EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 14th day of January, 2004 by and among ENVIRONMENTAL TECHNOLOGIES, INC.,
a Nevada corporation (the "Company"), and ▇▇▇▇▇▇ PARTNERS LP (the "Investor").
WHEREAS, the Company is offering 2,000,000 shares of its common stock,
$0.001 par value per share (the "Common Stock") for a purchase price of $1.00
per share, 1,500,000 cashless non-callable A Warrant for the purchase of the
Common Stock exercisable at $1.00 per share, 1,500,000 cashless and callable B
Warrant for the purchase of the Common Stock exercisable at $1.00 per share,
2,000,000 cashless and callable C Warrant for the purchase of the Common Stock
exercisable at $2.00 per share, 1,000,000 cashless and callable D Warrant for
the purchase of the Common Stock exercisable at $4.00 per share, and 1,000,000
cashless and callable E Warrant for the purchase of the Common Stock exercisable
at $6.00 per share (such shares of the Common Stock and warrants hereinafter
collectively referred to as the "Units"); and
WHEREAS, the warrants contained in the Units are hereinafter individually
referred to as a "Warrant" and collectively as the "Warrants" and all of the
Warrants are in the form described in Attachment A hereto; and
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WHEREAS, the Investor wishes to purchase for the sum of $2,000,000 (the
"Purchase Price"), upon the terms and subject to the conditions of this
Agreement, all of the Units; and
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby conclusively acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER AND DEFINITIONS
1.1 Incorporation by Reference. The foregoing recitals, and all
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Attachments hereto and referred to herein, are hereby acknowledged to be true
and accurate, and are incorporated herein by this reference.
1.2 Superseder. This Agreement, to the extent that it is inconsistent
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with any other instrument or understanding among the parties governing the
affairs of the Company, shall supersede such instrument or understanding to the
fullest extent permitted by law. A copy of this Agreement shall be filed at the
Company's principal office.
1.3 Certain Definitions. For purposes of this Agreement, the following
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capitalized terms shall have the following meanings (all capitalized terms used
in this Agreement that are not defined in this Article 1 shall have the meanings
set forth elsewhere in this Agreement):
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Affiliate" means a Person or Persons directly or indirectly,
through one or more intermediaries, controlling, controlled by or under common
control with the Person(s) in question. The term "control," as used in the
immediately preceding sentence, means, with respect to a Person that is a
corporation, the right to the exercise, directly or indirectly, of more than 50
percent of the voting rights attributable to the shares of such controlled
corporation and, with respect to a Person that is not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such controlled Person.
(d) "Articles" means the Articles of Incorporation of the Company,
as the same may be amended from time to time.
(e) "Closing Date" means January 23, 2004 or upon all of the
conditions of Article VIII and Article IX herein are satisfied, subject to
acceleration or postponement from time to time as the parties hereto may
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mutually agree. The closing (the "Closing") shall be held at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 2:00 p.m., California time, on the
Closing Date, unless another hour or place is mutually agreed upon by the
parties hereto.
(f) "Common Stock" means the shares of the common stock of the
Company, par value $0.001 per share.
(g) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby is
declared effective.
(h) "Material Adverse Effect" shall mean any adverse effect on the
business, operations, properties 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 materially interfere with the ability of the Company to perform any
of its material obligations under this Agreement or the Registration Rights
Agreement or to perform its obligations under any other material agreement.
(i) "Person" means an individual, partnership, firm, limited
liability company, trust, joint venture, association, corporation, or any other
legal entity.
(j) "Purchase Price" means the purchase price for the Units, which
is the sum of $2,000,000.
(k) "Registration Rights Agreement" shall mean the registration
rights agreement between the Investor and the Company attached hereto as
Attachment B.
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(l) "Registration Statement" shall mean the registration statement
under the 1933 Act to be filed with the Securities and Exchange Commission for
the registration of the Shares pursuant to the Registration Rights Agreement
attached hereto as Attachment B.
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(m) "SEC" means the Securities and Exchange Commission.
(n) "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.
(o) "Shares" shall mean, collectively, the shares of Common Stock
of the Company being subscribed for hereunder and those shares of Common Stock
issuable to the Investor upon exercise of the Warrants.
(p) "Units" shall mean the Shares and the Warrants collectively.
(q) "Warrants" shall mean the Common Stock purchase warrants in
the form attached hereto Attachment A.
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ARTICLE II
SALE AND PURCHASE OF THE UNITS AND PURCHASE PRICE
2.1 Sale of the Units. Upon the terms and subject to the conditions
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set forth herein, and in accordance with applicable law, the Company agrees to
sell, and the Investor, severally and not jointly, agree to purchase all of the
Units, at the Purchase Price on the Closing Date. The Units shall consist of
the following:
(a) Common Stock. Upon the Closing of this Agreement and the
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Company's receipt of the Purchase Price, the Investor shall receive 2,000,000
shares of the Common Stock of the Company at a value of $1.00 per share. The
Company shall register the resale of the shares of Common Stock as well as the
resale of the shares of the Common Stock upon the exercise of any of the
Warrants pursuant to the terms and conditions of a Registration Rights Agreement
attached hereto as Attachment B.
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(b) Warrants. Upon execution and delivery of this Agreement and
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the Company's receipt of the Purchase Price, the Investor shall receive
1,500,000 cashless non-callable A Warrants for the purchase of the
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Common Stock exercisable at $1.00 per share, 1,500,000 cashless and callable B
Warrants for the purchase of the Common Stock exercisable at $1.00 per share,
2,000,000 cashless and callable C Warrants for the purchase of the Common Stock
exercisable at $2.00 per share, 1,000,000 cashless and callable D Warrants for
the purchase of the Common Stock exercisable at $4.00 per share, and 1,000,000
cashless and callable E Warrants for the purchase of the Common Stock
exercisable at $6.00 per share. Each of such Warrant is in the form described in
Attachment A attached hereto.
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2.2 Payment of the Purchase Price and Escrow. The Purchase Price to be
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paid by the Investor on the Closing Date has been paid on the date hereof into
escrow by delivery of a check to the Company payable to the order of "City
National Bank, Ontario, California, as Escrow Agent for Environmental
Technologies, Inc." (the "Escrow Agent"). Upon the satisfaction of all of the
terms hereof, the Escrow Agent at the Closing shall deliver the Purchase Price
to the Company. Until the satisfaction of all of the terms of this Agreement,
the Escrow Agent shall hold the Purchase Price in escrow subject to the
following terms:
(a) Escrow Account. The Purchase Price received by the Escrow
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Agent shall be held in a non-interest bearing account. The Escrow Agent shall
disburse the funds to the Company, or as the Company shall in writing direct,
upon the satisfaction of all of the terms and conditions of this Agreement and
receipt of written confirmation from the Investor that it consents to the
distribution of the Purchase Price as directed by the Company. If the closing
of this Agreement has not taken place by the Closing Date, the Escrow Agent
shall return the Purchase Price to the Investor immediately, without any offset
or deduction.
(b) Fees and Costs of the Escrow Agent. The Investor and the
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Company, jointly and severally, agree to pay the fees and costs of the Escrow
Agent according to its customary practices.
(c) Duty of the Escrow Agent. The sole duty of the Escrow Agent,
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other than as hereinafter specified, shall be to receive the Purchase Price and
hold it subject to release, in accordance with this Agreement.
(d) Release of the Purchase Price and Termination. The Escrow
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Agent shall release the Purchase Price as provided herein. Upon the complete
delivery of the Purchase Price by the Escrow Agent to the Company in accordance
with the distribution terms hereinabove set forth, the Escrow Agent shall be
relieved of all liabilities in connection with the Purchase Price and its
obligations and duties under this Agreement shall terminate.
(e) Liability of the Escrow Agent. The duties of the Escrow Agent
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hereunder will be limited to observance of the express provisions of this
Agreement. Furthermore, the Escrow Agent is not expected or required to be
familiar with the provisions of any other writing, understanding or agreement,
and shall not be charged with any responsibility or liability in connection with
the observance or non observance of the provisions of such other writing,
understanding or agreement, and no implied covenant of any type whatsoever shall
be read into this Agreement. Further, in receiving the Purchase Price, the
Escrow Agent will act only as a depository and thereby assumes no
responsibility, except pursuant to the terms of this Agreement. The Escrow
Agent shall have no responsibility or liability for any act or omission on its
part, notwithstanding any demand or notice to the contrary by the Company or the
Investor or any other person or entity, all subject to the sole limitation that
the Escrow Agent exercises its best judgment. Except as herein expressly
provided, none of the provisions of this Agreement shall require the Escrow
Agent to expend or risk its own funds or otherwise incur financial liability or
expense in the performance of any of its duties hereunder.
(f) Actions by the Escrow Agent. The Escrow Agent may act or
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refrain from acting in respect of any matter covered by this Agreement in full
reliance upon and with the advice of counsel which may be selected by it, and
shall be fully protected in so acting or in refraining from acting upon the
advice of such counsel. Furthermore, the Escrow Agent may rely and shall be
protected in acting upon any writing that may be submitted to it in connection
with its duties hereunder without determining the genuineness, authenticity or
due authority from any such writing or the person signing same and shall have no
liability or responsibility with respect to the form, content or validity
thereof.
(g) Compliance with Orders, Etc. The Escrow Agent is hereby
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authorized to comply with and obey all orders, judgments, decrees or writs
entered or issued by any court, and in the event the Escrow Agent obeys or
complies with any such order, judgment, decree or writ, in whole or in part, it
shall not be liable to the Company or to the Investor, or to any other person or
entity, by reason or such compliance, notwithstanding that it
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shall be determined that any such order, judgment, decree or writ be entered
without jurisdiction or be invalid for any reason or be subsequently reversed,
modified, annulled, satisfied or vacated.
(h) No Action. The Escrow Agent shall not be required to institute
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or defend any action or legal process involving any matter referred to herein
which in any manner affects its duties or liabilities hereunder to take any
other action with reference to the Purchase Price not specifically agreed to
herein, and the Escrow Agent shall not be responsible for any act or failure to
act on its part except in the case of its own fraud or gross negligence.
(i) Controversy. Should any controversy arise between the Escrow
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Agent, the Company, the Investor, or between any other person or entity with
respect to this Agreement, or with respect to the ownership of or the right to
receive the Purchase Price, the Escrow Agent shall have the right to institute a
plea of interpleader in any court of competent jurisdiction to determine the
rights of the parties. Should a plea of interpleader be instituted, or should
the Escrow Agent become involved in litigation in any manner whatsoever
connected with or pertaining to this Agreement or the Purchase Price, the
Company and the Investor hereby agree to pay the Escrow Agent, on demand, in
addition to any charge made hereunder for acting as Escrow Agent, reasonable
attorneys' fees incurred by the Escrow Agent, and any other disbursements,
expenses, losses, costs, and damages in connection with or resulting from such
litigation.
(j) Indemnification. The Company and the Investor hereby agree to
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indemnify and hold the Escrow Agent harmless from and against any and all
claims, loses, liabilities, costs, damages, fees, charges, and expenses
(including attorneys' fees) which the Escrow Agent may incur or sustain by
reason of its acting as the Escrow Agent under this Agreement, unless same shall
result from the fraud or gross negligence of the Escrow Agent.
(k) Resignation of the Escrow Agent. In the event of the
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resignation of an Escrow Agent, the Company and the Investor shall appoint a
successor Escrow Agent within 10 days following such resignation. If the
Company and the Investor shall fail to appoint a successor Escrow Agent within
such 10 day period, this Agreement shall terminate and the Purchase Price shall
be returned immediately to the Investor without and offset or deduction. Any
substitute Escrow Agent appointed hereunder shall possess and exercise all
powers and authority herein conferred on an original Escrow Agent.
(l) No Trusteeship. The Company and the Investor agree that the
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Escrow Agent is acting solely as an escrowee hereunder and not as a trustee and
that the Escrow Agent has no fiduciary duties, obligations or liabilities under
this Agreement.
ARTICLE III
CLOSING DATE AND DELIVERIES AT CLOSING
3.1 Closing Date. The closing of the transaction contemplated by this
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Agreement (the "Closing"), unless expressly determined herein, shall be held at
the offices of the Company, at 2:00 p.m. California time, on the Closing Date or
on such other date and at such other place as may be mutually agreed by the
parties, including closing by facsimile with originals to follow.
3.2 Deliveries by the Company at the Closing. At the Closing, the
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Company agrees to deliver, or cause to be delivered, to the Investor, the
following:
(a) An executed copy of this Agreement;
(b) A certificate representing the shares of the Common Stock
purchased hereunder duly endorsed in favor of the Investor;
(c) Executed Warrants in the name of the Investor as described in
Attachment A;
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(d) An executed Registration Rights Agreement between the Investor
and the Company in the form attached hereto as Attachment B;
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(e) Confirmation that the Company has closed the acquisition of a
publicly trading corporate shell as described in Paragraph 9.1 hereof; and
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(f) Such other documents or certificates as shall be reasonably
requested by the Investor or its counsel.
3.3 Deliveries by the Investor. In addition to and without limiting
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any other provision of this Agreement, the Investor agrees to deliver, or cause
to be delivered, to the Company at the Closing, as appropriate, the following:
(a) An executed copy of this Agreement;
(b) The Purchase Price;
(c) An executed Registration Rights Agreement between the Investor
and the Company; and
(d) Such other documents or certificates as shall be reasonably
requested by the Company or its counsel.
In the event any document provided to the other party in Paragraphs 3.2 and
3.3 herein are provided by facsimile, the party shall forward an original
document to the other party within seven business days.
3.4 Further Assurances. The Company and the Investor shall, upon
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request, on or after the Closing Date, cooperate with each other, by furnishing
any additional information, executing and delivering any additional documents
and/or other instruments and doing any and all such things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor (which warranties and
representations shall survive the Closing regardless of what examinations,
inspections, audits and other investigations the Investor has heretofore made or
may hereinafter make with respect to such warranties and representations) as
follows:
4.1 Organization and Qualification. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Nevada, and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and is duly qualified to do business in any other jurisdiction by virtue of the
nature of the businesses conducted by it or the ownership or leasing of its
properties, except where the failure to be so qualified will not, when taken
together with all other such failures, have a Material Adverse Effect on the
business, operations, properties, assets, financial condition or results of
operation of the Company and its subsidiaries taken as a whole.
4.2 Articles of Incorporation and By-Laws. The Company's Articles of
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Incorporation and By-Laws, as amended or restated to date are in effect on the
date hereof and as of the Closing Date.
