered as of the date first written above, is solely for
your benefit in connection with the Agreement and may not be relief upon or used
by, circulated, quoted, or referred to nor may any copies hereof by delivered to
any other person without our prior written consent. We disclaim any obligation
to update this opinion letter or to advise you of facts, circumstances, events
or developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
32
EXHIBIT C
COMPLIANCE CERTIFICATE
ADVANCED AERODYNAMICS & STRUCTURES, INC.
The undersigned, _______________, hereby certifies, with respect to shares
of common stock of the Advanced Aerodynamics & Structures, Inc. (the "Company")
issuable in connection with the Optional Purchase Notice, dated (the "Notice"),
delivered pursuant to Article II of the Private Equity Line of Credit Agreement,
dated August 15, 2000, by and among the Company and certain Investors (the
"Agreement"), as follows:
1. The undersigned is the duly elected Chairman and Chief Executive
Officer of the Company.
2. The representations and warranties of the Company set forth in Article
IV of the Agreement are true and correct in all material respects as though made
on and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VI and Article VII of the
Agreement.
The undersigned has executed this Certificate this ____ day of ________,
2000.
ADVANCED AERODYNAMICS &
STRUCTURES, INC.
By:_____________________________________
Name:
Chairman and Chief Executive Officer
33
EXHIBIT D
INSTRUCTIONS TO TRANSFER AGENT
ADVANCED AERODYNAMICS & STRUCTURES, INC.
Name, address and phone and fax number of Transfer Agent
Dear Sirs:
Reference is made to the Private Equity Line of Credit Agreement (the
"Agreement"), dated as of August 15, 2000 among certain Investors (the
"Investor") and Advanced Aerodynamics & Structures, Inc. (the "Company").
Pursuant to the Agreement, subject to the terms and conditions set forth in the
Agreement the Investor has agreed to purchase from the Company and the Company
has agreed to sell to the Investor from time to time during the term of the
Agreement shares of Common Stock of the Company, $.001 par value (the "Common
Stock"). As a condition to the effectiveness of the Agreement, the Company has
agreed to issue to you, as the transfer agent for the Common Stock (the
"Transfer Agent"), these instructions relating to the Common Stock to be issued
to the Investor (or a permitted assignee) pursuant to the Agreement. All terms
used herein and not otherwise defined shall have the meaning set forth in the
Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file with the
Commission, and maintain the effectiveness of, a registration statement or
registration statements registering the resale of the Common Stock to be
acquired by the Investor under the Agreement. The Company will advise the
Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates evidencing Common Stock which bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered, the Transfer Agent shall deliver to
the Investor the certificates representing the Common Stock not bearing the
Legend, in such names and denominations as the Investor shall request, provided
that:
(a) in connection with such event, the Investor (or its permitted assignee)
shall confirm in writing to the Transfer Agent that (i) the Investor confirms to
the transfer agent that it has sold, pledged or otherwise transferred or agreed
to sell, pledge or otherwise transfer such Common Stock in a bona fide
transaction to a designated transferee that is not an affiliate of the Company;
and (ii) the Investor confirms to the transfer agent that the Investor has
complied with the prospectus delivery requirement;
34
(b) the Investor (or its permitted assignee) shall represent that it is
permitted to dispose thereof with limitation as to amount of manner of sale
pursuant to Rule 144(k) under the Securities Act; or
(c) the Investor, its permitted assignee, or either of their brokers
confirms to the transfer agent that (i) the Investor has held the shares of
Common Stock for at least one year, (ii) counting the shares surrendered as
being sold upon the date the unlegended Certificates would be delivered to the
Investor (or the Trading Day immediately following if such date is not a Trading
Day), the Investor will not have sold more than the greater of (a) one percent
(1%) of the total number of outstanding shares of Common Stock or (b) the
average weekly trading volume of the Common Stock for the preceding four weeks
during the three months ending upon such delivery date (or the Trading Day
immediately following if such date is not a Trading Day), and (iii) the
Investor has complied with the manner of sale and notice requirements of Rule
144 under the Securities Act.
Any advice, notice or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of ()--.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver certificates
representing Common Stock (with or without the Legend, as appropriate) as
promptly as practicable, but in no event later than three business days, after
such Closing.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investor is an express third party beneficiary of these Irrevocable Instructions
and shall be entitled to rely upon, and enforce, the provisions hereof.
ADVANCED AERODYNAMICS &
STRUCTURES, INC.
By:_________________________________
Name:
Chairman and Chief Executive Officer
AGREED:
NAME OF TRANSFER AGENT
35
SCHEDULE 13.2
-------------
---------------------------------------------------------------------------------------------------
FINDERS CASH FINDERS FEE (1) WARRANTS ISSUABLE
UPON SIGNING OF
PRIVATE EQUITY LINE OF
CREDIT AGREEMENT (2)
---------------------------------------------------------------------------------------------------
Libra Finance,S.A. $164,000.00 (41%) 125,000
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
---------------------------------------------------------------------------------------------------
Talbiya B. Investments Ltd. -0- 125,000
Ragnall House
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
---------------------------------------------------------------------------------------------------
Alon Enterprises Ltd. $236,000.00 (59%) -▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
---------------------------------------------------------------------------------------------------
TOTALS $ 400,000 250,000
---------------------------------------------------------------------------------------------------
(1) Total finder's fee represents 2% of the Commitment Amount.
(2) The per common share purchase price shall be $3.15.
36