10.2 Private Equity Line of Credit Agreement between MediaX Corporation and
Villabeach Investments Limited
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
MediaX Corporation
And
Villabeach Investments Limited
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of April 26, 2000 (the
"Agreement"), between Villabeach Investments Limited, a British Virgin Islands
corporation (the "Investor") and MediaX Corporation, a corporation organized and
existing under the laws of the State of Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to Investor from time to time
as provided herein, and Investor shall purchase, up to $6,000,000 (the
"Aggregate Purchase Price") of the Common Stock (as defined below); and
WHEREAS, such investments will be made by the Investor as statutory underwriter
of a registered indirect primary offering of such Common Stock by the Company.
NOW, THEREFORE, the parties hereto agree as follows:
Certain Definitions
"Bid Price" shall mean the closing bid price (as reported by Bloomberg L.P.) of
the Common Stock on the Principal Market on the date in question.
"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.
"Capital Shares Equivalents" shall mean any securities, rights, or obligations
that are convertible into or exchangeable for or give any right to subscribe for
any Capital Shares of the Company or any warrants, options or other rights to
subscribe for or purchase Capital Shares or any such convertible or exchangeable
securities.
"Closing" shall mean one of the closings of a purchase and sale of the Common
Stock pursuant to Section 2.1.
"Closing Date" shall mean, with respect to a Closing, the fifth Trading Day
following the end of the Valuation Period related to such Closing, provided all
conditions to such Closing have been satisfied on or before such Trading Day.
"Commitment Amount" shall mean the up to $6,000,000 which the Investor has
agreed to provide to the Company in order to purchase the Put Shares pursuant to
the terms and conditions of this Agreement.
"Commitment Period" shall mean the period commencing on the Effective Date and
expiring on the earliest to occur of (x) the date on which the Investor shall
have purchased $6,000,000 of Put Shares pursuant to this Agreement, (y) the date
this Agreement is terminated pursuant to Section 2.4, or (z) the date occurring
thirty-six (36) months from the date of commencement of the Commitment Period.
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"Common Stock" shall mean the Company's common stock, par value $.0001 per
share.
"Condition Satisfaction Date" shall have the meaning set forth in Section 7.2.
"Effective Date" shall mean the date on which the SEC first declares effective a
Registration Statement registering the sale by the Company and resale by the
Investor of the Registrable Securities as set forth in Section 7.2(f).
"Escrow Agent" shall mean the escrow agent designated in the Escrow Agreement.
"Escrow Agreement" shall mean the escrow agreement in the form attached hereto
as Exhibit A.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Investment Amount" shall mean the dollar amount to be invested by the Investor
to purchase Put Shares with respect to any Put Date as notified by the Company
to the Investor, all in accordance with Section 2.2 hereof.
"Market Price" on any given date shall mean the lowest trade price of the Common
Stock during the Valuation Period relating to such date.
"Material Adverse Effect" shall mean any effect on the business, Bid Price,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, 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
any of its obligations under this Agreement, the Registration Rights Agreement
or the Escrow Agreement in any material respect.
"Maximum Put Amount" shall mean $500,000 per Put, subject to adjustments
according to the following table:
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
20,000-50,000 Avg. 50,001-75,000 Avg. 30 75,001-100,000 Avg. 100,001-Above Avg.
Stock Bid Price 30 Trading Day Volume Trading Day Volume 30 Trading Day Volume 30 Trading Day Volume
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
1.50-3.50 $500,000 $750,000 $1,000,000 $1,250,000
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
3.51-5.00 $750,000 $1,000,000 $1,250,000 $1,500,000
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
5.01-6.50 $1,000,000 $1,250,000 $1,500,000 $1,750,000
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
6.51-8.00 $1,250,000 $1,500,000 $1,750,000 $1,750,000
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
8.01-9.50 $1,500,000 $1,750,000 $1,750,000 $2,000,000
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
9.51-Above $1,750,000 $1,750,000 $2,000,000 $2,000,000
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Outstanding" when used with reference to shares of Common Stock 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.
"Person" shall mean an individual, a corporation, a partnership, a limited
liability company, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
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"Principal Market" shall mean the NASDAQ National Market, the NASDAQ SmallCap
Market, the American Stock Exchange, the New York Stock Exchange or the OTC
Bulletin Board, whichever is at the time the principal trading exchange or
market for the Common Stock.
"Purchase Price" shall mean with respect to Put Shares, eighty-six percent (86%)
(the "Purchase Price Percentage") of the Market Price on the Trading Day
immediately following the Valuation Period related to a Put (or such other date
on which the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement) and eighty-two percent (82%) for a Put related to
a Special Activity.
"Put" shall mean each occasion the Company elects to exercise its right to
tender a Put Notice requiring the Investor to purchase shares of the Company's
Common Stock, subject to the terms of this Agreement.
"Put Date" shall mean the Trading Day during the Commitment Period that a Put
Notice to sell Common Stock to the Investor is deemed delivered pursuant to
Section 2.2(b) hereof.
"Put Notice" shall mean a written notice to the Investor setting forth the
Investment Amount that the Company intends to sell to the Investor in the form
attached hereto as Exhibit B.
"Put Shares" shall mean all shares of Common Stock or other securities issued or
issuable pursuant to a Put that has occurred or may occur in accordance with the
terms and conditions of this Agreement.
"Registrable Securities" shall mean the Put Shares and the Warrant Shares until
(i) 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
persons who may trade such shares without restriction 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, 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.
"Registration Rights Agreement" shall mean the agreement regarding the filing of
the Registration Statement for the sale and resale of the Registrable Securities
annexed hereto as Exhibit C.
"Registration Statement" shall mean a registration statement on Form S-3 (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, such as Form S-1 or
SB-2, for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale by the
Investor of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement, 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 of the Registrable Securities under
the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB as of the
time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time as the Company no longer has an obligation to maintain the effectiveness of
a Registration Statement as set forth in the Registration Rights Agreement.
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"Special Activity" shall mean any one time charge the Company expects to incur
for any reason, including, without limitation, in connection with the
acquisition of another business.
"Threshold Price" is the lowest Market Price at which the Company will sell its
Common Stock with respect to this Agreement.
"Trading Cushion" shall mean the mandatory fifteen (15) Trading Days between Put
Dates, unless waived by the Investor. Notwithstanding the foregoing, in the
event the Company gives the Investor twenty-one (21) days notice of a Special
Activity, the Trading Cushion shall be adjusted to eight (8) Trading Days for a
period of seven (7) consecutive weeks.
"Valuation Event" shall mean an event in which the Company at any time prior to
the end of the Commitment Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)
above or
(d) and (e) below, 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 (other than pursuant to this Agreement); (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 Material
Adverse Effect upon the rights of the Investor at the time of a Put.
"Valuation Period" shall mean the period of five (5) Trading Days beginning two
(2) Trading Days before the Trading Day on which a Put Notice is deemed to be
delivered and ending two (2) Trading Days after such date; provided, however,
that if a Valuation Event occurs during a Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately after the occurrence of such
Valuation Event and end on the fifth (5th) Trading Day thereafter.
"Warrants" shall mean the 100,000 Common Stock Purchase Warrants in the form of
Exhibit D hereto to be delivered to the Investor at the initial Closing.
"Warrant Shares" shall mean the shares of Common Stock issuable upon exercise of
the Warrants.
48
Purchase and Sale of Common Stock Investments.