4.3 Capitalization. The authorized capital stock of the Company
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consists of 100,000,000 shares of the Common Stock, and 20,000,000 shares of
preferred stock, par value $0.001 per share. All shares of capital stock have
been duly authorized and are validly issued, and are fully paid and
non-assessable, and free of preemptive rights. Except pursuant to this
Agreement and an agreement with Affiliates of Windstone Capital Partners, Inc.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇ Capital Associates, as of the date
hereof and as of the Closing Date, there are no outstanding options, warrants,
rights to subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any class of capital stock of the Company, or agreements,
understandings or arrangements to which the Company is a party, or by which the
Company is or may be bound, to issue additional shares of its capital stock or
options, warrants, scrip or rights to subscribe for, calls or commitment of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of any class of its capital stock.
4.4 Actions by the Company before the Closing Date. Before the Closing
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Date, the Company:
(a) Will issue no additional shares of the Common Stock and no
other capital stock;
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(b) Shall not change any of the provisions of its Articles of
Incorporation or Bylaws; and
(c) Will pay and discharge all of its obligations, taxes, accounts
payable and indebtedness in accordance with customary practices, except those
amounts being contested in good faith and against which the Company has set up
adequate reserves.
4.5 Actions by the Company after the Closing Date. After the Closing
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Date, the Company does not have any plans to issue any options or warrants, or
to adopt any stock option plans for its employees or advisers. However, after
the Closing Date, the Company may adopt an incentive option plan, which will be
consistent with accepted practice and conform to all applicable laws, be at an
exercise price not lower than the higher of $1.00 or the then current Fair
Market Price of the Common Stock, and not represent more than 15 percent of the
fully diluted shares of the Common Stock then outstanding. Any such options
will provide for vesting proportionately over a period of three to five years.
"Fair Market Value" means the mean between the highest and lowest reported sales
prices of the Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on which
the Common Stock is listed or on The Nasdaq Stock Market, or, if not so listed
on any other national securities exchange or The Nasdaq Stock Market, then the
average of the bid price of the Common Stock during the last five trading days
on the OTC Bulletin Board immediately preceding the last trading day prior to
the date with respect to which the Fair Market Value is to be determined. If
the Common Stock is not then publicly traded, then the Fair Market Value of the
Common Stock shall be the book value of the Company per share as determined on
the last day of March, June, September, or December in any year closest to the
date when the determination is to be made. For the purpose of determining book
value hereunder, book value shall be determined by adding as of the applicable
date called for herein the capital, surplus, and undivided profits of the
Company, and after having deducted any reserves theretofore established; the sum
of these items shall be divided by the number of shares of the Common Stock
outstanding as of said date, and the quotient thus obtained shall represent the
book value of each share of the Common Stock of the Company.
4.6 Shares Outstanding. As of the Closing Date, 9,750,000 shares of the
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Common Stock will be issued and outstanding, while no shares of the Company's
preferred stock were issued and outstanding. The Common Stock will be owned as
of the Closing Date hereof as follows:
SHARES BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D. . . . 1,000,000 10.25%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ . . . . . . . 3,750,000 38.46%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇. . . . . . . . . 250,000 2.56%
▇▇▇▇ ▇▇▇▇▇ . . . . . . . . . . . 650,000 6.66%
▇▇▇▇ ▇▇▇▇▇▇▇▇. . . . . . . . . . 500,000 5.12%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. . . . . . . . 1,250,000 12.82%
▇▇▇▇▇▇ ▇. ▇▇▇▇ . . . . . . . . . 910,000 9.33%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇. . . . . . . . . 200,000 2.05%
▇▇▇▇▇▇ ▇. St. Clair. . . . . . . 40,000 0.04%
San ▇▇▇▇▇ ▇▇▇▇▇▇ Hills Capital . 375,000 3.84%
▇▇▇▇▇▇▇ ▇▇▇▇▇. . . . . . . . . . 375,000 3.84%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ . . . . . . . 250,000 2.56%
Publicly traded corporate shell. 200,000 2.05%
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Total. . . . . . . . . . . . . . 9,750,000 100.00%
========= ========
4.7 Delivery of the Units. The Company on the Closing Date (a) will
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have full right, power, and authority to sell, assign, transfer, and deliver, by
reason of record and beneficial ownership to the Investor, the Units, free and
clear of all liens, charges, claims, options, pledges, restrictions, and
encumbrances whatsoever; other than those imposed by applicable securities laws,
and (b) upon delivery of and payment by the Investor of the Purchase Price to
the Company, the Investor will acquire good and marketable title to the Common
Stock and the Warrants, free and clear of all liens, charges, claims, options,
pledges, restrictions, and encumbrances whatsoever; other than those imposed by
applicable securities laws.
4.8 Authority. The Company has all requisite corporate power and
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authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
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execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby except as disclosed in this Agreement. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally and general principles of equity.
4.9 No Conflict; Required Filings and Consents. The execution and
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delivery of this Agreement by the Company does not, and the performance by the
Company of its respective obligations hereunder will not (a) conflict with or
violate the Articles of Incorporation or By-Laws of the Company; (b) conflict
with, breach or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "Laws") in
effect as of the date of this Agreement and applicable to the Company; or (c)
result in any breach of, constitute a default (or an event that with notice or
lapse of time or both would become a default) under, give to any other entity
any right of termination, amendment, acceleration or cancellation of, require
payment under, or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by the Company or
any of its properties or assets is bound. Excluding from the foregoing, are
such violations, conflicts, breaches, defaults, terminations, accelerations,
creations of liens, or incumbency that would not, in the aggregate, have a
Material Adverse Effect.
4.10 Financial Statements. The financial statements of the Company
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(including the related notes and schedules thereto) presented to the Investor
(the "Financial Statements") fairly presented the financial position of the
Company as of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such Financial
Statements (including any related notes and schedules thereto) fairly presents
and will fairly present the results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of the Company for the
periods to which they relate, in each case in accordance with United States
generally accepted accounting principles ("U.S. GAAP") consistently applied
during the periods involved, except in each case as may be noted therein,
subject to normal year-end audit adjustments in the case of unaudited
statements. The books and records of the Company have been, and are being,
maintained in all material respects in accordance with U.S. GAAP and any other
applicable legal and accounting requirements and reflect only actual
transaction.
4.11 Compliance with Applicable Laws. The Company is not in violation
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of, or, to the knowledge of the Company, under investigation with respect to or
has been given notice or has been charged with the violation of any Law of a
governmental agency, except for violations which individually or in the
aggregate do not have a Material Adverse Effect.
4.12 Brokers. Except for Windstone Capital Partners, Inc., no broker,
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finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. In addition to the
cash compensation to Windstone Capital Partners, Inc., the Company has agreed to
execute warrants granting to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ the right to purchase 171,875
shares of the Common Stock, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ the right to purchase 171,875
shares of the Common Stock, and Wood Capital Associates the right to purchase
100,000 shares of the Common Stock. All of the warrants described in this
paragraph will be similar to the A Warrant to be issued to the Investor, except
that the Exercise Price will be $1.10 and there will be no adjustment to the
Exercise Price. Any such warrant shall also be subject to the Registration
Rights Agreement described in Attachment B hereto, except there will be no
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demand registration rights. However, the "piggy-back" registration rights
provision will be subject to penalty.
4.13 SEC Documents. After the Company becomes a publicly held
--------------
company, it will make available to the Investor true and complete copies of any
requested SEC Documents. Further, after the Company becomes a publicly held
company, it shares of Common Stock will be registered for trading pursuant to
Section 12 of the 1934 Act, and the Common Stock will be listed and traded on
the OTC Bulletin Board maintained by The Nasdaq Stock Market, Inc., or such
other publicly trading market for which its shares of the Common Stock may then
qualify. As of the date hereof, the Company has received no notice, either oral
or written, with respect to the eligibility of the Common Stock for such listing
on the OTC Bulletin Board. The Company has not provided to the Investor any
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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.
4.14 Litigation. To the knowledge of the Company, no litigation,
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claim, or other proceeding before any court or governmental agency is pending or
threatened against the Company.
4.15 Exemption from Registration. Subject to the accuracy of the
-----------------------------
Investor' representations in Article V hereof, except as required pursuant to
the Registration Rights Agreement, the sale of the Units will not require
registration under the 1933 Act and/or any applicable state securities law.
When validly converted in accordance with the terms of the Warrants, the Shares
underlying the Warrants will be duly and validly issued, fully paid, and
non-assessable. The Company is issuing the Units in accordance with and in
reliance upon the exemption from securities registration afforded, inter alia,
by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act,
and/or Section 4(2) of the 1933 Act.
4.16 No General Solicitation or Advertising in Regard to this
----------------------------------------------------------------
Transaction. Neither the Company nor any of its Affiliates nor, to the
-----------
knowledge of the Company, any Person acting on its or their behalf (a) has
conducted or will conduct any general solicitation (as that term is used in Rule
502(c) of Regulation D as promulgated by the SEC under the ▇▇▇▇ ▇▇▇) or general
advertising with respect to the sale of the Units, or (b) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Units, under the 1933 Act,
except as required herein.
4.17 No Material Adverse Change. Since December 31, 2003, no Material
--------------------------
Adverse Effect has occurred or exists with respect to the Company. No material
supplier has given notice, oral or written, that it intends to cease or reduce
the volume of its business with the Company from historical levels. Since
December 31, 2003, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, prospects, operations or financial
condition, that, under any 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 writing to the Investor.
4.18 Material Non-Public Information. The Company has not disclosed
---------------------------------
to the Investor any material non-public information that (a) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock, or (b) 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.
4.19 Internal Controls and Procedures. The Company maintains books
-----------------------------------
and records and internal accounting controls which provide reasonable assurance
that (a) 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;
(b) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (c) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (d) 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. GAAP.
4.20 Full Disclosure. No representation or warranty made by the
----------------
Company in this Agreement and no certificate or document furnished or to be
furnished to the Investor pursuant to this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company as follows:
5.1 Organization and Standing of the Investor. The Investor is validly
-----------------------------------------
existing and in good standing under the laws of the state in which it was
formed. The state in which the offer to purchase the Units hereunder was made
or accepted by the Investor is the state shown as the Investor's address. The
Investor was not formed for the purpose of investing solely in the Units.
8
5.2 Authorization and Power. The Investor has the requisite power and
------------------------
authority to enter into and perform this Agreement and to purchase the Units
being sold to it hereunder. The execution, delivery and performance of this
Agreement by the Investor and the consummation by the Investor of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action where appropriate. This Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Investor and at the
Closing shall constitute valid and binding obligations of the Investor
enforceable against the Investor in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
5.3 No Conflicts. The execution, delivery and performance of this
-------------
Agreement and the consummation by the Investor of the transactions contemplated
hereby or relating hereto do not and will not (a) result in a violation of the
Investor's charter documents or bylaws where appropriate or (b) conflict with,
or constitute a default (or an event which 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 agreement, indenture or
instrument to which the Investor is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on the Investor). The Investor is not
required 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 the Investor's obligations under this Agreement or to
purchase the Units in accordance with the terms hereof, provided that for
purposes of the representation made in this sentence, the Investor is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Company herein.
5.4 Financial Risks. The Investor acknowledges that the Investor is
----------------
able to bear the financial risks associated with an investment in the Units and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as it has
deemed necessary or appropriate to conduct its due diligence investigation. The
Investor is capable of evaluating the risks and merits of an investment in the
Units by virtue of its experience as an investor and its knowledge, experience,
and sophistication in financial and business matters and the Investor is capable
of bearing the entire loss of its investment in the Units.
5.5 Accredited Investor. The Investor is (a) an "accredited investor"
--------------------
as that term is defined in Rule 501 of Regulation D promulgated under the 1933
Act by reason of Rule 501(a)(3) and (6) thereunder, (b) experienced in making
investments of the kind described in this Agreement and the related documents,
(c) able, by reason of the business and financial experience of its officers (if
an entity) and professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its affiliates or selling agents), to
protect its own interests in connection with the transactions described in this
Agreement, and the related documents, and (d) able to afford the entire loss of
its investment in the Units.
5.6 Brokers. Except for Windstone Capital Partners, Inc. and its
-------
Affiliates, who shall be paid by the Company, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Investor.
5.7 No Short Sales. Prior to the Closing Date, neither the Investor
----------------
nor any of the Investor's Affiliates will be in a net short position with regard
to the Common Stock in any accounts directly or indirectly controlled by the
Investor.
5.8 Knowledge of the Company. The Investor and the Investor's advisors,
------------------------
if any, have been, upon request, furnished with all materials relating to the
business, finances and operations of the Company and materials relating to the
offer and sale of the Units. The Investor and the Investor's advisors, if any,
have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries.
5.9 Risk Factors. The Investor understands that the Investor's
-------------
investment in the Units involves a high degree of risk. The Investor understands
that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Units. The Investor warrants that the Investor is able to bear the complete
loss of the Investor's investment in the Units.
9
5.10 Full Disclosure. No representation or warranty made by the
----------------
Investor in this Agreement and no certificate or document furnished or to be
furnished to the Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading. Except as set forth or referred to in this Agreement, the Investor
does not have any agreement or understanding with any person relating to
acquiring, holding, voting or disposing of any equity securities of the Company.
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 Registration Rights. The Company shall cause the Registration
--------------------
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
6.2 Reservation of Common Stock. As of the date hereof, the Company
------------------------------
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the shares of the Common Stock underlying the
Warrants.
6.3 Listing of Common Stock. Following the acquisition of a publicly
-------------------------
trading corporate shell as described herein, the Company agrees to maintain the
listing of the Common Stock on a publicly trading market. The Company will take
all action to continue the listing and trading of its Common Stock on a publicly
trading market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the applicable
publicly trading market. As used herein, the term "publicly trading market"
shall not include the "Pink Sheets" which is an electronic quotation system that
displays quotes from broker dealers for many over-the-counter securities
operated by Pink Sheets LLC.
6.4 Exchange Act Registration. Following the acquisition of a publicly
-------------------------
trading corporate shell as described herein, the Company will cause the Common
Stock to be registered under Section 12(b) or (g) of the 1934 Act, and will use
its best efforts to comply in all respects with its reporting and filing
obligations under the 1934 Act, and will not take any action or file any
document (whether or not permitted by the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the 1934 until the Investor has disposed of all of
its Shares or the shares of Common Stock underlying the Warrants.
6.5 Corporate Existence; Conflicting Agreements. The Company will take
-------------------------------------------
all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
6.6 Independent Directors. The Company will cause the appointment of
----------------------
at least two independent directors within 60 days from the Closing Date. If no
such directors are appointed, the Company shall pay to the Investor, pro rata,
as liquidated damages and not as a penalty, an amount equal to six percent of
the Purchase Price per annum, payable monthly. The parties agree that the only
damages payable for a violation of the terms of this Agreement with respect to
which liquidated damages are expressly provided shall be such liquidated
damages. Nothing shall preclude the Investor from pursuing or obtaining
specific performance or other equitable relief with respect to this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Paragraph 6.6 constitute a reasonable estimate of the damages that may be
incurred by the Investor by reason of the failure of the Company to appoint at
least two independent directors in accordance with the provision hereof.