Puts. Upon the terms and conditions set forth herein (including, without
limitation, the provisions of Article VII hereof), on any Put Date the Company
may make a Put by the delivery of a Put Notice. The number of Put Shares that
the Investor shall receive pursuant to such Put shall be determined by dividing
the Investment Amount specified in the Put Notice by the Purchase Price for such
Valuation Period. In connection with each Valuation Period, the Company may set
the Threshold Price, if any, in the Put Notice. If the Market Price is less than
the Threshold Price, the Company shall not sell and the Purchaser shall not be
obligated to purchase the Shares otherwise to be purchased for such Put.
Maximum Aggregate Amount of Puts. Anything in this Agreement to the contrary
notwithstanding, the Company may not make a Put to the extent that, after such
purchase by the Investor, the sum of the number of shares of Common Stock and
Warrants beneficially owned by the Investor and its affiliates would result in
beneficial ownership by the Investor and its affiliates of more than 9.9% of the
then outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities and Exchange Act of 1934, as amended. Mechanics.
(a) Put Notice. At any time during the Commitment Period, the
Company may deliver a Put Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, that the Investment Amount for each Put
as designated by the Company in the applicable Put Notice shall be neither less
than $100,000 nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put 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 Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered on a day that
is not a Trading Day.
Closings. On or before each Closing Date for a Put the Investor shall deliver
the Investment Amount specified in the Put Notice by wire transfer of
immediately available funds to the Escrow Agent. In addition, on or prior to the
Closing Date, each of the Company and the Investor shall deliver to the Escrow
Agent 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. Upon receipt of
notice from the Escrow Agent that the Escrow Agent has possession of the
Investment Amount, the Company shall, if possible, deliver the Put Shares to the
Investor's account through the Depository Trust Company DWAC system, per written
49
account instructions delivered by the Investor to the Company, and if the
Company is not eligible to participate in the DWAC system, to deliver to the
Escrow Agent one or more certificates, as requested by the Investor,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
registered in the name of such account or accounts as may be designated by the
Investor. Payment of funds to the Company and delivery of the certificates to
the Investor (unless delivered by DWAC) shall occur out of escrow in accordance
with the Escrow Agreement, 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 13.7, the amount of such fees, expenses, and
disbursements shall be paid in immediately available 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.
Termination of Investment Obligation.
(a) The obligation of the 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 an
aggregate of thirty (30) Trading Days during the Commitment Period, for any
reason other than deferrals or suspensions in accordance with the Registration
Rights Agreement as a result of corporate developments subsequent to the
Effective Date that would require such Registration Statement to be amended to
reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act or (ii) the Company shall at any time fail to
comply with the requirements of Section 6.2, 6.3 or 6.5 or (iii) the
Registration Statement shall not have become effective by September 30, 2000.
(b) The obligation of the Company to sell Put Shares to the
Investor shall terminate if the Investor fails to honor any Put Notice within
two (2) Trading Days of the Closing Date scheduled for such Put, and the Company
notifies Investor of such termination. Upon such termination, the Company shall
maintain the Registration Statement in effect for such reasonable period, not to
exceed forty-five (45) days, as the Investor may request in order to dispose of
any remaining Put Shares. Such termination shall be the Company's sole remedy
for the Investor's failure to honor a Put.
Section 2.5 Additional Shares. In the event that (a) within
five (5) Trading Days of any Closing Date, the Company gives notice to the
Investor of an impending "blackout period" in accordance with Section 3(f) of
the Registration Rights Agreement and (b) the Bid Price on the Trading Day
immediately preceding such "blackout period" (the "Old Bid Price") is greater
than the Bid Price on the first Trading Day following such "blackout period"
(the "New Bid Price") the Company shall issue to the Investor a number of
additional shares (the "Blackout Shares") equal to the difference between (y)
the product of the number of Registrable Securities purchased by the Investor on
such most recent Closing Date and still held by the Investor during such
"blackout period" that are not otherwise freely tradable during such "blackout
period" and the Old Bid Price, divided by the New Bid Price and (z) the number
of Registrable Securities purchased by the Investor on such most recent Closing
Date and still held by the Investor during such "blackout period" that are not
otherwise freely tradable during such "blackout period". If any such issuance
would result in the issuance of a number of shares which exceeds the number set
forth in Section 2.1(b), then in lieu of such issuance, the Company shall pay
Investor the closing ask price of the Blackout Shares on the first Trading Day
following the end of the blackout period in cash within five Trading Days.
Liquidated Damages. The parties hereto acknowledge and agree that the obligation
to issue Registrable Securities under Section 2.5 above shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities or in connection with a "blackout period" under the Registration
Rights Agreement, and (c) the parties are sophisticated business parties and
have been represented by legal and financial counsel and negotiated this
Agreement at arm's length.
50
Representations and Warranties of Investor
Investor represents and warrants to the Company that:
Intent. The Investor is entering into this Agreement for its 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.
Sophisticated Investor. The Investor is a sophisticated 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 has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Authority. This Agreement has been duly authorized and 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.
Not an Affiliate. Investor is not an officer, director or "affiliate"
(as that term is defined in Rule 405 of the Securities Act) of the Company.
Organization and Standing. Investor is a corporation duly organized,
validly existing, and in good standing under the laws of the British Virgin
Islands.
Absence of Conflicts. The execution and delivery of this 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.
Disclosure; Access to Information.Investor has received and reviewed
all documents, records, books and other publicly available 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 reviewed copies of any such reports that have
been requested by it.
51
Manner of Sale. At no time was Investor presented with or solicited by
or through any leaflet, public promotional meeting, television advertisement or
any other form of general solicitation or advertising.
Financial Capacity. Investor currently has the financial capacity to
meet its obligations to the Company hereunder, and the Investor has no present
knowledge of any circumstances which could cause it to become unable to meet
such obligations in the future.
Underwriter Liability. Investor understands that it is the position of
the SEC that the Investor is an underwriter within the meaning of Section 2(11)
of the Securities Act and that the Investor will be identified as an underwriter
of the Put Shares in the Registration Statement.
Representations and Warranties of the Company
The Company represents and warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Nevada
and has all requisite corporate authority to own its properties and to carry on
its business as now being conducted. The Company does not have any subsidiaries
and does not own more that fifty percent (50%) of or control any other business
entity except as set forth in the SEC Documents. The Company is duly qualified
and is in good standing as a foreign corporation to do business 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.
Authority. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby have been duly 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, the Registration Rights
Agreement, the Escrow Agreement and the Warrants have been duly executed and
delivered by the Company and at the initial Closing shall 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. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the issuance of the
Put Shares and for the exercise of the Warrants.
Capitalization. As of April __, 2000, the authorized capital stock of
the Company consists of 25,000,000 shares of Common Stock, $0.0001 par value per
share, of which 7,251,810 shares are issued and outstanding, 10,000,000 shares
of preferred stock, $0.0001 par value per share, of which none are issued or
outstanding. Except for (i) outstanding options and warrants as set forth in the
SEC Documents and (ii) as set forth in the Disclosure Schedule, there are no
outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities. All
of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
52
Common Stock. The Company has registered its Common Stock pursuant to
Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with 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 OTC Bulletin Board
and the Company has not received any notice regarding, and to its knowledge
there is no threat, of the termination or discontinuance of the eligibility of
the Common Stock for such listing.
SEC Documents. The Company has made available to the Investor true and
complete copies of the SEC Documents. 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 Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
did not contain any untrue statement of a material fact or omit 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 complied 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 at the time of such
inclusion. 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 exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Valid Issuances. When issued and paid for in accordance with the terms
hereof or of the Warrants, the Put Shares and the Warrant Shares will be duly
and validly issued, fully paid, and non-assessable. Neither the sales of the Put
Shares, the Warrants or the Warrant Shares pursuant to, nor the Company's
performance of its obligations under, this Agreement, the Registration Rights
Agreement, the Escrow Agreement or the Warrants will (i) result in the creation
or imposition by the Company of any liens, charges, claims or other encumbrances
upon the Put Shares, the Warrants or the Warrant Shares or, except as
contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
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No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put
Shares, the Warrants and the Warrant Shares, 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 material 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 or 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 or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). 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
would not have a Material Adverse Effect. The Company is not required under any
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 Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the initial 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 Principal Market);
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.
No Material Adverse Change. Since September 30, 1999 no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
No Undisclosed Events or Circumstances. Since September 30, 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. Litigation and Other
Proceedings. Except as disclosed in the SEC Documents, there are no lawsuits or
proceedings pending or, to the knowledge of the Company, threatened, against the
Company or any subsidiary, nor has the Company received any written or oral
notice of any such action, suit, proceeding or investigation, which could
reasonably be expected to 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, to the knowledge of the Company, requested of any court,
arbitrator or governmental agency which could result in a Material Adverse
Effect. No Misleading or Untrue Communication. The Company and, to the knowledge
of the Company, any person representing the Company, or any other person selling
or offering to sell the Put Shares or the Warrants in connection with the
transaction 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.
54
Material Non-Public Information. The Company has not disclosed to the
Investor any material non-public information that (i) if disclosed publicly,
would reasonably be expected to have a material 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.
Insurance. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Tax Matters. The Company and each subsidiary has filed all Tax Returns
which it is required to file under applicable laws; all such Tax Returns are
true and accurate and has been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which it is required
to withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by the
Company or any subsidiary from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to ss. 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to ss. 481 (a) of the Internal Revenue Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
55
The Company has not made an election under ss. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
For purposes of this Section 4.14:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof. Property. Neither the Company nor any of its subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property and buildings held under lease by the Company as
tenant are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
intended to be made of such property and buildings by the Company. Licensing and
Permits. The Company holds all necessary licenses and permits for the conduct of
its business. All of such licenses and permits are in good standing and the
Company is not in material default of any of the conditions thereof.
Intellectual Property. Each of the Company and its subsidiaries owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, except as disclosed
in the SEC Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed in the SEC Documents, no adverse claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
56
Payments and Contributions. Neither the Company, any subsidiary, nor
any of its directors, officers or, to its knowledge, other employees has (i)
used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
No Misrepresentation. The representations and warranties of the Company
contained in this Agreement, any schedule, annex or exhibit hereto and any
agreement, instrument or certificate furnished by the Company to the Investor
pursuant to this Agreement, do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
Covenants of the Investor Investor covenants with the Company that:
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 rules and
regulations of the Principal Market on which the Company's Common Stock is
listed. Without limiting the generality of the foregoing, the Investor agrees
that it will, whenever required by federal securities laws, deliver the
prospectus included in the Registration Statement to any purchaser of Put Shares
from the Investor. No Short Sales. The Investor and its affiliates shall not
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) during the Commitment Period.
Covenants of the Company
Registration Rights. The Company shall cause the Registration Rights
Agreement to remain in full force and effect and the Company shall comply in all
material respects with the terms thereof.
Listing of Common Stock. The Company hereby agrees to 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 and the Warrant Shares. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Put Shares and the Warrant Shares and
will 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 will take all action 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 Principal Market and shall provide Investor with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within one Trading Day of the Company's
receipt thereof.
57
Exchange Act Registration. The Company will cause its Common Stock to
continue to be registered under Section 12(g) or 12(b) of the Exchange Act, will
use its best efforts to comply in all respects with its reporting and filing
obligations under the Exchange Act, and will not take any action or file any
document (whether or not permitted by Exchange Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said Act.
Legends. The certificates evidencing the Common Stock to be sold to the
Investor shall be free of restrictive legends.
Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Additional SEC Documents. During the Commitment Period, 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, or else notify the Investor that such documents are available on the ▇▇▇▇▇
system.
Notice of Certain Events Affecting Registration; Suspension of Right to
Make a Put. 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 from the SEC or any other federal or
state governmental authority during the period of effectiveness of the
Registration Statement the response to which would require any 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 the
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 Put
Notice during the continuation of any of the foregoing events.
Expectations Regarding Put Notices. Within ten (10) days after the
commencement of each calendar quarter occurring subsequent to the commencement
of the Commitment Period, the Company must notify the Investor, in writing, as
to its reasonable expectations as to the dollar amount it intends to raise
during such calendar quarter, if any, through the issuance of Put Notices. Such
notification shall constitute only the Company's good faith estimate and shall
in no way obligate the Company to raise such amount, or any amount, or otherwise
limit its ability to deliver Put Notices. The failure by the Company to comply
with this provision can be cured by the Company's notifying the Investor, in
writing, at any time as to its reasonable expectations with respect to the
current calendar quarter.
58
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 or by operation of law
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.
Limitation on Future Financing. The Company agrees that it will not
enter into any sale of its securities for cash at a discount to its then-current
bid price during the Commitment Period except for any sales (i) pursuant to any
presently existing employee benefit plan which plan has been approved by the
Company's stockholders, (ii) pursuant to any compensatory plan for a full-time
employee or key consultant, (iii) pursuant to any underwritten public offering
(including any equity line of credit), or (iv) with the prior approval of the
Investor, which will not be unreasonably withheld, in connection with a
strategic partnership or other business transaction, the principal purpose of
which is not simply to raise money.
Conditions to Delivery of Puts and Conditions to Closing
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 material 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, and Investor shall
provide a certificate to the Company, substantially in the form of that
delivered by the Investor.
Conditions Precedent to the Right of the Company to Deliver a Put
Notice and the Obligation of the Investor to Purchase Put Shares. The right of
the Company to deliver a Put Notice and the obligation of Investor hereunder to
acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on both (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Closing Certificate. All representations and warranties of
the Company contained herein shall remain true and correct as of the Closing
Date as though made as of such date and the Company shall have delivered into
escrow an Officer's Certificate signed by its Chief Executive Officer certifying
that all of the Company's representations and warranties herein remain true and
correct as of the Closing Date and that the Company has performed all covenants
and satisfied all conditions to be performed or satisfied by the Company prior
to such Closing;
59
(b) Blue Sky. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Common Stock
to the Investor and by the Investor as set forth in the Registration Rights
Agreement or shall have the availability of exemptions therefrom;
(c) Delivery of Put Shares. Delivery into escrow or to DTC of
the Put Shares;
(d) Opinion of Counsel. Receipt by the Investor of an opinion
of counsel to the Company, in the form of Exhibit D hereto; and
(e) Transfer Agent. Delivery to the Company's transfer agent
of instructions to such transfer agent in form and substance reasonably
satisfactory to the Investor.
(f) Registration of the Common Stock with the SEC. The
Registration Statement shall have previously become effective and shall remain
effective and available for making resales of the Put Shares and Warrant Shares
by the Investor 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 (unless the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
the Registration Statement or related prospectus shall exist.
(g) Authority. The Company will satisfy all laws and
regulations pertaining to the sale and issuance of the Put Shares.
(h) 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, the Registration Rights
Agreement and the Escrow Agreement to be performed, satisfied or complied with
by the Company at or prior to each Condition Satisfaction Date.
(i) 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.
(j) 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.
(k) No Suspension of Trading In or Delisting of Common Stock.
The trading of the Common Stock (including, without limitation, the Put Shares)
is not suspended by the SEC or the Principal Market, 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. The Company shall not have received any notice threatening to
delist the Common Stock from the Principal Market.