6.7 Registration by Officers and Directors. The officers and directors
--------------------------------------
of the Company, without the written consent of the Investor, shall not be
permitted to register any of their shares of the Common Stock for a period of
one year from the Closing Date.
6.8 Use of Proceeds. The anticipated use of proceeds from the sale of
----------------
the Common Stock is shown in the following table. The foregoing table assumes
that a maximum of $2,000,000 is received by the Company from the sale of the
Shares. Until they are needed, the Company intends to invest the proceeds from
the sale of the Units in short term, interest bearing investment grade
securities. Notwithstanding anything herein contained to the contrary, the
following described use of proceeds may be modified as determined in the best
interest of the Company.
10
USE OF PROCEEDS IF ALL UNITS ARE SOLD
--------------- ---------------------
Fees to Windstone Capital at 15% . . . . . . . . . . . . $ 300,000
Purchase of publicly trading shell . . . . . . . . . . . 275,000
Development of marketing materials and sales effort for
Constant Vacuum Monitor and LNG/CNG markets. . . . . . . 400,000
Payment on subsidiary purchases. . . . . . . . . . . . . 300,000
Installation of Beta site for ARCO . . . . . . . . . . . 15,000
Legal fees for registration documents. . . . . . . . . . 50,000
Working capital. . . . . . . . . . . . . . . . . . . . . 660,000
---------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000,000
=====================
ARTICLE VII
COVENANTS OF THE INVESTOR
7.1 Voting Rights. For so long as the Investor owns any shares of the
--------------
Common Stock, the Investor grants to the members of the board of directors of
the Company, collectively, a proxy, coupled with an interest, to vote 20 percent
of the shares of the Common Stock held by the Investor at the time any such vote
is taken.
7.2 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 any public market on which the Common Stock may be listed.
7.3 Transfer Restrictions. The Investor's acknowledge that (a) the
----------------------
Shares, Warrants and shares of the Common Stock underlying the Warrants have not
been registered under the provisions of the 1933 Act, and may not be transferred
unless (i) subsequently registered thereunder or (ii) the Investor shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Shares, Warrants and
shares of the Common Stock underlying the Warrants to be sold or transferred may
be sold or transferred pursuant to an exemption from such registration; and (b)
any sale of the Shares, Warrants and shares of the Common Stock underlying the
Warrants made in reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder.
7.4 Purchase for Investment. The purchase of the Units hereunder is
-------------------------
being made for the Investor's own account for investment, with no present
intention of resale.
7.5 Restrictive Legend. The Investor acknowledges and agrees that the
-------------------
Shares and the Warrants, and, until such time as the shares of the Common Stock
underlying the Warrants have been registered under the 1933 Act and sold in
accordance with an effective Registration Statement, certificates and other
instruments representing any of the Shares and the Warrants shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such securities):
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT."
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
11
8.1 No Termination. This Agreement shall not have been terminated
---------------
pursuant to Article X hereof.
8.2 Representations True and Correct. The representations and
-----------------------------------
warranties of the Investor contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as if made on as of the Closing Date.
8.3 Compliance with Covenants. The Investor shall have performed and
---------------------------
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied by it prior to or at the
Closing Date.
8.4 No Adverse Proceedings. On the Closing Date, no action or
------------------------
proceeding shall be pending by any public authority or individual or entity
before any court or administrative body to restrain, enjoin, or otherwise
prevent the consummation of this Agreement or the transactions contemplated
hereby or to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
ARTICLE IX
CONDITIONS PRECEDENT TO THE INVESTOR'S OBLIGATIONS
The obligation of the Investor to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
9.1 Closing of Acquisition of Publicly Trading Corporate Shell.
-----------------------------------------------------------------
Simultaneously with the Closing, the Company shall close the acquisition of a
publicly trading corporate shell (the "Corporate Shell"), which will not have
liabilities in excess of $100,000, either by means of a stock acquisition or
reverse merger (the "Shell Acquisition"), as determined by the Company.
Following the closing of the Shell Acquisition, the stockholders of the Company,
including the Investor, shall receive shares of the common stock of the
Corporate Shell in exchange for their shares of the Common Stock in the same
proportion as the shares of the Common Stock issued in favor of the current
stockholders of the Company as of the Closing Date and the Investor, after the
issuance of the 2,000,000 shares of the Common Stock to be sold to the Investor
hereunder. Further, the Corporate Shell shall assume all of the obligations of
the Company described hereunder, including, but not limited to the issuance of
the Warrants, and the obligations under the Registration Rights Agreement. For
example, if 200,000 shares of the Common Stock are issued for the acquisition of
the Corporate Shell, then the Investor's ownership on a primary shares of the
Common Stock outstanding basis would be 2,000,000 shares (2,000,000 +
9,750,000) = 17.02 percent ownership of the entire resulting ownership of the
Corporate Shell. Moreover, on a fully diluted basis, the Investor would own
(2,000,000 shares of the Common Stock + Warrants to purchase 7,000,000
additional shares) (9,750,000 shares + 2,000,000 shares + Warrants to purchase
7,000,000 shares) = 48 percent of the entire resulting ownership of the
Corporate Shell. The fully diluted calculation is an approximation because the
calculation does not include the exercise of other warrants or options of the
Company may be then outstanding.
9.2 No Termination. This Agreement shall not have been terminated
---------------
pursuant to Article X hereof.
9.3 Representations True and Correct. The representations and
-----------------------------------
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as if made on as of the Closing Date.
9.4 Compliance with Covenants. The Company shall have performed and
---------------------------
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied by it prior to or at the
Closing Date.
9.5 No Adverse Proceedings. On the Closing Date, no action or
------------------------
proceeding shall be pending by any public authority or individual or entity
before any court or administrative body to restrain, enjoin, or otherwise
prevent the consummation of this Agreement or the transactions contemplated
hereby or to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing Date:
12
(a) By mutual written consent of the Investor and the Company;
(b) By the Company upon a material breach of any representation,
warranty, covenant or agreement on the part of the Investor set forth in this
Agreement, or the Investor upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company or the Investor,
respectively, shall have become untrue, in either case such that any of the
conditions set forth in Article VIII or Article IX hereof would not be
satisfied, and such breach shall, if capable of cure, not have been cured within
five days after receipt by the party in breach of a notice from the
non-breaching party setting forth in detail the nature of such breach;
(c) By either party, if the Closing Date is after February 29,
2004.
10.2 Effect of Termination. In the event of the termination of this
-----------------------
Agreement pursuant to Paragraph 10.1 hereof, there shall be no liability on the
part of the Company or the Investor or any of their respective officers,
directors, agents or other representatives and all rights and obligations of any
party hereto shall cease, except as expressed herein.
10.3 Amendment. This Agreement may be amended by the parties hereto
---------
any time prior to the Closing Date by an instrument in writing signed by the
parties hereto.
10.4 Waiver. At any time prior to the Closing Date, the Company or the
------
Investor, as appropriate, may (a) extend the time for the performance of any of
the obligations or other acts of other party or; (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto which have been made to it or them; or (c) waive compliance with
any of the agreements or conditions contained herein for its or their benefit.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party or parties to be bound hereby.
ARTICLE XI
GENERAL PROVISIONS
11.1 Transaction Costs. Except as otherwise provided herein, each of
------------------
the parties shall pay all of its costs and expenses (including attorneys' fees
and other legal costs and expenses and accountants' fees and other accounting
costs and expenses) incurred by that party in connection with this Agreement.
11.2 Indemnification. The Investor agrees to defend and hold the
---------------
Company (following the Closing Date) and its officers and directors harmless
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities or damages, including interest, penalties and
reasonable attorney's fees, that it shall incur or suffer, which arise out of,
result from or relate to any breach of this Agreement by the Investor or failure
by the Investor to perform with respect to any of its representations,
warranties or covenants contained in this Agreement or in any exhibit or other
instrument furnished or to be furnished under this Agreement. The Company
agrees to defend and hold the Investor harmless against and in respect of any
and all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney's fees, that it
shall incur or suffer, which arise out of, result from or relate to any breach
of this Agreement or failure by the Company to perform with respect to any of
its representations, warranties or covenants contained in this Agreement or in
any exhibit or other instrument furnished or to be furnished under this
Agreement.
11.3 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.4 Entire Agreement. This Agreement (together with the Attachments
-----------------
and documents referred to herein) constitute the entire agreement of the parties
and supersede all prior agreements and undertakings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
11.5 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇.
13
▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a
copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, and if to the Investor addressed to Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party hereto may change
its address upon 10 days' written notice to any other party hereto.
11.6 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
11.7 Binding Effect. All the terms and provisions of this Agreement
---------------
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and assignees.
11.8 Preparation of Agreement. This Agreement shall not be construed
--------------------------
more strongly against any party regardless of who is responsible for its
preparation. The parties acknowledge each contributed and is equally responsible
for its preparation.
11.9 Attorneys' Fees. In the event that it should become necessary for
---------------
any party entitled hereunder to bring suit against any other party to this
Agreement for a breach of this Agreement, the parties hereby covenant and agree
that the party who is found to be in breach of this Agreement shall also be
liable for all reasonable attorneys' fees and costs of court incurred by the
other parties. Provided, however, in the event that there has been no breach of
this Agreement, whether or not the transactions contemplated hereby are
consummated, each party shall bear its own costs and expenses (including any
fees or disbursements of its counsel, accountants, brokers, investment bankers,
and finder's fees).
11.10 Law Governing; Jurisdiction. This Agreement shall be governed by
---------------------------
and construed in accordance with the laws of the State of California, without
regard to any conflicts of laws provisions thereof. Each party hereby
irrevocably submits to the personal jurisdiction of the United States District
Court for the Central District of California, as well as of the Superior Courts
of the State of California in Riverside County, California over any suit, action
or proceeding arising out of or relating to this Agreement. Each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such mediation,
arbitration, suit, action or proceeding brought in any such county and any claim
that any such mediation, arbitration, suit, action or proceeding brought in such
county has been brought in an inconvenient forum.
11.11 Preparation and Filing of Securities and Exchange Commission
-----------------------------------------------------------------
Filings. Each Investor shall reasonably assist and cooperate with the Company
-------
in the preparation of all filings with the SEC after the Closing Date due after
the Closing Date.
11.12 Further Assurances, Cooperation. Each party shall, upon
---------------------------------
reasonable request by the other party, execute and deliver any additional
documents necessary or desirable to complete the transactions herein pursuant to
and in the manner contemplated by this Agreement. The parties hereto agree to
cooperate and use their respective best efforts to consummate the transactions
contemplated by this Agreement.
11.13 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive the Closing of the transaction contemplated
hereby.
11.14 Third Parties. Except as disclosed in this Agreement, nothing in
-------------
this Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties hereto and their respective administrators, executors, legal
representatives, heirs, successors and assignees. Nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
14
11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No
-----------------------------------------------------------
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
11.16 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
IN WITNESS WHEREOF, the Investor and the Company have as of the date first
written above executed this Agreement.
ENVIRONMENTAL TECHNOLOGIES, INC.
By
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
▇▇▇▇▇▇ PARTNERS LP
By
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, President, ▇▇▇▇▇▇ Capital
Advisors LLC, General Partner
Attachments:
-----------
Attachment A - Form of Warrants
Attachment B - Registration Rights Agreement
15
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ACT, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, OR
(C) IF REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, A STOCK PURCHASE AGREEMENT (THE "STOCK PURCHASE AGREEMENT"), DATED
THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE
PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE
RIGHTS OF THE HOLDER AND SPECIFY MANDATORY REDEMPTION OBLIGATIONS OF THE
COMPANY.
---------------------------------------
CYBER PUBLIC RELATIONS, INC.
A WARRANT FOR THE PURCHASE OF COMMON STOCK
1,500,000 Shares Rancho Cucamonga, California
THIS IS TO CERTIFY that pursuant to that certain Stock Purchase Agreement
of even date herewith executed by the parties hereto (the "Stock Purchase
Agreement"), for value received, ▇▇▇▇▇▇ PARTNERS LP (the "Holder") is entitled
at any time from the date hereof, but prior to 5:00 p.m., Rancho Cucamonga,
California time on January ___, 2009, or 18 months after the effectiveness of a
Registration Statement (hereinafter defined) subsequent to the issuance hereof,
whichever is longer, subject to and upon the terms and conditions contained
herein, to purchase up to 1,500,000 fully paid and non-assessable shares of the
common stock, par value $0.001 per share (the "Common Stock") of CYBER PUBLIC
RELATIONS, INC., a Florida corporation (the "Company"), at a purchase price of
$1.00 per share of the Common Stock (the "Exercise Price") such number of the
shares and the Exercise Price being subject to adjustment as provided herein.
This A Warrant shall be void and of no effect and all rights hereunder
shall cease at 5:00 p.m., Rancho Cucamonga, California time on January ___,
2009, or 18 months after the effectiveness of a Registration Statement
subsequent to the issuance hereof, whichever is longer, except to the extent
theretofore exercised; provided that in the case of the earlier dissolution of
the Company, this A Warrant shall become void on the date fixed for such
dissolution. As used herein, "Registration Statement" means a registration
statement filed by the Company on Form ▇-▇, ▇▇-▇, ▇▇ ▇-▇, or some other similar
form pursuant to the Securities Act of 1933, as amended (the "1933 Act") to
register the resale of the shares of the Common Stock upon the exercise of this
A Warrant.
1. Registration of this A Warrant. The Company shall register this A
--------------------------------
Warrant upon records to be maintained by the Company for that purpose (the "A
Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this A Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Investment Representation. The Holder by accepting this A Warrant
--------------------------
represents that the Holder is acquiring this A Warrant for its own account or
the account of an affiliate for investment purposes and not with the view to any
offering or distribution and that the Holder will not sell or otherwise dispose
of this A Warrant or the underlying Common Stock in violation of applicable
securities laws. The Holder acknowledges that the certificates representing any
shares of the Common Stock will bear a legend indicating that they have not been
registered under the 1933 Act and may not be sold by the Holder except pursuant
to an effective Registration Statement or pursuant to an exemption from
registration requirements of the 1933 Act and in accordance with federal and
state securities laws.
3. Validity of A Warrant and Issuance of the Common Stock. The Company
------------------------------------------------------
represents and warrants that this A Warrant has been duly authorized and validly
issued and warrants and agrees that the Common Stock that may be issued upon the
exercise of the rights represented by this A Warrant will, when issued upon such
exercise,
1
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which the rights
represented by this A Warrant may be exercised, the Company will at all times
have authorized and reserved a sufficient number of shares of the Common Stock
to provide for the exercise of the rights represented by this A Warrant.
4. Registration of Transfers and Exchange of this A Warrant.
--------------------------------------------------------------
(a) Subject to compliance with the legend set forth on the face of
this A Warrant, the Company shall register the transfer of any portion of this A
Warrant in the A Warrant Register, upon surrender of this A Warrant with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Paragraph 9 hereof. Upon any such
registration or transfer, a new warrant to purchase the Common Stock, in
substantially the form of this A Warrant (any such new warrant, a "New A
Warrant"), evidencing the portion of this A Warrant so transferred shall be
issued to the transferee and a New A Warrant evidencing the remaining portion of
this A Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New A Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
the Holder.