60
(l) No Knowledge. The Company has 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 reasonably likely to
occur within the thirty (30) Trading Days following the Trading Day on which
such Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed
since the next preceding Put Date.
(n) 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.
Due Diligence Review; Non-Disclosure of Non-Public Information.
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 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 SEC Documents and other filings with the
SEC, and all other publicly available 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 publicly
available 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.
Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor 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 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),
61
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 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.
Transfer Agent Instructions
Transfer Agent Instructions. Upon each Closing, the Company will issue
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 to deliver the Put Shares
without restrictive legends to the Escrow Agent.
No Legend or Stock Transfer Restrictions. No legend shall be placed on
the share certificates representing the Put Shares and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto.
Investor's Compliance. Nothing in this Article shall affect in any way
the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Put Shares.
Choice of Law
Governing Law/Arbitration. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
in New York by persons domiciled in New York City and without regard to its
principles of conflicts of laws. Any dispute under this Agreement or any Exhibit
attached hereto shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
62
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
Assignment
Assignment. Neither this Agreement nor any rights of the Investor or the Company
hereunder may be assigned by either party to any other person except by
operation of law. Notwithstanding the foregoing, upon the prior written consent
of the Company, which consent shall not unreasonably be withheld or delayed in
the case of an assignment to an affiliate of the Investor, 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) who agrees
to make the representations and warranties contained in Article III and who
agrees to be bound hereby.
Notices
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 reputable
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 MediaX Corporation: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ 9023
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
63
if to the Investor: c/o Dr. ▇▇. ▇▇▇▇▇▇▇▇ & Partner
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇-▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone:
Facsimile: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
with a copy to (shall not constitute notice):
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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.
Miscellaneous
Counterparts/ Facsimile/ Amendments. 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. Except as otherwise stated herein, in
lieu of the original documents, a facsimile transmission or copy of the original
documents shall be as effective and enforceable as the original. This Agreement
may be amended only by a writing executed by all parties.
Entire Agreement. This Agreement, the Exhibits hereto, which include, but are
not limited to the Escrow Agreement, the Registration Rights Agreement and the
Warrants, 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 is fully set forth
herein.
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.
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. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the 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.
64
Replacement of Certificates. Upon (i) receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of a
certificate representing the Put Shares and (ii) in the case of any such loss,
theft or destruction of such certificate, upon delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
(which shall not exceed that required by the Company's transfer agent in the
ordinary course) or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor. Fees and Expenses.
Each of the Company and the Investors 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 Investors' counsel in the amount of
$10,000 plus $1,000 per Closing of a Put.
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 other than Triton West
Group whose fee shall be paid by the Company. 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 person 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 13.9 Publicity. The Company agrees that it will not issue any
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent.
Section 13.10 Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
65
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.
Dated: April 27, 2000
MEDIAX CORPORATION
By: _____________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman
Villabeach Investments Limited
By: _____________________________
▇▇▇▇ ▇▇▇▇▇▇▇, Authorized Signatory
66
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of April 27, 2000, by and
among MediaX Corporation, a corporation incorporated under the laws of the State
of Nevada, (the "Company"), Villabeach Investments Limited, a British Virgin
Islands corporation ("Investor"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., (the "Escrow
Agent"). Capitalized terms used but not defined herein shall have the meanings
set forth in the Private Equity Line of Credit Agreement referred to in the
first recital.
W I T N E S S E T H:
WHEREAS, the Investor will from time to time as requested by the Company,
purchase shares of the Company's Common Stock from the Company as set forth in
that certain Private Equity Line of Credit Agreement (the "Purchase Agreement")
dated the date hereof between the Investor and the Company, which will be issued
as per the terms and conditions contained herein and in the Purchase Agreement;
and
WHEREAS, the Company and the Investor have requested that the Escrow Agent hold
in escrow and then distribute the initial documents and certain funds which are
conditions precedent to the effectiveness of the Purchase Agreement, and have
further requested that upon each exercise of a Put, the Escrow Agent hold the
relevant documents and the applicable purchase price pending receipt by the
Investor of certificates representing the securities issuable upon such Put;
NOW, THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties agree as follows:
TERMS OF THE ESCROW FOR THE INITIAL CLOSING
The parties hereby agree to establish an escrow account with the Escrow Agent
whereby the Escrow Agent shall hold the funds and documents which are referenced
in Section 7.2 of the Purchase Agreement.
At the Initial Closing, the Company shall deliver to the Escrow Agent:
the original Warrant certificate in the form of Exhibit D to the Purchase
Agreement;
the original executed Registration Rights Agreement in the form of Exhibit C to
the Purchase Agreement;
the original executed opinion of Weed & Co. L.P. counsel of the Company, in the
form of Exhibit E to the Purchase Agreement;
the sum of $10,000; a certificate representing five thousand (5,000) shares of
Common Stock issued to Triton West Group (the "Triton Certificate");
the original executed Company counterpart of this Escrow Agreement;
and the original executed Company counterpart of the Purchase Agreement.
Upon receipt of the foregoing, and receipt of executed counterparts from
Investor of the Purchase Agreement, the Registration Rights Agreement and this
Escrow Agreement, the Escrow Agent shall calculate the exercise price of the
Warrant and enter the Exercise Price, the Commencement Date and Termination Date
of the Warrant on the face of the Warrant and immediately transfer the sum of
Ten Thousand Dollars ($10,000) to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C. ("EB&G"), ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ for the Investor's legal and
administrative costs and the Escrow Agent shall then arrange to have the Warrant
certificate, the Purchase Agreement, this Escrow Agreement, the Registration
Rights Agreement and the opinion of counsel delivered to the Investor and the
Triton Certificate to Triton West Group.
68
TERMS OF THE ESCROW FOR EACH PUT
Each time the Company shall send a Put Notice to the Investor as provided in the
Purchase Agreement, it shall send a copy, by facsimile, to the Escrow Agent.
Each time the Investor shall purchase shares pursuant to a Put, the Investor
shall send the applicable Investment Amount of the Put Shares to the Escrow
Agent on or before the Closing Date for such Put. The Company shall promptly,
but no later than five (5) Trading Days after receipt of notice from the Escrow
Agent that it has the funds for the Investment Amount cause its Transfer Agent
to deliver the Put Shares to Investor's account through the Depository Trust
Company, if possible, or else to deliver such certificates to the Escrow Agent.
In the event that the certificates representing the Put Shares are not in the
Investor's or the Escrow Agent's possession within five (5) Trading Days of the
date of the Escrow Agent's notice, then Investor shall have the right to demand,
by notice, the return of the Investment Amount, and the Put Notice shall be
deemed cancelled. The Escrow Agent shall within one (1) Trading Day of Closing
wire the Investment Amount per the written instructions of the Company net of: a
finder's fee to Triton West Group equal to, (i) as to each of the initial six
Puts, if any, .3333% of the Commitment Amount plus three percent (3%) of the
applicable Investment Amount and, (ii) as to each subsequent Put thereafter, if
any, three percent (3%) of the applicable Investment Amount;
and One Thousand Dollars ($1,000) as escrow expenses to the Escrow Agent.
The Escrow Agent shall remit finder's fee to Triton West Group in accordance
with wire instructions that will be sent to Escrow Agent from Triton West Group.
MISCELLANEOUS
No waiver or any breach of any covenant or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof, or of any other
covenant or provision herein contained. No extension of time for performance of
any obligation or act shall be deemed an extension of the time for performance
of any other obligation or act. All notices or other communications required or
permitted hereunder shall be in writing, and shall be sent by fax, overnight
courier, registered or certified mail, postage prepaid, return receipt
requested, and shall be deemed received upon receipt thereof, as set forth in
the Purchase Agreement.
This Escrow Agreement shall be binding upon and shall inure to the benefit of
the permitted successors and permitted assigns of the parties hereto.
This Escrow Agreement is the final expression of, and contains the entire
agreement between, the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Escrow Agreement
may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by their respective agents duly authorized in writing
or as otherwise expressly permitted herein.
68
Whenever required by the context of this Escrow Agreement, the singular shall
include the plural and masculine shall include the feminine. This Escrow
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
The parties hereto expressly agree that this Escrow Agreement shall be governed
by, interpreted under and construed and enforced in accordance with the laws of
the State of New York. Except as expressly set forth herein, any action to
enforce, arising out of, or relating in any way to, any provisions of this
Escrow Agreement shall brought through the American Arbitration Association at
the designated locale of New York, New York as is more fully set forth in the
Purchase Agreement.
The Escrow Agent's duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, each Investor and the Escrow Agent.
The Escrow Agent shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by the Escrow
Agent to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be personally liable for any act the Escrow
Agent may do or omit to do hereunder as the Escrow Agent while acting in good
faith, excepting only its own gross negligence or willful misconduct, and any
act done or omitted by the Escrow Agent pursuant to the advice of the Escrow
Agent's attorneys-at-law (other than Escrow Agent itself) shall be conclusive
evidence of such good faith.
The Escrow Agent is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
The Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting to
execute or deliver the Purchase Agreement or any documents or papers deposited
or called for thereunder or hereunder.
The Escrow Agent shall be entitled to employ such legal counsel and other
experts as the Escrow Agent may deem necessary properly to advise the Escrow
Agent in connection with the Escrow Agent's duties hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation
therefor. The Escrow Agent has acted as legal counsel for the Investor, and may
continue to act as legal counsel for the Investor, from time to time,
notwithstanding its duties as the Escrow Agent hereunder. The Company consents
to the Escrow Agent in such capacity as legal counsel for the Investors and
waives any claim that such representation represents a conflict of interest on
the part of the Escrow Agent. The Company understands that the Investor and the
Escrow Agent are relying explicitly on the foregoing provision in entering into
this Escrow Agreement.
The Escrow Agent's responsibilities as escrow agent hereunder shall terminate if
the Escrow Agent shall resign by written notice to the Company and the Investor.
In the event of any such resignation, the Investors and the Company shall
appoint a successor Escrow Agent.
If the Escrow Agent reasonably requires other or further instruments in
connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
69
It is understood and agreed that should any dispute arise with respect to the
delivery and/or ownership or right of possession of the documents or the escrow
funds held by the Escrow Agent hereunder, the Escrow Agent is authorized and
directed in the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of said documents
or the escrow funds until such disputes shall have been settled either by mutual
written agreement of the parties concerned by a final order, decree or judgment
or a court of competent jurisdiction after the time for appeal has expired and
no appeal has been perfected, but the Escrow Agent shall be under no duty
whatsoever to institute or defend any such proceedings or (2) to deliver the
escrow funds and any other property and documents held by the Escrow Agent
hereunder to a state or federal court having competent subject matter
jurisdiction and located in the State and City of New York in accordance with
the applicable procedure therefor. The Company and the Investor agree jointly
and severally to indemnify and hold harmless the Escrow Agent and its partners,
employees, agents and representatives from any and all claims, liabilities,
costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder or the transactions contemplated
hereby or by the Purchase Agreement other than any such claim, liability, cost
or expense to the extent the same shall have been determined by final,
unappealable judgment of a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the Escrow Agent.
70
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.
Dated: April 27, 2000
MEDIAX CORPORATION
By:
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
INVESTOR:
Villabeach Investments Limited
By:
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Authorized Signatory
ESCROW AGENT:
By:
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Authorized
Signatory
71
EXHIBIT B
PUT NOTICE/COMPLIANCE CERTIFICATE
MediaX, Inc.
The undersigned hereby certifies, with respect to shares of Common
Stock of MediaX, Inc. (the "Company") issuable in connection with this Put
Notice and Compliance Certificate dated _____________ (the "Notice"), delivered
pursuant to Article II of the Private Equity Line of Credit Agreement dated as
of April __, 2000 (the "Agreement"), as follows:
1. The undersigned is the duly appointed President of the Company.
2. The representations and warranties of the Company set forth in the
Agreement are true and correct in all material respects as though made on
and as of the date hereof and all SEC Documents are as represented in
Section 4.5 of the Agreement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the date of this
Put Notice and has complied in all material respects with all obligations
and conditions contained in the Agreement.
4. The Investment Amount is $___________.
5. The Threshold Price per share is $ ___________.
The undersigned has executed this Certificate this ____ day of ________, _____.
NASTECH PHARMACEUTICAL
COMPANY INC.
------------------------
President
72
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the 27th day of April, 2000,
between Villabeach Investments Limited ("Holder") and MediaX Corporation, a
corporation incorporated under the laws of the State of Nevada (the "Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
pursuant to a Private Equity Line of Credit Agreement dated the date hereof (the
"Purchase Agreement") the Holder has committed to purchase up to $6,000,000 of
the Company's Common Stock (terms not defined herein shall have the meanings
ascribed to them in the Purchase Agreement); and
WHEREAS, the Company desires to
grant to the Holder the registration rights set forth herein with respect to the
Put Shares and the Blackout Shares issuable upon exercise of the Company's Put
rights from time to time and the Warrant Shares (hereinafter referred to as the
"Put Shares" or "Stock" or "Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Registrable Securities. As used herein the term "Registrable Security" means the
Securities until (i) 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 persons who may trade such Securities without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such Put Shares and Warrant
Shares not bearing a restrictive legend or (iv) such time as, in the opinion of
counsel to the Company, 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. The term "Registrable
Securities" means any and/or all of the securities falling within the foregoing
definition of a "Registrable Security." In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be deemed to be made
in the definition of "Registrable Security" as is appropriate in order to
prevent any dilution or enlargement of the rights granted pursuant to this
Agreement.
Restrictions on Transfer. The Holder acknowledges and understands that in the
absence of an effective Registration Statement authorizing the resale of the
Securities as provided herein, the Securities are "restricted securities" as
defined in Rule 144 promulgated under the Act. The Holder understands that no
disposition or transfer of the Securities may be made by Holder in the absence
of (i) an opinion of counsel to the Holder, in form and substance reasonably
satisfactory to the Company, that such transfer may be made without registration
under the Securities Act or (ii) such registration.
With a view to making available to the Holder the benefits of Rule 144 under the
Securities Act or any other similar rule or regulation of the Commission that
may at any time permit the Holder to sell securities of the Company to the
public without registration ("Rule 144"), the Company agrees to:
comply with the provisions of paragraph (c)(1) of Rule 144; and file with the
Commission in a timely manner all reports and other documents required to be
filed by the Company pursuant to Section 13 or 15(d) under the Exchange Act;
and, if at any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request of any
Holder, make available other information as required by, and so long as
necessary to permit sales of, its Registrable Securities pursuant to Rule 144.
74
Registration Rights With Respect to the Securities. The Company agrees that it
will prepare and file with the Securities and Exchange Commission
("Commission"), within forty-five (45) days after the date hereof, a
registration statement (on Form ▇-▇, ▇-▇, or other appropriate form of
registration statement) under the Securities Act (the "Registration Statement"),
at the sole expense of the Company (except as provided in Section 3(c) hereof),
so as to permit a public offering and resale of the Securities under the Act by
Holder.