(b) This A Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Paragraph 9
for one or more New A Warrants, evidencing in the aggregate the right to
purchase the number of shares of the Common Stock which may then be purchased
hereunder. Any such New A Warrant will be dated the date of such exchange.
5. Exercise of this A Warrant.
----------------------------
(a) Upon surrender of this A Warrant with the Form of Election to
Purchase attached hereto duly completed and signed to the Company, at its
address set forth in Paragraph 9 hereof, and upon payment and delivery of the
Exercise Price multiplied by the number of shares of the Common Stock that the
Holder intends to purchase hereunder, in lawful money of the United States of
America, in cash or by certified or official bank check or checks, to the
Company, all as specified by the Holder in the Form of Election to Purchase, the
Company shall promptly but in no event later than five business days after the
Date of Exercise (as defined herein) issue or cause to be issued and delivered
to or upon the written order of the Holder and in such name or names as the
Holder may designate (subject to the restrictions on transfer described in the
legend set forth on the face of this A Warrant), a certificate for the shares of
the Common Stock issuable upon such exercise, with such restrictive legend as
required by the 1933 Act. Any person so designated by the Holder to receive the
shares of the Common Stock shall be deemed to have become holder of record of
the Common Stock as of the Date of Exercise of this A Warrant.
(b) "Date of Exercise" means the date on which the Company shall
have received (i) this A Warrant (or any New A Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New A Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of shares of the Common Stock so indicated by the Holder to be
purchased.
(c) This A Warrant shall be exercisable at any time and from time
to time for such number of shares of the Common Stock as is indicated in the
attached Form of Election to Purchase. If less than all of the shares of the
Common Stock which may be purchased under this A Warrant are purchased at any
time, the Company shall issue or cause to be issued, at its expense, a New A
Warrant evidencing the right to purchase the remaining number of shares of the
Common Stock for which no exercise has been evidenced by this A Warrant.
(d) Notwithstanding anything contained herein to the contrary, the
holder of this A Warrant may, at its election exercised in its sole discretion,
exercise this A Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of the Common Stock determined according to the following
formula (a "Cashless Exercise"):
2
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number shares with respect to which this A
Warrant is then being exercised.
B = the last reported sale price (as reported by Bloomberg) of
the Common Stock on the date immediately preceding the date
of the notice of exercise of this A Warrant.
C = the Exercise Price then in effect at the time of such
exercise.
Provided, however, notwithstanding anything herein contained to the
contrary, the Holder may not affect a Cashless Exercise of this A Warrant until
after July ___, 2004, and thereafter so long as there is an effective
Registration Statement with respect to the shares of the Common Stock.
6. Adjustment of Exercise Price and Number of Shares. The shares of
----------------------------------------------------
the Common Stock or other securities at the time issuable upon exercise of this
A Warrant and the Exercise Price therefore, are subject to adjustment upon the
occurrence of the following events:
(a) Adjustment of the Exercise Price due to EBIT. The Exercise
-----------------------------------------------
Price will be adjusted on a sliding scale if the earnings before interest and
taxes ("EBIT") of the Company, not including any non recurring gains or losses,
is less than $3,000,000 for the fiscal year of the Company ending September 30,
2004 (the "Adjustment Date") as hereinafter described. If the EBIT of the
Company is $2,000,000 or less as of the Adjustment Date, then the Exercise Price
will be $0.25 per share of the Common Stock. If the EBIT of the Company is less
than $3,000,000 but more than $2,000,000 as of the Adjustment Date, then the
Exercise Price will equal $1.00 - [$.75 x ($3,000,000-E)/$1,000,000], where E is
the actual EBIT as of Adjustment Date. For example, if EBIT is $2,500,000, the
Exercise Price will be $1.00 - [$.75 x ($3,000,000-$2,500,000)/$1,000,000], or
$0.63. In no event will the Exercise Price be less than $0.25 per share of the
Common Stock.
(b) Adjustment for Stock Splits, Stock Dividends,
--------------------------------------------------
Recapitalizations, Etc. The Exercise Price of this A Warrant and the number of
-----------------------
shares of the Common Stock or other securities at the time issuable upon the
exercise of this A Warrant shall be appropriately adjusted to reflect any stock
dividend, stock split, combination of shares, reclassification, recapitalization
or other similar event affecting the number of outstanding shares of the Common
Stock or other securities of the Company.
(c) Adjustment for Reorganization, Consolidation, Merger, Etc. In
---------------------------------------------------------
case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being referred to
as a "Reorganization"), then, in each case, the Holder, on exercise hereof at
any time after the consummation or effective date of such Reorganization (the
"Effective Date"), shall receive, in lieu of the shares of the Common Stock or
other securities of the Company at any time issuable upon the exercise of this A
Warrant prior to the Effective Date, the shares of the Common Stock and other
securities of the Company and property (including cash) to which the Holder
would have been entitled upon the Effective Date if the Holder had exercised
this A Warrant immediately prior thereto (all subject to further adjustment as
provided in this A Warrant).
(d) Certificate as to Adjustments. In case of any adjustment or
-------------------------------
readjustment in the price or kind of securities issuable on the exercise of this
A Warrant, the Company will promptly give written notice thereof to the Holder
in the form of a certificate, certified and confirmed by the Board of Directors
of the Company, setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based.
3
7. Fractional Shares. The Company shall not be required to issue or
------------------
cause to be issued fractional shares of the Common Stock on the exercise of this
A Warrant. The number of full shares of the Common Stock that shall be issuable
upon the exercise of this A Warrant shall be computed on the basis of the
aggregate number of shares of the Common Stock purchasable on exercise of this A
Warrant so presented. If any fraction of shares of the Common Stock would,
except for the provisions of this Paragraph 8, be issuable on the exercise of
this A Warrant, the Company shall, at its option, (a) pay an amount in cash
equal to the Exercise Price multiplied by such fraction or (b) round the number
of shares of the Common Stock issuable, up to the next whole number.
8. Notice. All notices and other communications hereunder shall be in
------
writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and if to the Holder addressed to Mr. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
9. Miscellaneous.
-------------
(a) This A Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
A Warrant may be amended only in writing and signed by the Company and the
Holder.
(b) Nothing in this A Warrant shall be construed to give to any
person or corporation other than the Company and the Holder any legal or
equitable right, remedy or cause of action under this A Warrant. This A Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.
(c) This A Warrant shall be governed by and construed in
accordance with the laws of the State of California, without regard to any
conflicts of laws provisions thereof. Each party hereby irrevocably submits to
the personal jurisdiction of the United States District Court for the Central
District of California, as well as of the Superior Courts of the State of
California in Riverside County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
(d) The headings herein are for convenience only, do not
constitute a part of this A Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this A Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this A Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonably substitute therefore, and upon so agreeing, shall
incorporate such substitute provision in this A Warrant.
(f) The Holder shall not, by virtue hereof, be entitled to any
voting or other rights of a shareholder of the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this A Warrant.
(g) In the event of any conflict between the terms of this A
Warrant or the Stock Purchase Agreement, the terms of the Stock Purchase
Agreement shall control.
4
IN WITNESS WHEREOF, the Company has caused this A Warrant to be duly
executed by the authorized officer as of the date first above stated.
CYBER PUBLIC RELATIONS, INC.
By
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
5
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing A Warrant)
To: Cyber Public Relations, Inc.
In accordance with the A Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase ______________
shares of the Common Stock (the "Common Stock"), $0.001 par value, of Cyber
Public Relations, Inc. and encloses this A Warrant and $_______ for each share
of the Common Stock being purchased or an aggregate of $________________ in cash
or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the A Warrant) together with any
applicable taxes payable by the undersigned pursuant to the A Warrant.
The undersigned requests that certificates for the shares of the Common
Stock issuable upon this exercise be issued in the name of:
_____________________________________________________
_____________________________________________________
_____________________________________________________
(Please print name and address)
_____________________________________________________
(Please insert Social Security or Tax Identification Number)
If the number of shares of the Common Stock issuable upon this exercise
shall not be all of the shares of the Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed A Warrant, the undersigned
requests that a New A Warrant (as defined in the A Warrant) evidencing the right
to purchase the shares of the Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
_____________________________________________________
_____________________________________________________
_____________________________________________________
(Please print name and address)
Dated: ________________________ Name of Holder:
(Print)_______________________________
By____________________________________
Name__________________________________
Title_________________________________
Signature must conform in all respects
to name of Holder as specified on the
face of the A Warrant
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ACT, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, OR
(C) IF REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, A STOCK PURCHASE AGREEMENT (THE "STOCK PURCHASE AGREEMENT"), DATED
THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE
PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE
RIGHTS OF THE HOLDER AND SPECIFY MANDATORY REDEMPTION OBLIGATIONS OF THE
COMPANY.
---------------------------------------
CYBER PUBLIC RELATIONS, INC.
B WARRANT FOR THE PURCHASE OF COMMON STOCK
1,650,000 Shares Rancho Cucamonga, California
THIS IS TO CERTIFY that pursuant to that certain Stock Purchase Agreement
of even date herewith executed by the parties hereto (the "Stock Purchase
Agreement"), for value received, ▇▇▇▇▇▇ PARTNERS LP (the "Holder") is entitled
at any time from the date hereof, but prior to 5:00 p.m., Rancho Cucamonga,
California time on January ___, 2009, or 18 months after the effectiveness of a
Registration Statement (hereinafter defined) subsequent to the issuance hereof,
whichever is longer, subject to and upon the terms and conditions contained
herein, to purchase up to 1,650,000 fully paid and non-assessable shares of the
common stock, par value $0.001 per share (the "Common Stock") of CYBER PUBLIC
RELATIONS, INC., a Florida corporation (the "Company"), at a purchase price of
$1.00 per share of the Common Stock (the "Exercise Price") such number of the
shares and the Exercise Price being subject to adjustment as provided herein.
This B Warrant shall be void and of no effect and all rights hereunder
shall cease at 5:00 p.m., Rancho Cucamonga, California time on January ___,
2009, or 18 months after the effectiveness of a Registration Statement
subsequent to the issuance hereof, whichever is longer, except to the extent
theretofore exercised; provided that in the case of the earlier dissolution of
the Company, this B Warrant shall become void on the date fixed for such
dissolution. As used herein, "Registration Statement" means a registration
statement filed by the Company on Form ▇-▇, ▇▇-▇, ▇▇ ▇-▇, or some other similar
form pursuant to the Securities Act of 1933, as amended (the "1933 Act") to
register the resale of the shares of the Common Stock upon the exercise of this
B Warrant.
1. Registration of this B Warrant. The Company shall register this B
--------------------------------
Warrant upon records to be maintained by the Company for that purpose (the "B
Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this B Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Investment Representation. The Holder by accepting this B Warrant
--------------------------
represents that the Holder is acquiring this B Warrant for its own account or
the account of an affiliate for investment purposes and not with the view to any
offering or distribution and that the Holder will not sell or otherwise dispose
of this B Warrant or the underlying Common Stock in violation of applicable
securities laws. The Holder acknowledges that the certificates representing any
shares of the Common Stock will bear a legend indicating that they have not been
registered under the 1933 Act and may not be sold by the Holder except pursuant
to an effective Registration Statement or pursuant to an exemption from
registration requirements of the 1933 Act and in accordance with federal and
state securities laws.
3. Validity of B Warrant and Issuance of the Common Stock. The Company
------------------------------------------------------
represents and warrants that this B Warrant has been duly authorized and validly
issued and warrants and agrees that the Common Stock that may be issued upon the
exercise of the rights represented by this B Warrant will, when issued upon such
exercise, be
1
duly authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company further
warrants and agrees that during the period within which the rights represented
by this B Warrant may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of the Common Stock to
provide for the exercise of the rights represented by this B Warrant.
4. Registration of Transfers and Exchange of this B Warrant.
--------------------------------------------------------------
(a) Subject to compliance with the legend set forth on the face of
this B Warrant, the Company shall register the transfer of any portion of this B
Warrant in the B Warrant Register, upon surrender of this B Warrant with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Paragraph 9 hereof. Upon any such
registration or transfer, a new warrant to purchase the Common Stock, in
substantially the form of this B Warrant (any such new warrant, a "New B
Warrant"), evidencing the portion of this B Warrant so transferred shall be
issued to the transferee and a New B Warrant evidencing the remaining portion of
this B Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New B Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
the Holder.
(b) This B Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Paragraph 9
for one or more New B Warrants, evidencing in the aggregate the right to
purchase the number of shares of the Common Stock which may then be purchased
hereunder. Any such New B Warrant will be dated the date of such exchange.
5. Exercise of this B Warrant.
----------------------------
(a) Upon surrender of this B Warrant with the Form of Election to
Purchase attached hereto duly completed and signed to the Company, at its
address set forth in Paragraph 9 hereof, and upon payment and delivery of the
Exercise Price multiplied by the number of shares of the Common Stock that the
Holder intends to purchase hereunder, in lawful money of the United States of
America, in cash or by certified or official bank check or checks, to the
Company, all as specified by the Holder in the Form of Election to Purchase, the
Company shall promptly but in no event later than five business days after the
Date of Exercise (as defined herein) issue or cause to be issued and delivered
to or upon the written order of the Holder and in such name or names as the
Holder may designate (subject to the restrictions on transfer described in the
legend set forth on the face of this B Warrant), a certificate for the shares of
the Common Stock issuable upon such exercise, with such restrictive legend as
required by the 1933 Act. Any person so designated by the Holder to receive the
shares of the Common Stock shall be deemed to have become holder of record of
the Common Stock as of the Date of Exercise of this B Warrant.
(b) "Date of Exercise" means the date on which the Company shall
have received (i) this B Warrant (or any New B Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New B Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of shares of the Common Stock so indicated by the Holder to be
purchased.
(c) This B Warrant shall be exercisable at any time and from time
to time for such number of shares of the Common Stock as is indicated in the
attached Form of Election to Purchase. If less than all of the shares of the
Common Stock which may be purchased under this B Warrant are purchased at any
time, the Company shall issue or cause to be issued, at its expense, a New B
Warrant evidencing the right to purchase the remaining number of shares of the
Common Stock for which no exercise has been evidenced by this B Warrant.
(d) Notwithstanding anything contained herein to the contrary, the
holder of this B Warrant may, at its election exercised in its sole discretion,
exercise this B Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of the Common Stock determined according to the following
formula (a "Cashless Exercise"):
2
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number shares with respect to which this B
Warrant is then being exercised.
B = the last reported sale price (as reported by
Bloomberg) of the Common Stock on the date immediately
preceding the date of the notice of exercise of this B
Warrant.
C = the Exercise Price then in effect at the time of such
exercise.