The Company shall use its best efforts to cause the Registration
Statement to become effective within ninety (90) days from the date hereof, or,
if earlier, within five (5) days of SEC clearance to request acceleration of
effectiveness. If the Registration Statement is not declared effective by
September 30, 2000, this Agreement and the Purchase Agreement shall terminate
and the Company shall pay Investor the sum of $25,000 as liquidated damages. The
number of shares designated in the Registration Statement to be registered shall
be at least 2,500,000 and shall include appropriate language regarding reliance
upon Rule 416 to the extent permitted by the Commission. The Company will notify
Holder of the effectiveness of the Registration Statement within one Trading Day
of such event.
The Company will maintain the Registration Statement or post-effective amendment
filed under this Section 3 hereof effective under the Securities Act until the
earlier of (i) the date that none of the Securities are or may become issued and
outstanding, (ii) the date that all of the Securities have been sold pursuant to
the Registration Statement, (iii) the date the holders thereof receive an
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Holder, that the Securities may be sold under the provisions of Rule 144
without limitation as to volume, (iv) all Securities have been otherwise
transferred to persons who may trade such shares without restriction 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
(v) all Securities 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 in the opinion of counsel to the Company, which counsel shall be
reasonably acceptable to the Holder (the "Effectiveness Period").
All fees, disbursements and out-of-pocket expenses and costs incurred by the
Company in connection with the preparation and filing of the Registration
Statement under subparagraph 3(a) and in complying with applicable securities
and Blue Sky laws (including, without limitation, all attorneys' fees of the
Company) shall be borne by the Company. The Holder shall bear the cost of
underwriting and/or brokerage discounts, fees and commissions, if any,
applicable to the Securities being registered and the fees and expenses of its
counsel. The Holder and its counsel shall have a reasonable period, not to
exceed ten (10) Trading Days, to review the proposed Registration Statement or
any amendment thereto, prior to filing with the Commission, and the Company
shall provide each Holder with copies of any comment letters received from the
Commission with respect thereto within two (2) Trading Days of receipt thereof.
The Company shall make reasonably available for inspection by Holder, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such Holder
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the Company's officers, directors and employees to supply all information
74
reasonably requested by such Holder or any such underwriter, attorney,
accountant or agent in connection with the Registration Statement, in each case,
as is customary for similar due diligence examinations; provided, however, that
all records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any material
non-public information shall be kept confidential by such Holder and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such Holder or agent), unless such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided further that, if the
foregoing inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the Holder
and the other parties entitled thereto by one firm of counsel designed by and on
behalf of the majority in interest of Holder and other parties. The Company
shall qualify any of the securities for sale in such states as such Holder
reasonably designates and shall furnish indemnification in the manner provided
in Section 6 hereof.
However, the Company shall not be required to qualify in any state which will
require an escrow or other restriction relating to the Company and/or the
sellers, or which will require the Company to qualify to do business in such
state or require the Company to file therein any general consent to service of
process. The Company at its expense will supply the Holder with copies of the
Registration Statement and the prospectus included therein and other related
documents in such quantities as may be reasonably requested by the Holder.
The
Company shall not be required by this Section 3 to include a Holder's Securities
in any Registration Statement which is to be filed if, in the opinion of counsel
for both the Holder and the Company (or, should they not agree, in the opinion
of another counsel experienced in securities law matters acceptable to counsel
for the Holder and the Company) the proposed offering or other transfer as to
which such registration is requested is exempt from applicable federal and state
securities laws and would result in all purchasers or transferees obtaining
securities which are not "restricted securities", as defined in Rule 144 under
the Securities Act. No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Securities pursuant to this Section 3.
If at any time or
from time to time after the effective date of the Registration Statement, the
Company notifies the Holder in writing of the existence of a Potential Material
Event (as defined in Section 3(g) below), the Holder shall not offer or sell any
Securities or engage in any other transaction involving or relating to
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Holder receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that if the
Company so suspends the right to such holders of Securities for more than thirty
(30) days in the aggregate during any twelve month period, during the periods
the Registration Statement is required to be in effect such excess periods shall
be a Registration Default, and shall entitle the Investor to receive Blackout
Shares as provided in the Purchase Agreement. If a Potential Material Event
shall occur prior to the date the Registration Statement is filed, then the
Company's obligation to file the Registration Statement shall be delayed without
penalty for not more than thirty (30) days. The Company must give Holder notice
in writing at least two (2) Trading Days prior to the first day of the blackout
period, if lawful to do so.
75
"Potential Material Event" means any of the following: (a) the possession by the
Company of material information that is not ripe for disclosure in a
registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors of the Company or that disclosure of such
information in the Registration Statement would be detrimental to the business
and affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Chief Executive
Officer or the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Chief Executive Officer or
the Board of Directors of the Company that the Registration Statement would be
materially misleading absent the inclusion of such information.
Cooperation with Company. Holder will cooperate with the Company in all respects
in connection with this Agreement, including timely supplying all information
reasonably requested by the Company (which shall include all information
regarding the Holder and proposed manner of sale of the Registrable Securities
required to be disclosed in the Registration Statement) and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities and entering into and performing its
obligations under any underwriting agreement, if the offering is an underwritten
offering, in usual and customary form, with the managing underwriter or
underwriters of such underwritten offering. The Holder consents to be named as a
statutory underwriter in the Registration Statement.
Registration Procedures. If and whenever the Company is required by any of the
provisions of this Agreement to effect the registration of any of the
Registrable Securities under the Act, the Company shall (except as otherwise
provided in this Agreement), as expeditiously as possible, subject to the
Holder's assistance and cooperation as reasonably required:
prepare and file with the Commission such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Act with respect to the sale or other disposition of all
securities covered by such registration statement whenever the Holder of such
Registrable Securities shall desire to sell or otherwise dispose of the same
(including prospectus supplements with respect to the sales of securities from
time to time in connection with a registration statement pursuant to Rule 415
promulgated under the Act) and (ii) take all lawful action such that each of (A)
the Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, not misleading and (B) the Prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Registration Period include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
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prior to the filing with the Commission of any Registration Statement (including
any amendments thereto) and the distribution or delivery of any prospectus
(including any supplements thereto), provide draft copies thereof to the Holders
and reflect in such documents all such comments as the Holders (and their
counsel) reasonably may propose and (ii) furnish to each Holder such numbers of
copies of a prospectus including a preliminary prospectus or any amendment or
supplement to any prospectus, as applicable, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or blue sky laws of such jurisdictions as
the Holder shall reasonably request (subject to the limitations set forth in
Section 3(d) above), and do any and all other acts and things which may be
necessary or advisable to enable each Holder to consummate the public sale or
other disposition in such jurisdiction of the securities owned by such Holder,
except that the Company shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not so
qualified or to file therein any general consent to service of process;
list such Registrable Securities on the Primary Market, and any other exchange
on which the Common Stock of the Company is then listed, if the listing of such
Registrable Securities is then permitted under the rules of such exchange;
notify each Holder at any time when a prospectus relating thereto covered by the
Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
as promptly as practicable after becoming aware of such event, notify Holder
(or, in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission or any state authority of any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time and take all lawful action to effect the withdrawal, recession or
removal of such stop order or other suspension;
cooperate with the Holder to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Holder reasonably may request and registered in such names as the Holder may
request;
and, within three Trading Days after a Registration Statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Holder) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Holder of its Registrable Securities in
accordance with the intended methods therefor provided in the prospectus which
are customary for issuers to perform under the circumstances;
in the event of an underwritten offering, promptly include or incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the managers reasonably agree should be included therein and
to which the Company does not reasonably object and make all required filings of
such Prospectus supplement or post-effective amendment as soon as practicable
after it is notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment;
and maintain a transfer agent and registrar for its Common Stock.