Provided, however, notwithstanding anything herein contained to the
contrary, the Holder may not affect a Cashless Exercise of this B Warrant until
after July ___, 2004, and thereafter so long as there is an effective
Registration Statement with respect to the shares of the Common Stock.
6. Call by the Company. In the event that the closing price of the
------------------
Common Stock as listed on a nationally public securities market is $1.75 or more
for a period of 20 consecutive trading days and the Registration Statement for
the Common Stock is effective for such 20 consecutive trading days, the Company
may call this B Warrant upon 30 days notice and pay to the Holder the sum of
$0.001 per share of the Common Stock covered by this B Warrant, for all such
shares not purchased under the exercise provisions at the expiration of the 30
days notice period.
7. Adjustment of Exercise Price and Number of Shares. The shares of
----------------------------------------------------
the Common Stock or other securities at the time issuable upon exercise of this
B Warrant and the Exercise Price therefore, are subject to adjustment upon the
occurrence of the following events:
(a) Adjustment of the Exercise Price due to EBIT. The Exercise
-----------------------------------------------
Price will be adjusted on a sliding scale if the earnings before interest and
taxes ("EBIT") of the Company, not including any non recurring gains or losses,
is less than $3,000,000 for the fiscal year of the Company ending September 30,
2004 (the "Adjustment Date") as hereinafter described. If the EBIT of the
Company is $2,000,000 or less as of the Adjustment Date, then the Exercise Price
will be $0.25 per share of the Common Stock. If the EBIT of the Company is less
than $3,000,000 but more than $2,000,000 as of the Adjustment Date, then the
Exercise Price will equal $1.00 - [$.75 x ($3,000,000-E)/$1,000,000], where E is
the actual EBIT as of Adjustment Date. For example, if EBIT is $2,500,000, the
Exercise Price will be $1.00 - [$.75 x ($3,000,000-$2,500,000)/$1,000,000], or
$0.63. In no event will the Exercise Price be less than $0.25 per share of the
Common Stock.
(b) Adjustment for Stock Splits, Stock Dividends,
--------------------------------------------------
Recapitalizations, Etc. The Exercise Price of this B Warrant and the number of
-----------------------
shares of the Common Stock or other securities at the time issuable upon the
exercise of this B Warrant shall be appropriately adjusted to reflect any stock
dividend, stock split, combination of shares, reclassification, recapitalization
or other similar event affecting the number of outstanding shares of the Common
Stock or other securities of the Company.
(c) Adjustment for Reorganization, Consolidation, Merger, Etc. In
---------------------------------------------------------
case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being referred to
as a "Reorganization"), then, in each case, the Holder, on exercise hereof at
any time after the consummation or effective date of such Reorganization (the
"Effective Date"), shall receive, in lieu of the shares of the Common Stock or
other securities of the Company at any time issuable upon the exercise of this B
Warrant prior to the Effective Date, the shares of the Common Stock and other
securities of the Company and property (including cash) to which the Holder
would have been entitled upon the Effective Date
3
if the Holder had exercised this B Warrant immediately prior thereto (all
subject to further adjustment as provided in this B Warrant).
(d) Certificate as to Adjustments. In case of any adjustment or
-------------------------------
readjustment in the price or kind of securities issuable on the exercise of this
B Warrant, the Company will promptly give written notice thereof to the Holder
in the form of a certificate, certified and confirmed by the Board of Directors
of the Company, setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based.
8. Fractional Shares. The Company shall not be required to issue or
------------------
cause to be issued fractional shares of the Common Stock on the exercise of this
B Warrant. The number of full shares of the Common Stock that shall be issuable
upon the exercise of this B Warrant shall be computed on the basis of the
aggregate number of shares of the Common Stock purchasable on exercise of this B
Warrant so presented. If any fraction of shares of the Common Stock would,
except for the provisions of this Paragraph 8, be issuable on the exercise of
this B Warrant, the Company shall, at its option, (a) pay an amount in cash
equal to the Exercise Price multiplied by such fraction or (b) round the number
of shares of the Common Stock issuable, up to the next whole number.
9. Notice. All notices and other communications hereunder shall be in
------
writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and if to the Holder addressed to Mr. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
10. Miscellaneous.
-------------
(a) This B Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
B Warrant may be amended only in writing and signed by the Company and the
Holder.
(b) Nothing in this B Warrant shall be construed to give to any
person or corporation other than the Company and the Holder any legal or
equitable right, remedy or cause of action under this B Warrant. This B Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.
(c) This B Warrant shall be governed by and construed in
accordance with the laws of the State of California, without regard to any
conflicts of laws provisions thereof. Each party hereby irrevocably submits to
the personal jurisdiction of the United States District Court for the Central
District of California, as well as of the Superior Courts of the State of
California in Riverside County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
(d) The headings herein are for convenience only, do not
constitute a part of this B Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this B Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this B Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonably substitute therefore, and upon so agreeing, shall
incorporate such substitute provision in this B Warrant.
4
(f) The Holder shall not, by virtue hereof, be entitled to any
voting or other rights of a shareholder of the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this B Warrant.
(g) In the event of any conflict between the terms of this B
Warrant or the Stock Purchase Agreement, the terms of the Stock Purchase
Agreement shall control.
IN WITNESS WHEREOF, the Company has caused this B Warrant to be duly
executed by the authorized officer as of the date first above stated.
CYBER PUBLIC RELATIONS, INC.
By
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
5
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing B Warrant)
To: Cyber Public Relations, Inc.
In accordance with the B Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase ______________
shares of the Common Stock (the "Common Stock"), $0.001 par value, of Cyber
Public Relations, Inc. and encloses this B Warrant and $_______ for each share
of the Common Stock being purchased or an aggregate of $________________ in cash
or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the B Warrant) together with any
applicable taxes payable by the undersigned pursuant to the B Warrant.
The undersigned requests that certificates for the shares of the Common
Stock issuable upon this exercise be issued in the name of:
________________________________________________
________________________________________________
________________________________________________
________________________________________________
(Please print name and address)
________________________________________________
(Please insert Social Security or Tax Identification Number)
If the number of shares of the Common Stock issuable upon this exercise
shall not be all of the shares of the Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed B Warrant, the undersigned
requests that a New B Warrant (as defined in the B Warrant) evidencing the right
to purchase the shares of the Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
_________________________________________
_________________________________________
_________________________________________
(Please print name and address)
Dated: __________________________ Name of Holder:
(Print)________________________________
By_____________________________________
Name___________________________________
Title__________________________________
Signature must conform in all respects
to name of Holder as specified on the
face of the B Warrant
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ACT, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, OR
(C) IF REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, A STOCK PURCHASE AGREEMENT (THE "STOCK PURCHASE AGREEMENT"), DATED
THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE
PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE
RIGHTS OF THE HOLDER AND SPECIFY MANDATORY REDEMPTION OBLIGATIONS OF THE
COMPANY.
---------------------------------------
CYBER PUBLIC RELATIONS, INC.
C WARRANT FOR THE PURCHASE OF COMMON STOCK
2,000,000 Shares Rancho Cucamonga, California
THIS IS TO CERTIFY that pursuant to that certain Stock Purchase Agreement
of even date herewith executed by the parties hereto (the "Stock Purchase
Agreement"), for value received, ▇▇▇▇▇▇ PARTNERS LP (the "Holder") is entitled
at any time from the date hereof, but prior to 5:00 p.m., Rancho Cucamonga,
California time on January ___, 2009, or 18 months after the effectiveness of a
Registration Statement (hereinafter defined) subsequent to the issuance hereof,
whichever is longer, subject to and upon the terms and conditions contained
herein, to purchase up to 2,000,000 fully paid and non-assessable shares of the
common stock, par value $0.001 per share (the "Common Stock") of CYBER PUBLIC
RELATIONS, INC., a Florida corporation (the "Company"), at a purchase price of
$2.00 per share of the Common Stock (the "Exercise Price") such number of the
shares and the Exercise Price being subject to adjustment as provided herein.
This C Warrant shall be void and of no effect and all rights hereunder
shall cease at 5:00 p.m., Rancho Cucamonga, California time on January ___,
2009, or 18 months after the effectiveness of a Registration Statement
subsequent to the issuance hereof, whichever is longer, except to the extent
theretofore exercised; provided that in the case of the earlier dissolution of
the Company, this C Warrant shall become void on the date fixed for such
dissolution. As used herein, "Registration Statement" means a registration
statement filed by the Company on Form ▇-▇, ▇▇-▇, ▇▇ ▇-▇, or some other similar
form pursuant to the Securities Act of 1933, as amended (the "1933 Act") to
register the resale of the shares of the Common Stock upon the exercise of this
C Warrant.
1. Registration of this C Warrant. The Company shall register this C
--------------------------------
Warrant upon records to be maintained by the Company for that purpose (the "C
Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this C Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Investment Representation. The Holder by accepting this C Warrant
--------------------------
represents that the Holder is acquiring this C Warrant for its own account or
the account of an affiliate for investment purposes and not with the view to any
offering or distribution and that the Holder will not sell or otherwise dispose
of this C Warrant or the underlying Common Stock in violation of applicable
securities laws. The Holder acknowledges that the certificates representing any
shares of the Common Stock will bear a legend indicating that they have not been
registered under the 1933 Act and may not be sold by the Holder except pursuant
to an effective Registration Statement or pursuant to an exemption from
registration requirements of the 1933 Act and in accordance with federal and
state securities laws.
3. Validity of C Warrant and Issuance of the Common Stock. The Company
------------------------------------------------------
represents and warrants that this C Warrant has been duly authorized and validly
issued and warrants and agrees that the Common Stock that may be issued upon the
exercise of the rights represented by this C Warrant will, when issued upon such
exercise, be
1
duly authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company further
warrants and agrees that during the period within which the rights represented
by this C Warrant may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of the Common Stock to
provide for the exercise of the rights represented by this C Warrant.
4. Registration of Transfers and Exchange of this C Warrant.
--------------------------------------------------------------
(a) Subject to compliance with the legend set forth on the face of
this C Warrant, the Company shall register the transfer of any portion of this C
Warrant in the C Warrant Register, upon surrender of this C Warrant with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Paragraph 9 hereof. Upon any such
registration or transfer, a new warrant to purchase the Common Stock, in
substantially the form of this C Warrant (any such new warrant, a "New C
Warrant"), evidencing the portion of this C Warrant so transferred shall be
issued to the transferee and a New C Warrant evidencing the remaining portion of
this C Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New C Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
the Holder.
(b) This C Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Paragraph 9
for one or more New C Warrants, evidencing in the aggregate the right to
purchase the number of shares of the Common Stock which may then be purchased
hereunder. Any such New C Warrant will be dated the date of such exchange.
5. Exercise of this C Warrant.
----------------------------
(a) Upon surrender of this C Warrant with the Form of Election to
Purchase attached hereto duly completed and signed to the Company, at its
address set forth in Paragraph 9 hereof, and upon payment and delivery of the
Exercise Price multiplied by the number of shares of the Common Stock that the
Holder intends to purchase hereunder, in lawful money of the United States of
America, in cash or by certified or official bank check or checks, to the
Company, all as specified by the Holder in the Form of Election to Purchase, the
Company shall promptly but in no event later than five business days after the
Date of Exercise (as defined herein) issue or cause to be issued and delivered
to or upon the written order of the Holder and in such name or names as the
Holder may designate (subject to the restrictions on transfer described in the
legend set forth on the face of this C Warrant), a certificate for the shares of
the Common Stock issuable upon such exercise, with such restrictive legend as
required by the 1933 Act. Any person so designated by the Holder to receive the
shares of the Common Stock shall be deemed to have become holder of record of
the Common Stock as of the Date of Exercise of this C Warrant.
(b) "Date of Exercise" means the date on which the Company shall
have received (i) this C Warrant (or any New C Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New C Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of shares of the Common Stock so indicated by the Holder to be
purchased.
(c) This C Warrant shall be exercisable at any time and from time
to time for such number of shares of the Common Stock as is indicated in the
attached Form of Election to Purchase. If less than all of the shares of the
Common Stock which may be purchased under this C Warrant are purchased at any
time, the Company shall issue or cause to be issued, at its expense, a New C
Warrant evidencing the right to purchase the remaining number of shares of the
Common Stock for which no exercise has been evidenced by this C Warrant.
(d) Notwithstanding anything contained herein to the contrary, the
holder of this C Warrant may, at its election exercised in its sole discretion,
exercise this C Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of the Common Stock determined according to the following
formula (a "Cashless Exercise"):
2
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number shares with respect to which this C
Warrant is then being exercised.
B = the last reported sale price (as reported by
Bloomberg) of the Common Stock on the date immediately
preceding the date of the notice of exercise of this C
Warrant.
C = the Exercise Price then in effect at the time of such
exercise.
Provided, however, notwithstanding anything herein contained to the
contrary, the Holder may not affect a Cashless Exercise of this C Warrant until
after January ___, 2006, and thereafter so long as there is an effective
Registration Statement with respect to the shares of the Common Stock.
6. Call by the Company. In the event that the closing price of the
-------------------
Common Stock as listed on a nationally public securities market is $2.75 or more
for a period of 20 consecutive trading days and the Registration Statement for
the Common Stock is effective for such 20 consecutive trading days, the Company
may call this C Warrant upon 30 days notice and pay to the Holder the sum of
$0.001 per share of the Common Stock covered by this C Warrant, for all such
shares not purchased under the exercise provisions at the expiration of the 30
days notice period.
7. Adjustment of Exercise Price and Number of Shares. The shares of
----------------------------------------------------
the Common Stock or other securities at the time issuable upon exercise of this
C Warrant and the Exercise Price therefor, are subject to adjustment upon the
occurrence of the following events:
(a) Adjustment for Stock Splits, Stock Dividends,
--------------------------------------------------
Recapitalizations, Etc. The Exercise Price of this C Warrant and the number of
-----------------------
shares of the Common Stock or other securities at the time issuable upon the
exercise of this C Warrant shall be appropriately adjusted to reflect any stock
dividend, stock split, combination of shares, reclassification, recapitalization
or other similar event affecting the number of outstanding shares of the Common
Stock or other securities of the Company.
(b) Adjustment for Reorganization, Consolidation, Merger, Etc. In
---------------------------------------------------------
case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being referred to
as a "Reorganization"), then, in each case, the Holder, on exercise hereof at
any time after the consummation or effective date of such Reorganization (the
"Effective Date"), shall receive, in lieu of the shares of the Common Stock or
other securities of the Company at any time issuable upon the exercise of this C
Warrant prior to the Effective Date, the shares of the Common Stock and other
securities of the Company and property (including cash) to which the Holder
would have been entitled upon the Effective Date if the Holder had exercised
this C Warrant immediately prior thereto (all subject to further adjustment as
provided in this C Warrant).