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Indemnification. The Company agrees to indemnify and hold harmless the Holder
and each person, if any, who controls the Holder within the meaning of the
Securities Act ("Distributing Holder") against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which the Distributing
Holder may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
preliminary prospectus, final prospectus or amendment or supplement thereto in
reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Holder, specifically for use in the preparation
thereof. This Section 6(a) shall not inure to the benefit of any Distributing
Holder with respect to any person asserting such loss, claim, damage or
liability who purchased the Registrable Securities which are the subject thereof
if the Distributing Holder failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Distributing Holder was obligated to do so under the
Securities Act or the rules and regulations promulgated thereunder. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
Each Distributing Holder agrees that it will indemnify and hold harmless the
Company, and each officer, director of the Company or person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) to which the Company or any
such officer, director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, or any related preliminary prospectus, final
prospectus or amendment or supplement thereto, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, preliminary prospectus, final prospectus or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by such Distributing Holder, specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Distributing Holder may otherwise have. Notwithstanding
anything to the contrary herein, the Distributing Investor shall not be liable
under this Section 6(b) for any amount in excess of the net proceeds to such
Distributing Investor as a result of the sale of Registrable Securities pursuant
to the Registration Statement.
78
Promptly after receipt by an indemnified party under this Section 6 of notice of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section
6, notify the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party except to the extent of
actual prejudice demonstrated by the indemnifying party. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject to
the provisions herein stated and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that if the indemnified party is the Distributing Holder, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
All fees and expenses of the indemnified party (including reasonable
costs of defense and investigation in a manner not inconsistent with this
Section and all reasonable attorneys' fees and expenses) shall be paid to the
indemnified party, as incurred, within ten (10) Trading Days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the indemnifying party may require such indemnified
party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such indemnified party is not entitled to
indemnification hereunder).
Contribution. In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) the indemnified party makes a claim for
indemnification pursuant to Section 6 hereof but is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 6 hereof provide for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
79
part of any indemnified party, then the Company and the applicable Distributing
Holder shall contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Holder on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no event
shall any (i) Holder be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the net proceeds to
be received by such Holder from the sale of such Holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
pursuant to any Registration Statement under which such Registrable Securities
are to be registered under the Securities Act and (ii) underwriter be required
to undertake liability to any person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Registration Statement.
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 reputable
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 as set forth in the Purchase Agreement.
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Either party hereto may from time to time change its address or
facsimile number for notices under this Section 8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Assignment. Neither this Agreement nor any rights of the Holder 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 any of the Common Stock purchased
by the Investor pursuant to the Purchase Agreement, and (b) upon the prior
written consent of the Company, which consent shall not be unreasonably withheld
or delayed in the case of an assignment to an affiliate of the Holder, the
Holder'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 Holder) who
agrees to be bound hereby.
Additional Covenants of the Company. The Company agrees that at such time as it
meets all the requirements for the use of Securities Act Registration Statement
on Form S-3 it shall file all reports and information required to be filed by it
with the Commission in a timely manner and take all such other action so as to
maintain such eligibility for the use of such form.
Counterparts/Facsimile. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
together shall constitute but one and the same instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
Remedies. The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
Conflicting Agreements. The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise prevents the
Company from complying with all of its obligations hereunder.
Headings. The headings in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Governing Law, Arbitration. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
in New York by persons domiciled in New York City and without regard to its
principles of conflicts of laws. Any dispute under this Agreement shall be
submitted to arbitration under the American Arbitration Association (the "AAA")
in New York City, New York, and shall be finally and conclusively determined by
the decision of a board of arbitration consisting of three (3) members
(hereinafter referred to as the "Board of Arbitration") selected as according to
the rules governing the AAA. The Board of Arbitration shall meet on consecutive
business days in New York City, New York, and shall reach and render a decision
in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
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Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding with thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The prevailing party shall be awarded its costs,
including attorneys' fees, from the non-prevailing party as part of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent jurisdiction in any case where such relief is available.
The prevailing party in such injunctive action shall be awarded its costs,
including attorney's fees, from the non-prevailing party.
Severability. If any provision of this Agreement shall for any reason be held
invalid or unenforceable, such invalidity or unenforceablity shall not affect
any other provision hereof and this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on the day and year first above written.
Dated: April 27, 2000
MEDIAX CORPORATION
By:
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman
Villabeach Investments Limited
By:
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Authorized Signatory
83
EXHIBIT D
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase 100,000 Shares of Common Stock of
MEDIAX CORPORATION
THIS CERTIFIES that, for value received, Villabeach Investments Limited (the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or October __, 2000 (the "Initial Exercise Date") and
on or prior to the close of business on October __, 2003 (the "Termination
Date") but not thereafter, to subscribe for and purchase from MediaX
Corporation, a Nevada corporation (the "Company"), up to one hundred thousand
(100,000) shares (the "Warrant Shares") of Common Stock, $.0001 par value, of
the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be $___ (125% of the
Market Price on the Closing Date). The Exercise Price and the number of shares
for which the Warrant is exercisable shall be subject to adjustment as provided
herein. In the event of any conflict between the terms of this Warrant and the
Private Equity Line of Credit Agreement dated April 27, 2000 pursuant to which
this Warrant has been issued (the "Purchase Agreement"), the Purchase Agreement
shall control. Capitalized terms used and not otherwise defined herein shall
have the meanings set forth for such terms in the Purchase Agreement.
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Title to Warrant. Prior to the Termination Date and subject to compliance with
applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
Authorization of Shares. The Company covenants that all shares of Common Stock
which may be issued upon the exercise of rights represented by this Warrant
will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
Exercise of Warrant. Except as provided in Section 4 herein, exercise of the
purchase rights represented by this Warrant may be made at any time or times on
or after the Initial Exercise Date, and before the close of business on the
Termination Date. Exercise of this Warrant or any part hereof shall be effected
by the surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company) and
upon payment of the Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank, the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within three (3) Trading Days after the date on
which this Warrant shall have been exercised as aforesaid. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the Warrant has been exercised by payment to
the Company of the Exercise Price and all taxes required to be paid by Holder,
if any, pursuant to Section 5 prior to the issuance of such shares, have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant. If
a registration statement is not effective for the resale of the Warrant Shares
at any time after one year from the date of this Warrant, this Warrant may also
be exercised by means of a "cashless exercise" in which the holder shall be
entitled to receive a certificate for the number of shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrants; and
(X) = the number of shares issuable upon exercise of the Warrants in accordance
with the terms of this Warrant.
No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the Exercise Price.
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Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock
upon the exercise of this Warrant shall be made without charge to the holder
hereof for any issue or transfer tax or other incidental expense in respect of
the issuance of such certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the name of the holder
of this Warrant or in such name or names as may be directed by the holder of
this Warrant; provided, however, that in the event certificates for shares of
Common Stock are to be issued in a name other than the name of the holder of
this Warrant, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the holder hereof; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
Closing of Books. The Company will not close its shareholder books or records in
any manner which prevents the timely exercise of this Warrant.
Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of shares
of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 7.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price, the Warrant Shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the later of the date of such surrender or
payment.