(c) Certificate as to Adjustments. In case of any adjustment or
-------------------------------
readjustment in the price or kind of securities issuable on the exercise of this
C Warrant, the Company will promptly give written notice thereof to the Holder
in the form of a certificate, certified and confirmed by the Board of Directors
of the Company, setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based.
8. Fractional Shares. The Company shall not be required to issue or
------------------
cause to be issued fractional shares of the Common Stock on the exercise of this
C Warrant. The number of full shares of the Common Stock
3
that shall be issuable upon the exercise of this C Warrant shall be computed on
the basis of the aggregate number of shares of the Common Stock purchasable on
exercise of this C Warrant so presented. If any fraction of shares of the Common
Stock would, except for the provisions of this Paragraph 8, be issuable on the
exercise of this C Warrant, the Company shall, at its option, (a) pay an amount
in cash equal to the Exercise Price multiplied by such fraction or (b) round the
number of shares of the Common Stock issuable, up to the next whole number.
9. Notice. All notices and other communications hereunder shall be in
------
writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and if to the Holder addressed to Mr. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
10. Miscellaneous.
-------------
(a) This C Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
C Warrant may be amended only in writing and signed by the Company and the
Holder.
(b) Nothing in this C Warrant shall be construed to give to any
person or corporation other than the Company and the Holder any legal or
equitable right, remedy or cause of action under this C Warrant. This C Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.
(c) This C Warrant shall be governed by and construed in
accordance with the laws of the State of California, without regard to any
conflicts of laws provisions thereof. Each party hereby irrevocably submits to
the personal jurisdiction of the United States District Court for the Central
District of California, as well as of the Superior Courts of the State of
California in Riverside County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
(d) The headings herein are for convenience only, do not
constitute a part of this C Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this C Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this C Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonably substitute therefore, and upon so agreeing, shall
incorporate such substitute provision in this C Warrant.
(f) The Holder shall not, by virtue hereof, be entitled to any
voting or other rights of a shareholder of the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this C Warrant.
(g) In the event of any conflict between the terms of this C
Warrant or the Stock Purchase Agreement, the terms of the Stock Purchase
Agreement shall control.
4
IN WITNESS WHEREOF, the Company has caused this C Warrant to be duly
executed by the authorized officer as of the date first above stated.
CYBER PUBLIC RELATIONS, INC.
By
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
5
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing C Warrant)
To: Cyber Public Relations, Inc.
In accordance with the C Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase ______________
shares of the Common Stock (the "Common Stock"), $0.001 par value, of Cyber
Public Relations, Inc. and encloses this C Warrant and $_______ for each share
of the Common Stock being purchased or an aggregate of $________________ in cash
or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the C Warrant) together with any
applicable taxes payable by the undersigned pursuant to the C Warrant.
The undersigned requests that certificates for the shares of the Common
Stock issuable upon this exercise be issued in the name of:
_______________________________________________
_______________________________________________
_______________________________________________
(Please print name and address)
_______________________________________________
(Please insert Social Security or Tax Identification Number)
If the number of shares of the Common Stock issuable upon this exercise
shall not be all of the shares of the Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed C Warrant, the undersigned
requests that a New C Warrant (as defined in the C Warrant) evidencing the right
to purchase the shares of the Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
__________________________________________
__________________________________________
__________________________________________
(Please print name and address)
Dated: _________________________ Name of Holder:
(Print)________________________________
By_____________________________________
Name___________________________________
Title__________________________________
Signature must conform in all respects
to name of Holder as specified on the
face of the C Warrant
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ACT, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, OR
(C) IF REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, A STOCK PURCHASE AGREEMENT (THE "STOCK PURCHASE AGREEMENT"), DATED
THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE
PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE
RIGHTS OF THE HOLDER AND SPECIFY MANDATORY REDEMPTION OBLIGATIONS OF THE
COMPANY.
---------------------------------------
CYBER PUBLIC RELATIONS, INC.
D WARRANT FOR THE PURCHASE OF COMMON STOCK
1,000,000 Shares Rancho Cucamonga, California
THIS IS TO CERTIFY that pursuant to that certain Stock Purchase Agreement
of even date herewith executed by the parties hereto (the "Stock Purchase
Agreement"), for value received, ▇▇▇▇▇▇ PARTNERS LP (the "Holder") is entitled
at any time from the date hereof, but prior to 5:00 p.m., Rancho Cucamonga,
California time on January ___, 2009, or 18 months after the effectiveness of a
Registration Statement (hereinafter defined) subsequent to the issuance hereof,
whichever is longer, subject to and upon the terms and conditions contained
herein, to purchase up to 1,000,000 fully paid and non-assessable shares of the
common stock, par value $0.001 per share (the "Common Stock") of CYBER PUBLIC
RELATIONS, INC., a Florida corporation (the "Company"), at a purchase price of
$4.00 per share of the Common Stock (the "Exercise Price") such number of the
shares and the Exercise Price being subject to adjustment as provided herein.
This D Warrant shall be void and of no effect and all rights hereunder
shall cease at 5:00 p.m., Rancho Cucamonga, California time on January ___,
2009, or 18 months after the effectiveness of a Registration Statement
subsequent to the issuance hereof, whichever is longer, except to the extent
theretofore exercised; provided that in the case of the earlier dissolution of
the Company, this D Warrant shall become void on the date fixed for such
dissolution. As used herein, "Registration Statement" means a registration
statement filed by the Company on Form ▇-▇, ▇▇-▇, ▇▇ ▇-▇, or some other similar
form pursuant to the Securities Act of 1933, as amended (the "1933 Act") to
register the resale of the shares of the Common Stock upon the exercise of this
D Warrant.
1. Registration of this D Warrant. The Company shall register this D
--------------------------------
Warrant upon records to be maintained by the Company for that purpose (the "D
Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this D Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Investment Representation. The Holder by accepting this D Warrant
--------------------------
represents that the Holder is acquiring this D Warrant for its own account or
the account of an affiliate for investment purposes and not with the view to any
offering or distribution and that the Holder will not sell or otherwise dispose
of this D Warrant or the underlying Common Stock in violation of applicable
securities laws. The Holder acknowledges that the certificates representing any
shares of the Common Stock will bear a legend indicating that they have not been
registered under the 1933 Act and may not be sold by the Holder except pursuant
to an effective Registration Statement or pursuant to an exemption from
registration requirements of the 1933 Act and in accordance with federal and
state securities laws.
3. Validity of D Warrant and Issuance of the Common Stock. The Company
------------------------------------------------------
represents and warrants that this D Warrant has been duly authorized and validly
issued and warrants and agrees that the Common Stock that may be issued upon the
exercise of the rights represented by this D Warrant will, when issued upon such
exercise,
1
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof. The Company
further warrants and agrees that during the period within which the rights
represented by this D Warrant may be exercised, the Company will at all times
have authorized and reserved a sufficient number of shares of the Common Stock
to provide for the exercise of the rights represented by this D Warrant.
4. Registration of Transfers and Exchange of this D Warrant.
--------------------------------------------------------------
(a) Subject to compliance with the legend set forth on the face of
this D Warrant, the Company shall register the transfer of any portion of this D
Warrant in the D Warrant Register, upon surrender of this D Warrant with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Paragraph 9 hereof. Upon any such
registration or transfer, a new warrant to purchase the Common Stock, in
substantially the form of this D Warrant (any such new warrant, a "New D
Warrant"), evidencing the portion of this D Warrant so transferred shall be
issued to the transferee and a New D Warrant evidencing the remaining portion of
this D Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New D Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
the Holder.
(b) This D Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Paragraph 9
for one or more New D Warrants, evidencing in the aggregate the right to
purchase the number of shares of the Common Stock which may then be purchased
hereunder. Any such New D Warrant will be dated the date of such exchange.
5. Exercise of this D Warrant.
----------------------------
(a) Upon surrender of this D Warrant with the Form of Election to
Purchase attached hereto duly completed and signed to the Company, at its
address set forth in Paragraph 9 hereof, and upon payment and delivery of the
Exercise Price multiplied by the number of shares of the Common Stock that the
Holder intends to purchase hereunder, in lawful money of the United States of
America, in cash or by certified or official bank check or checks, to the
Company, all as specified by the Holder in the Form of Election to Purchase, the
Company shall promptly but in no event later than five business days after the
Date of Exercise (as defined herein) issue or cause to be issued and delivered
to or upon the written order of the Holder and in such name or names as the
Holder may designate (subject to the restrictions on transfer described in the
legend set forth on the face of this D Warrant), a certificate for the shares of
the Common Stock issuable upon such exercise, with such restrictive legend as
required by the 1933 Act. Any person so designated by the Holder to receive the
shares of the Common Stock shall be deemed to have become holder of record of
the Common Stock as of the Date of Exercise of this D Warrant.
(b) "Date of Exercise" means the date on which the Company shall
have received (i) this D Warrant (or any New D Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New D Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of shares of the Common Stock so indicated by the Holder to be
purchased.
(c) This D Warrant shall be exercisable at any time and from time
to time for such number of shares of the Common Stock as is indicated in the
attached Form of Election to Purchase. If less than all of the shares of the
Common Stock which may be purchased under this D Warrant are purchased at any
time, the Company shall issue or cause to be issued, at its expense, a New D
Warrant evidencing the right to purchase the remaining number of shares of the
Common Stock for which no exercise has been evidenced by this D Warrant.
(d) Notwithstanding anything contained herein to the contrary, the
holder of this D Warrant may, at its election exercised in its sole discretion,
exercise this D Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of the Common Stock determined according to the following
formula (a "Cashless Exercise"):
2
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number shares with respect to which this D
Warrant is then being exercised.
B = the last reported sale price (as reported by
Bloomberg) of the Common Stock on the date immediately
preceding the date of the notice of exercise of this D
Warrant.
C = the Exercise Price then in effect at the time of such
exercise.
Provided, however, notwithstanding anything herein contained to the
contrary, the Holder may not affect a Cashless Exercise of this D Warrant until
after January ___, 2006, and thereafter so long as there is an effective
Registration Statement with respect to the shares of the Common Stock.
6. Call by the Company. In the event that the closing price of the
-------------------
Common Stock as listed on a nationally public securities market is $5.50 or more
for a period of 20 consecutive trading days and the Registration Statement for
the Common Stock is effective for such 20 consecutive trading days, the Company
may call this D Warrant upon 30 days notice and pay to the Holder the sum of
$0.001 per share of the Common Stock covered by this D Warrant, for all such
shares not purchased under the exercise provisions at the expiration of the 30
days notice period.
7. Adjustment of Exercise Price and Number of Shares. The shares of
----------------------------------------------------
the Common Stock or other securities at the time issuable upon exercise of this
D Warrant and the Exercise Price therefore, are subject to adjustment upon the
occurrence of the following events:
(a) Adjustment for Stock Splits, Stock Dividends,
--------------------------------------------------
Recapitalizations, Etc. The Exercise Price of this D Warrant and the number of
-----------------------
shares of the Common Stock or other securities at the time issuable upon the
exercise of this D Warrant shall be appropriately adjusted to reflect any stock
dividend, stock split, combination of shares, reclassification, recapitalization
or other similar event affecting the number of outstanding shares of the Common
Stock or other securities of the Company.
(b) Adjustment for Reorganization, Consolidation, Merger, Etc. In
---------------------------------------------------------
case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being referred to
as a "Reorganization"), then, in each case, the Holder, on exercise hereof at
any time after the consummation or effective date of such Reorganization (the
"Effective Date"), shall receive, in lieu of the shares of the Common Stock or
other securities of the Company at any time issuable upon the exercise of this D
Warrant prior to the Effective Date, the shares of the Common Stock and other
securities of the Company and property (including cash) to which the Holder
would have been entitled upon the Effective Date if the Holder had exercised
this D Warrant immediately prior thereto (all subject to further adjustment as
provided in this D Warrant).
(c) Certificate as to Adjustments. In case of any adjustment or
-------------------------------
readjustment in the price or kind of securities issuable on the exercise of this
D Warrant, the Company will promptly give written notice thereof to the Holder
in the form of a certificate, certified and confirmed by the Board of Directors
of the Company, setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based.
8. Fractional Shares. The Company shall not be required to issue or
------------------
cause to be issued fractional shares of the Common Stock on the exercise of this
D Warrant. The number of full shares of the Common Stock that shall be issuable
upon the exercise of this D Warrant shall be computed on the basis of the
aggregate number of shares of the Common Stock purchasable on exercise of this D
Warrant so presented. If any fraction of shares of the
3
Common Stock would, except for the provisions of this Paragraph 8, be issuable
on the exercise of this D Warrant, the Company shall, at its option, (a) pay an
amount in cash equal to the Exercise Price multiplied by such fraction or (b)
round the number of shares of the Common Stock issuable, up to the next whole
number.
9. Notice. All notices and other communications hereunder shall be in
------
writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and if to the Holder addressed to Mr. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
10. Miscellaneous.
-------------
(a) This D Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
D Warrant may be amended only in writing and signed by the Company and the
Holder.
(b) Nothing in this D Warrant shall be construed to give to any
person or corporation other than the Company and the Holder any legal or
equitable right, remedy or cause of action under this D Warrant. This D Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.
(c) This D Warrant shall be governed by and construed in
accordance with the laws of the State of California, without regard to any
conflicts of laws provisions thereof. Each party hereby irrevocably submits to
the personal jurisdiction of the United States District Court for the Central
District of California, as well as of the Superior Courts of the State of
California in Riverside County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
(d) The headings herein are for convenience only, do not
constitute a part of this D Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this D Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this D Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonably substitute therefore, and upon so agreeing, shall
incorporate such substitute provision in this D Warrant.
(f) The Holder shall not, by virtue hereof, be entitled to any
voting or other rights of a shareholder of the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this D Warrant.
(g) In the event of any conflict between the terms of this D
Warrant or the Stock Purchase Agreement, the terms of the Stock Purchase
Agreement shall control.
4
IN WITNESS WHEREOF, the Company has caused this D Warrant to be duly
executed by the authorized officer as of the date first above stated.
CYBER PUBLIC RELATIONS, INC.
By
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
5
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing D Warrant)
To: Cyber Public Relations, Inc.
In accordance with the D Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase ______________
shares of the Common Stock (the "Common Stock"), $0.001 par value, of Cyber
Public Relations, Inc. and encloses this D Warrant and $_______ for each share
of the Common Stock being purchased or an aggregate of $________________ in cash
or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the D Warrant) together with any
applicable taxes payable by the undersigned pursuant to the D Warrant.
The undersigned requests that certificates for the shares of the
Common Stock issuable upon this exercise be issued in the name of:
_______________________________________________
_______________________________________________
_______________________________________________
(Please print name and address)
_______________________________________________
(Please insert Social Security or Tax Identification Number)
If the number of shares of the Common Stock issuable upon this exercise
shall not be all of the shares of the Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed D Warrant, the undersigned
requests that a New D Warrant (as defined in the D Warrant) evidencing the right
to purchase the shares of the Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
_________________________________________
_________________________________________
_________________________________________
(Please print name and address)
Dated: __________________________ Name of Holder:
(Print)____________________________
By_________________________________
Name_______________________________
Title______________________________
Signature must conform in all respects
to name of Holder as specified on the
face of the D Warrant
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ACT, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, OR
(C) IF REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, A STOCK PURCHASE AGREEMENT (THE "STOCK PURCHASE AGREEMENT"), DATED
THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE
PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE
RIGHTS OF THE HOLDER AND SPECIFY MANDATORY REDEMPTION OBLIGATIONS OF THE
COMPANY.
---------------------------------------
CYBER PUBLIC RELATIONS, INC.
E WARRANT FOR THE PURCHASE OF COMMON STOCK
1,000,000 Shares Rancho Cucamonga, California
THIS IS TO CERTIFY that pursuant to that certain Stock Purchase Agreement
of even date herewith executed by the parties hereto (the "Stock Purchase
Agreement"), for value received, ▇▇▇▇▇▇ PARTNERS LP (the "Holder") is entitled
at any time from the date hereof, but prior to 5:00 p.m., Rancho Cucamonga,
California time on January ___, 2009, or 18 months after the effectiveness of a
Registration Statement (hereinafter defined) subsequent to the issuance hereof,
whichever is longer, subject to and upon the terms and conditions contained
herein, to purchase up to 1,000,000 fully paid and non-assessable shares of the
common stock, par value $0.001 per share (the "Common Stock") of CYBER PUBLIC
RELATIONS, INC., a Florida corporation (the "Company"), at a purchase price of
$6.00 per share of the Common Stock (the "Exercise Price")
such number of the shares and the Exercise Price being subject to
adjustment as provided herein.
This E Warrant shall be void and of no effect and all rights hereunder
shall cease at 5:00 p.m., Rancho Cucamonga, California time on January ___,
2009, or 18 months after the effectiveness of a Registration Statement
subsequent to the issuance hereof, whichever is longer, except to the extent
theretofore exercised; provided that in the case of the earlier dissolution of
the Company, this E Warrant shall become void on the date fixed for such
dissolution. As used herein, "Registration Statement" means a registration
statement filed by the Company on Form ▇-▇, ▇▇-▇, ▇▇ ▇-▇, or some other similar
form pursuant to the Securities Act of 1933, as amended (the "1933 Act") to
register the resale of the shares of the Common Stock upon the exercise of this
E Warrant.
1. Registration of this E Warrant. The Company shall register this E
--------------------------------
Warrant upon records to be maintained by the Company for that purpose (the "E
Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this E Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Investment Representation. The Holder by accepting this E Warrant
--------------------------
represents that the Holder is acquiring this E Warrant for its own account or
the account of an affiliate for investment purposes and not with the view to any
offering or distribution and that the Holder will not sell or otherwise dispose
of this E Warrant or the underlying Common Stock in violation of applicable
securities laws. The Holder acknowledges that the certificates representing any
shares of the Common Stock will bear a legend indicating that they have not been
registered under the 1933 Act and may not be sold by the Holder except pursuant
to an effective Registration Statement or pursuant to an exemption from
registration requirements of the 1933 Act and in accordance with federal and
state securities laws.
3. Validity of E Warrant and Issuance of the Common Stock. The Company
------------------------------------------------------
represents and warrants that this E Warrant has been duly authorized and validly
issued and warrants and agrees that the Common Stock that
1
may be issued upon the exercise of the rights represented by this E Warrant
will, when issued upon such exercise, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof. The Company further warrants and agrees that during the
period within which the rights represented by this E Warrant may be exercised,
the Company will at all times have authorized and reserved a sufficient number
of shares of the Common Stock to provide for the exercise of the rights
represented by this E Warrant.
4. Registration of Transfers and Exchange of this E Warrant.
--------------------------------------------------------------
(a) Subject to compliance with the legend set forth on the face of
this E Warrant, the Company shall register the transfer of any portion of this E
Warrant in the E Warrant Register, upon surrender of this E Warrant with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Paragraph 9 hereof. Upon any such
registration or transfer, a new warrant to purchase the Common Stock, in
substantially the form of this E Warrant (any such new warrant, a "New E
Warrant"), evidencing the portion of this E Warrant so transferred shall be
issued to the transferee and a New E Warrant evidencing the remaining portion of
this E Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New E Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
the Holder.
(b) This E Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Paragraph 9
for one or more New E Warrants, evidencing in the aggregate the right to
purchase the number of shares of the Common Stock which may then be purchased
hereunder. Any such New E Warrant will be dated the date of such exchange.
5. Exercise of this E Warrant.
----------------------------
(a) Upon surrender of this E Warrant with the Form of Election to
Purchase attached hereto duly completed and signed to the Company, at its
address set forth in Paragraph 9 hereof, and upon payment and delivery of the
Exercise Price multiplied by the number of shares of the Common Stock that the
Holder intends to purchase hereunder, in lawful money of the United States of
America, in cash or by certified or official bank check or checks, to the
Company, all as specified by the Holder in the Form of Election to Purchase, the
Company shall promptly but in no event later than five business days after the
Date of Exercise (as defined herein) issue or cause to be issued and delivered
to or upon the written order of the Holder and in such name or names as the
Holder may designate (subject to the restrictions on transfer described in the
legend set forth on the face of this E Warrant), a certificate for the shares of
the Common Stock issuable upon such exercise, with such restrictive legend as
required by the 1933 Act. Any person so designated by the Holder to receive the
shares of the Common Stock shall be deemed to have become holder of record of
the Common Stock as of the Date of Exercise of this E Warrant.
(b) "Date of Exercise" means the date on which the Company shall
have received (i) this E Warrant (or any New E Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New E Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of shares of the Common Stock so indicated by the Holder to be
purchased.
(c) This E Warrant shall be exercisable at any time and from time
to time for such number of shares of the Common Stock as is indicated in the
attached Form of Election to Purchase. If less than all of the shares of the
Common Stock which may be purchased under this E Warrant are purchased at any
time, the Company shall issue or cause to be issued, at its expense, a New E
Warrant evidencing the right to purchase the remaining number of shares of the
Common Stock for which no exercise has been evidenced by this E Warrant.
(d) Notwithstanding anything contained herein to the contrary, the
holder of this E Warrant may, at its election exercised in its sole discretion,
exercise this E Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of the Common Stock determined according to the following
formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
2
For purposes of the foregoing formula:
A = the total number shares with respect to which this E
Warrant is then being exercised.
B = the last reported sale price (as reported by
Bloomberg) of the Common Stock on the date immediately
preceding the date of the notice of exercise of this E
Warrant.
C = the Exercise Price then in effect at the time of such
exercise.
Provided, however, notwithstanding anything herein contained to the
contrary, the Holder may not affect a Cashless Exercise of this E Warrant until
after January ___, 2006, and thereafter so long as there is an effective
Registration Statement with respect to the shares of the Common Stock.
6. Call by the Company. In the event that the closing price of the
-------------------
Common Stock as listed on a nationally public securities market is $8.00 or more
for a period of 20 consecutive trading days and the Registration Statement for
the Common Stock is effective for such 20 consecutive trading days, the Company
may call this E Warrant upon 30 days notice and pay to the Holder the sum of
$0.001 per share of the Common Stock covered by this E Warrant, for all such
shares not purchased under the exercise provisions at the expiration of the 30
days notice period.
7. Adjustment of Exercise Price and Number of Shares. The shares of
----------------------------------------------------
the Common Stock or other securities at the time issuable upon exercise of this
E Warrant and the Exercise Price therefore, are subject to adjustment upon the
occurrence of the following events:
(a) Adjustment for Stock Splits, Stock Dividends,
--------------------------------------------------
Recapitalizations, Etc. The Exercise Price of this E Warrant and the number of
-----------------------
shares of the Common Stock or other securities at the time issuable upon the
exercise of this E Warrant shall be appropriately adjusted to reflect any stock
dividend, stock split, combination of shares, reclassification, recapitalization
or other similar event affecting the number of outstanding shares of the Common
Stock or other securities of the Company.
(b) Adjustment for Reorganization, Consolidation, Merger, Etc. In
---------------------------------------------------------
case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization (any such transaction being referred to
as a "Reorganization"), then, in each case, the Holder, on exercise hereof at
any time after the consummation or effective date of such Reorganization (the
"Effective Date"), shall receive, in lieu of the shares of the Common Stock or
other securities of the Company at any time issuable upon the exercise of this E
Warrant prior to the Effective Date, the shares of the Common Stock and other
securities of the Company and property (including cash) to which the Holder
would have been entitled upon the Effective Date if the Holder had exercised
this E Warrant immediately prior thereto (all subject to further adjustment as
provided in this E Warrant).
(c) Certificate as to Adjustments. In case of any adjustment or
-------------------------------
readjustment in the price or kind of securities issuable on the exercise of this
E Warrant, the Company will promptly give written notice thereof to the Holder
in the form of a certificate, certified and confirmed by the Board of Directors
of the Company, setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based.
8. Fractional Shares. The Company shall not be required to issue or
------------------
cause to be issued fractional shares of the Common Stock on the exercise of this
E Warrant. The number of full shares of the Common Stock that shall be issuable
upon the exercise of this E Warrant shall be computed on the basis of the
aggregate number of shares of the Common Stock purchasable on exercise of this E
Warrant so presented. If any fraction of shares of the Common Stock would,
except for the provisions of this Paragraph 8, be issuable on the exercise of
this E Warrant,
3
the Company shall, at its option, (a) pay an amount in cash equal to the
Exercise Price multiplied by such fraction or (b) round the number of shares of
the Common Stock issuable, up to the next whole number.
9. Notice. All notices and other communications hereunder shall be in
------
writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and if to the Holder addressed to Mr. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
10. Miscellaneous.
-------------
(a) This E Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. This
E Warrant may be amended only in writing and signed by the Company and the
Holder.
(b) Nothing in this E Warrant shall be construed to give to any
person or corporation other than the Company and the Holder any legal or
equitable right, remedy or cause of action under this E Warrant. This E Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.
(c) This E Warrant shall be governed by and construed in
accordance with the laws of the State of California, without regard to any
conflicts of laws provisions thereof. Each party hereby irrevocably submits to
the personal jurisdiction of the United States District Court for the Central
District of California, as well as of the Superior Courts of the State of
California in Riverside County, California over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such mediation, arbitration,
suit, action or proceeding brought in any such county and any claim that any
such mediation, arbitration, suit, action or proceeding brought in such county
has been brought in an inconvenient forum.
(d) The headings herein are for convenience only, do not
constitute a part of this E Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this E Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this E Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonably substitute therefore, and upon so agreeing, shall
incorporate such substitute provision in this E Warrant.
(f) The Holder shall not, by virtue hereof, be entitled to any
voting or other rights of a shareholder of the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this E Warrant.
(g) In the event of any conflict between the terms of this E
Warrant or the Stock Purchase Agreement, the terms of the Stock Purchase
Agreement shall control.
4
IN WITNESS WHEREOF, the Company has caused this E Warrant to be duly
executed by the authorized officer as of the date first above stated.
CYBER PUBLIC RELATIONS, INC.
By
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
5
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing E Warrant)
To: Cyber Public Relations, Inc.
In accordance with the E Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase ______________
shares of the Common Stock (the "Common Stock"), $0.001 par value, of Cyber
Public Relations, Inc. and encloses this E Warrant and $_______ for each share
of the Common Stock being purchased or an aggregate of $________________ in cash
or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the E Warrant) together with any
applicable taxes payable by the undersigned pursuant to the E Warrant.
The undersigned requests that certificates for the shares of the Common
Stock issuable upon this exercise be issued in the name of:
____________________________________________
____________________________________________
____________________________________________
(Please print name and address)
____________________________________________
(Please insert Social Security or Tax Identification Number)
If the number of shares of the Common Stock issuable upon this exercise
shall not be all of the shares of the Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed E Warrant, the undersigned
requests that a New E Warrant (as defined in the E Warrant) evidencing the right
to purchase the shares of the Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
____________________________________________
____________________________________________
____________________________________________
(Please print name and address)
Dated: ___________________________ Name of Holder:
(Print)___________________________
By________________________________
Name______________________________
Title_____________________________
Signature must conform in all respects
to name of Holder as specified on the
face of the E Warrant
ATTACHMENT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of ___ day of January, 2004 by and among CYBER PUBLIC RELATIONS, INC., a
Florida corporation (the "Company"), and ▇▇▇▇▇▇ PARTNERS LP (the "Investor").
WHEREAS, the Company and the Investor have executed that certain Stock
Purchase Agreement dated January 13, 2004, as amended on January 23, 2004 (the
"Stock Purchase Agreement"); and
WHEREAS, pursuant to the Stock Purchase Agreement, the Investor purchased
from the Company 2,000,000 shares of its Common Stock for a purchase price of
$1.00 per share, 1,500,000 cashless non-callable A Warrant for the purchase of
the Common Stock exercisable at $1.00 per share, 1,650,000 cashless and callable
B Warrant for the purchase of the Common Stock exercisable at $1.00 per share,
2,000,000 cashless and callable C Warrant for the purchase of the Common Stock
exercisable at $2.00 per share, 1,000,000 cashless and callable D Warrant for
the purchase of the Common Stock exercisable at $4.00 per share, and 1,000,000
cashless and callable E Warrant for the purchase of the Common Stock exercisable
at $6.00 per share; and
WHEREAS, unless otherwise defined herein, all capitalized terms herein
shall have the identical meaning as in the Stock Purchase Agreement; and
WHEREAS, the ability of the Investor to sell its shares of the Common Stock
is subject to certain restrictions under the 1933 Act; and
WHEREAS, as a condition to the Stock Purchase Agreement, the Company has
agreed to provide the Investor with a mechanism that will permit the Investor,
subject to a market stand-off agreement, to sell its shares of the Common Stock
in the future;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER
1.1 Incorporation by Reference. The foregoing recitals are hereby
----------------------------
acknowledged to be true and accurate, and are incorporated herein by this
reference.
1.2 Superseder. This Agreement, to the extent that it is inconsistent
----------
with any other instrument or understanding among the parties governing the
affairs of the Company, shall supersede such instrument or understanding to the
fullest extent permitted by law. A copy of this Agreement shall be filed at the
Company's principal office.
ARTICLE II
DEMAND REGISTRATION RIGHTS
2.1 Definitions. As used herein, "Registrable Shares" means and
-----------
includes the shares of the Common Stock issued to the Investor pursuant to the
Stock Purchase Agreement. As to any particular Registrable Shares, such
securities will cease to be Registrable Shares when:
(a) They have been effectively registered under the 1933 Act and
disposed of in accordance with the Registration Statement hereinafter defined
covering them;
(b) They are or may be freely traded without registration pursuant
to Rule 144 under the 1933 Act (or any similar provisions that are then in
effect); or
1
(c) They have been otherwise transferred and new certificates for
them not bearing a restrictive legend have been issued by the Company and the
Company shall not have "stop transfer" instructions against them.