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant certificate or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
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Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking
of any action or the expiration of any right required or granted herein shall be
a Saturday, Sunday or a legal holiday, then such action may be taken or such
right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock Splits,
etc. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of any of the following. In case the Company shall (i) pay a
dividend in shares of Common Stock or make a distribution in shares of Common
Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per Warrant Share or other security obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares purchasable pursuant hereto immediately prior to such
adjustment and dividing by the number of Warrant Shares or other securities of
the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Company shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another corporation (where the Company
is not the surviving corporation or where there is a change in or distribution
with respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of the Company, then Holder shall
have the right thereafter to receive, upon exercise of this Warrant, the number
of shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
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and every covenant and condition of this Warrant to be performed and observed by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 11. For purposes of this Section 11, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 11 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
Voluntary Adjustment by the Company. The Company may at any time during the term
of this Warrant, reduce the then current Exercise Price to any amount and for
any period of time deemed appropriate by the Board of Directors of the Company.
Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of
securities or other property purchasable upon the exercise of this Warrant or
the Exercise Price is adjusted, as herein provided, the Company shall promptly
mail by registered or certified mail, return receipt requested, to the holder of
this Warrant notice of such adjustment or adjustments setting forth the number
of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
88
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).
Authorized Shares. The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Principal Market upon which the Common
Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use all commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
Before taking any action which would cause an adjustment
reducing the current Exercise Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Exercise Price.
89
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
Miscellaneous.
Jurisdiction. This Warrant shall be binding upon any successors or assigns of
the Company. This Warrant shall constitute a contract under the laws of New York
without regard to its conflict of law principles or rules, and be subject to
arbitration pursuant to the terms set forth in the Purchase Agreement.
Restrictions. The holder hereof acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise
any right hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company willfully fails to comply with any material provision of this Warrant,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
Notices. Any notice, request or other document required or permitted to be given
or delivered to the holder hereof by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
Limitation of Liability. No provision hereof, in the absence of affirmative
action by Holder to purchase shares of Common Stock, and no enumeration herein
of the rights or privileges of Holder hereof, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Remedies. Holder, in addition to being entitled to exercise all rights granted
by law, including recovery of damages, will be entitled to specific performance
of its rights under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
Successors and Assigns. Subject to applicable securities laws, this Warrant and
the rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
Indemnification. The Company agrees to indemnify and hold harmless Holder from
and against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder in
any manner relating to or arising out of any failure by the Company to perform
or observe in any material respect any of its covenants, agreements,
90
undertakings or obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.
Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
Headings. The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant. IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: April __, 2000
MEDIAX CORPORATION
By:
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman
91
NOTICE OF EXERCISE
To: MediaX Corporation
(1) The undersigned hereby elects to purchase ________ shares of Common Stock
(the "Common Stock"), of MediaX Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
------------------------------
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ______________, _______
Holder's Signature: __________________________________
Holder's Address: __________________________________
__________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
2
EXHIBIT E
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]
Villabeach Investments Limited
Re: Private Equity Line of Credit Agreement Between Villabeach Investments
Limited and MediaX Corporation
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Private Equity Line of Credit
Agreement by and between Villabeach Investments Limited (the "Investor") and
MediaX Corporation (the "Company"), dated as of April 27, 2000 (the "Line of
Credit Agreement"), which provides for the issuance and sale by the Company of
up to $6,000,000 of Common Stock of the Company and certain additional shares
upon the occurrence of certain events as set forth in Section 2.5 thereof (the
"Blackout Shares"). All terms used herein have the meanings defined for them in
the Line of Credit Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the negotiation of
the Line of Credit Agreement, the Warrant dated April 27, 2000 issued to the
Investor at the initial Closing (the "Warrant"), the Registration Rights
Agreement between the Investor and the Company, dated as of April 27, 2000 (the
"Registration Rights Agreement"), and the Escrow Agreement between the Investor,
the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., dated as of April 27, 2000 (the
"Escrow Agreement", and together with the Line of Credit Agreement, the Warrant
and the Registration Rights Agreement, the "Agreements"). As counsel, we have
made such legal and factual examinations and inquiries as we have deemed
advisable or necessary for the purpose of rendering this opinion. In addition,
we have examined, among other things, originals or copies of such corporate
records of the Company, certificates of public officials and such other
documents and questions of law that we consider necessary or advisable for the
purpose of rendering this opinion. In such examination we have assumed the
genuineness of all signatures on original documents, the authenticity and
completeness of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons, and the due execution and delivery of all documents
(except as to due execution and delivery by the Company) where due execution and
delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to the current
actual knowledge of the attorneys of this firm who have worked on matters for
the Company solely in connection with the Agreements and the Warrant and the
transactions contemplated thereby.
For purposes of this opinion, we have assumed that the Investor has all
requisite power and authority, and has taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by the Investor in the Agreements and
pursuant thereto are true and correct.
Based upon and subject to the foregoing, we are of the opinion that:
10.The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all requisite power and
authority (corporate and other) to carry on its business and to own, lease and
operate its properties and assets as described in the Company's SEC Documents.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the Company owns or leases
property, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
11. 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,
the Blackout Shares, the Warrants and the Warrant Shares. The execution and
delivery of the Agreements by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required. Each of the Agreements has been
duly executed and delivered by the Company and each of the Agreements
constitutes valid and binding obligations of the Company enforceable against the
Company in accordance with their respective 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.
12. The execution, delivery and performance of the Agreements by the Company and
the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the Put Shares, the Blackout
Shares, the Warrant and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Articles of Incorporation or By-Laws; (ii) to our
knowledge, conflict with, or constitute a material 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 or state law, rule or
regulation applicable to the Company or by which any property or asset of the
Company is bound or affected, except for such violations as would not,
individually or in the aggregate, have a Material Adverse Effect. To our
knowledge, the Company is not in violation of any terms of its Articles of
Incorporation or Bylaws.
13. When issued and paid for, the Put Shares, the Blackout Shares and the
Warrant Shares will be duly and validly issued, fully paid and nonassessable,
and free of any liens, encumbrances and preemptive or similar rights contained
in the Company's Articles of Incorporation or Bylaws or, to our knowledge, in
any agreement to which the Company is party.
14. To our knowledge, except as disclosed in the SEC Documents, there are no
claims, actions, suits, proceedings or investigations that are pending against
the Company or its properties, or against any officer or director of the Company
in his or her capacity as such, nor has the Company received any written threat
of any such claims, actions, suits, proceedings, or investigations.
15. To our knowledge, 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, except as described in the SEC
Documents or the Agreements. To our knowledge, the Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
4
16. Subject to compliance with the Principal Market's corporate governance
rules, the issuance of the Put Shares, the Blackout Shares and the Warrant
Shares will not violate the applicable listing agreement between the Company and
any securities exchange or market on which the Company's securities are listed.
17. The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, $0.0001 par value per share, of which 5,995,875 shares are issued
and outstanding and 10,000,000 shares of preferred stock, $0.0001 par value, of
which none are issued or outstanding.
18. The Registration Statement has been declared effective by the SEC and no
stop order is in effect with respect to the Registration Statement. Assuming
compliance by the Investor with the "Plan of Distribution" caption of the
Registration Statement and timely compliance by the Investor with all prospectus
delivery requirements, the Put Shares and any Blackout Shares shall be freely
transferable by Investor.
19. Nothing has come to our attention that has caused us to believe that the
Registration Statement and the Prospectus at the time the Registration Statement
became effective and as of the date of this opinion contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; however,
we express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data derived
therefrom included in the Registration Statement or the Prospectus. [Items 9 and
10 to be included in Opinion pursuant to Section 7.2(d) at each Put Closing.]
This opinion is furnished to the Investor solely for its benefit in connection
with the transactions described above and may not be relied upon by any other
person or for any other purpose without our prior written consent.