"Shares" shall mean, collectively, the shares of the Common Stock of the
Company being issued pursuant to the Stock Purchase Agreement and those shares
of the Common Stock issuable to the Investor upon exercise of the Warrants being
issued pursuant to the Stock Purchase Agreement.
2.2 Registration of Registrable Securities. The Company shall prepare
---------------------------------------
and file within 60 days following the date hereof (the "Filing Date") a
registration statement (the "Registration Statement") covering the resale of the
Registrable Securities. As used herein, "Registration Statement" means a
registration statement filed by the Company on Form ▇-▇, ▇▇-▇, ▇▇ ▇-▇, or some
other similar form pursuant to the 1933 Act to register the resale of the
Shares. The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the SEC on the earlier of:
(a) One hundred eighty days following the Closing Date pursuant to
the Stock Purchase Agreement;
(b) Ten days following the receipt of a "No Review" or similar
letter from the SEC; or
(c) The first day following the day the SEC determines the
Registration Statement eligible to be declared effective (the "Required
Effectiveness Date").
Nothing contained herein shall be deemed to limit the number of Registrable
Securities to be registered by the Company hereunder. As a result, should the
Registration Statement not relate to the maximum number of Registrable
Securities acquired by (or potentially acquirable by) the Investor pursuant to
the Stock Purchase Agreement, the Company shall be required to promptly file a
separate Registration Statement (utilizing Rule 462 promulgated under the 1933
Act, where applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to any such
separate Registration Statement as if it were an amendment to the Registration
Statement.
2.3 Demand Registration. Subject to the limitations of Paragraph 2.2,
--------------------
at any time, the Investor may request the registration, once and only once,
under the 1933 Act of all or part of the Registrable Shares then outstanding (a
"Demand Registration"). Subject to the conditions of Paragraph 3 hereof, the
Company shall use its best efforts to file such Registration Statement under the
1933 Act as promptly as practicable after the date any such request is received
by the Company and to cause such Registration Statement to be declared
effective. The Company shall notify the Investor promptly when any such
Registration Statement has been declared effective. If more than 80 percent of
the Shares as of the date of the Stock Purchase Agreement have been registered
or sold, this provision shall expire.
2.4 Registration Statement Form. Registrations under Paragraph 2.2 and
---------------------------
Paragraph 2.3 hereof shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
the Registration Statement; provided, however, such intended method of
disposition shall not include an underwritten offering of the Registrable
Securities.
2.5 Registration Expenses. The Company will pay all Registration
----------------------
Expenses in connection with any registration required by under Paragraphs 2.2
and Paragraph 2.3 hereof.
2.6 Effective Registration Statement. A registration requested
----------------------------------
pursuant to Paragraphs 2.2 and Paragraph 2.3 hereof shall not be deemed to have
been effected:
(a) Unless a Registration Statement with respect thereto has
become effective within the time period specified herein, provided that a
registration which does not become effective after the Company filed a
Registration Statement with respect thereto solely by reason of the refusal to
proceed of the Investor (other than a refusal to proceed based upon the advice
of counsel in the form of a letter signed by such counsel and provided to the
2
Company relating to a disclosure matter unrelated to the Investor) shall be
deemed to have been affected by the Company unless the Investor shall have
elected to pay all Registration Expenses in connection with such registration;
(b) If, after it has become effective, such registration becomes
subject to any stop order, injunction or other order or extraordinary
requirement of the SEC or other governmental agency or court for any reason; or
(c) If, after it has become effective, such registration ceases to
be effective for more than the allowable Black-Out Periods (as defined herein).
2.7 Plan of Distribution. The Company hereby agrees that the
----------------------
Registration Statement shall include a plan of distribution section reasonably
acceptable to the Investor; provided, however, such plan of distribution section
shall be modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
2.8 Liquidated Damages. If, after 180 days following the Closing Date
-------------------
pursuant to the Stock Purchase Agreement, in the event the Company does not
register the Registrable Securities pursuant to the requirements of Paragraph
2.2 hereof, or if the Registration Statement filed pursuant to Paragraph 2.2
hereof is not declared effective, or if the Registrable Securities are
registered pursuant to an effective Registration Statement and such Registration
Statement or other Registration Statement including the Registrable Securities
is not effective in the period within 180 days following the Closing Date
pursuant to the Stock Purchase Agreement, the Company shall, for each such day,
pay the Investor, as liquidated damages and not as a penalty, an amount equal to
24 percent of the Purchase Price per annum; and for any such day, such payment
shall be made no later than the first business day of the calendar month next
succeeding the month in which such day occurs.
The parties agree that the only damages payable for a violation of the
terms of this Agreement with respect to which liquidated damages are expressly
provided shall be such liquidated damages. Nothing shall preclude the Investor
from pursuing or obtaining specific performance or other equitable relief with
respect to this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Paragraph 2.8 constitute a reasonable estimate of the damages that may be
incurred by the Investor by reason of the failure of the Registration Statement
to be filed or declared effective in accordance with the provisions hereof.
The obligation of the Company terminates when the Investor no longer holds
more than 20 percent of the Registrable Securities.
ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
3.1 Right to Include ("Piggy-Back") Registrable Securities. Provided
--------------------------------------------------------
that the Registrable Securities have not been registered, if at any time after
the date hereof but before the second anniversary of the date hereof, the
Company proposes to register any of its securities under the 1933 Act (other
than by a registration in connection with an acquisition in a manner which would
not permit registration of Registrable Securities for sale to the public, on
Form S-8, or any successor form thereto, on Form S-4, or any successor form
thereto and other than pursuant to Paragraph 2 hereof), on an underwritten basis
(either "best-efforts" or "firm-commitment"), then, the Company will each such
time give prompt written notice to the Investor of its intention to do so and of
the Investor's rights under this Paragraph 3.1. Upon the written request of the
Investor made within 10 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by the
Investor and the intended method of disposition thereof), the Company will,
subject to the terms of this Agreement, use its commercially reasonable best
efforts to effect the registration under the 1933 Act of the Registrable
Securities, to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable Securities so
to be registered, by inclusion of the Registrable Securities in the Registration
Statement which covers the securities which the Company proposes to register,
provided that if, at any time after written notice of its intention to register
any securities and prior to the effective date of the Registration Statement
filed in connection
3
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Investor and,
thereupon:
(a) In the case of a determination not to register, shall be
relieved of this obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
the Investor to request that such registration be effected as a registration
under Paragraph 2 hereof; and
(b) In the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities.
No registration effected under this Paragraph 3.1 shall relieve the Company
of its obligation to effect any registration upon request under Paragraph 2
hereof. The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Paragraph 3.1.
The right provided the Investor pursuant to this Paragraph shall be exercisable
at its sole discretion.
3.2 Priority in Incidental Registrations. If the managing underwriter
-------------------------------------
of the underwritten offering contemplated by this Paragraph 3 shall inform the
Company and the Investor by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, then the Company will include in such registration, to
the extent of the number which the Company is so advised can be sold in such
offering:
(a) First, securities proposed by the Company to be sold for its
own account; and
(b) Second, Registrable Securities and securities of other selling
security holders requested to be included in such registration pro rata on the
basis of the number of shares of such securities so proposed to be sold and so
requested to be included; provided, however, the Investor shall have pro rata
rights of registration with all shares sought to be included by officers and
directors of the Company as well as holders of 10 percent or more of the Common
Stock.
ARTICLE IV
REGISTRATION PROCEDURES
4.1 Registration Procedures. If and whenever the Company is required
------------------------
to affect the registration of any Registrable Securities under the 1933 Act as
provided in Paragraph 2.2 hereof and, as applicable, Paragraph 2.3 hereof, the
Company shall, as expeditiously as possible:
(a) Prepare and file with the SEC the Registration Statement, or
amendments thereto, to effect such registration (including such audited
financial statements as may be required by the 1933 Act or the rules and
regulations promulgated thereunder) and thereafter use its commercially
reasonable best efforts to cause such Registration Statement to be declared
effective by the SEC, as soon as practicable, but in any event no later than the
Required Effectiveness Date (with respect to a registration pursuant to
Paragraph 2.2 hereof); provided, however, that before filing such Registration
Statement or any amendments thereto, the Company will furnish to the counsel
selected by the Investor, copies of all such documents proposed to be filed;
(b) With respect to any Registration Statement pursuant to
Paragraph 2.2 hereof or Paragraph 2.3 hereof, prepare and file with the SEC such
amendments and supplements to such 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 1933 Act with
respect to the disposition of all Registrable Securities covered by such
Registration Statement until the earlier to occur of 18 months after the date of
this Agreement (subject to the right of the Company to suspend the effectiveness
thereof for not more than 10 consecutive Trading Days or an aggregate of 40
Trading Days during each year (each a "Black-Out Period") or such time as all of
the securities which are the subject of such Registration Statement cease to be
Registrable Securities;
4
(c) Furnish to the Investor such number of conformed copies of
such Registration Statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
contained in such Registration Statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the 1933 Act, in conformity with the requirements of the 1933 Act, and such
other documents, as the Investor and underwriter, if any, may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by the Investor;
(d) Use its commercially reasonable best efforts to register or
qualify all Registrable Securities and other securities covered by such
Registration Statement under such other securities laws or blue sky laws as the
Investor shall reasonably request, to keep such registrations or qualifications
in effect for so long as such Registration Statement remains in effect, and take
any other action which may be reasonably necessary to enable the Investor to
consummate the disposition in such jurisdictions of the securities owned by the
Investor, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (d) be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(e) Use its commercially reasonable best efforts to cause all
Registrable Securities covered by such Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the Investor to consummate the disposition of such
Registrable Securities;
(f) Furnish to the Investor a signed counterpart, addressed to the
Investor, and the underwriters, if any, of an opinion of counsel for the
Company, dated the effective date of such Registration Statement (or, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), reasonably satisfactory in
form and substance to the Investor including that the prospectus and any
prospectus supplement forming a part of the Registration Statement does not
contain an untrue statement of a material fact or omits 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;
(g) Notify the Investor and its counsel promptly and confirm such
advice in writing promptly after the Company has knowledge thereof:
(i) When the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
Registration Statement has been filed, and, with respect to the Registration
Statement or any post-effective amendment thereto, when the same has become
effective;
(ii) Of any request by the SEC for amendments or supplements
to the Registration Statement or the prospectus or for additional information;
(iii) Of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings by any Person for that purpose; and
(iv) Of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
(h) Notify each holder of Registrable Securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Investor promptly prepare
and furnish to the Investor a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
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 not
misleading in the light of the circumstances then existing;
5
(i) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(j) Otherwise use its commercially reasonable best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least 12 months, but not more 18 eighteen
months, beginning with the first full calendar month after the effective date of
such Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(k) Enter into such agreements and take such other actions as the
Investor shall reasonably request in writing (at the expense of the requesting
or benefiting Investor) in order to expedite or facilitate the disposition of
such Registrable Securities; and
(l) Use its commercially reasonable best efforts to list all
Registrable Securities covered by such Registration Statement on any securities
exchange on which any of the Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being affected to furnish the Company such information
regarding such holder of Registrable Securities and the distribution of such
securities as the Company may from time to time reasonably request in writing.
4.2 Filings. The Company will not file any Registration Statement
-------
pursuant to Paragraph 2.2 or Paragraph 2.3 hereof, or amendment thereto or any
prospectus or any supplement thereto to which the Investor shall reasonably
object, provided that the Company may file such documents in a form required by
law or upon the advice of its counsel.
4.3 Representations and Warranties of the Company. The Company
--------------------------------------------------
represents and warrants to each holder of Registrable Securities that it has
obtained all necessary waivers, consents and authorizations necessary to execute
this Agreement and consummate the transactions contemplated hereby other than
such waivers, consents and/or authorizations specifically contemplated by the
Stock Purchase Agreement.
4.4 Discontinuance of Disposition of Registrable Securities. The
------------------------------------------------------------
Investor agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (h) of Paragraph
4.1 hereof, the Investor will forthwith discontinue the Investor's disposition
of Registrable Securities pursuant to the Registration Statement relating to
such Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (h) of Paragraph
4.1 and, if so directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in the
Investor's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1 Incidental Underwritten Offerings. If the Company at any time
-----------------------------------
proposes to register any of its securities under the 1933 Act as contemplated by
Paragraph 3.1 hereof and such securities are to be distributed by or through one
or more underwriters, the Company will, if requested by the Investor as provided
in Paragraph 3.1 and subject to the provisions of Paragraph 3.2 hereof, use its
commercially reasonable best efforts to arrange for such underwriters to include
all the Registrable Securities to be offered and sold by the Investor among the
securities to be distributed by such underwriters.
5.2 Holdback Agreements. Subject to such other reasonable requirements
-------------------
as may be imposed by the underwriter as a condition of inclusion of the
Registrable Securities in the Registration Statement, the Investor agrees by
acquisition of the Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested by the underwriter;
provided however:
6
(a) The secondary offering is intended to raise a minimum of
$8,000,000 on behalf of the Company and
(b) Such period shall not exceed the 90 day period commencing with
the completion of an underwritten offering.
The Company agrees and acknowledges that during any holdback period, the
Investor may sell, in the holdback period, Registrable Securities in the amount
of up to one percent per week of the shares of the Common Stock held by the
Investor as long as this Agreement remains effective.
5.3 Participation in Underwritten Offerings. The Investor may not
------------------------------------------
participate in any underwritten offering under Paragraph 3.1 hereof unless the
Investor:
(a) Agrees to sell such Person's securities on the basis provided
in any underwriting arrangements approved, subject to the terms and conditions
hereof, by the Investor; and
(b) Completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other
agreement in connection with such offering) shall require the Investor to make a
representation or warranty to or agreements with the Company or the underwriters
other than representations and warranties contained in a writing furnished by
the Investor expressly for use in the related Registration Statement or
representations, warranties or agreements regarding the Investor, the Investor
and the Investor's intended method of distribution and any other representation
required by law.
5.4 Preparation; Reasonable Investigation. In connection with the
---------------------------------------
preparation and filing of each Registration Statement under the 1933 Act
pursuant to this Agreement, the Company will give the Investor and its counsel
and accountants, the opportunity to participate in the preparation of such
Registration Statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
reasonable opinion of the Investor's and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the 1933 Act.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company. In the event of any registration
--------------------------------
of any securities of the Company under the 1933 Act, the Company will, and
hereby does agree to indemnify and hold harmless the Investor, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls the
Investor or any such underwriter within the meaning of the 1933 Act against any
losses, claims, damages or liabilities, joint or several, to which the Investor
or any such director or officer or underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse the Investor
and each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability, (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written
7
information furnished to the Company by the Investor or underwriter stating that
it is for use in the preparation thereof and, provided further that the Company
shall not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or to any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the 1933 Act to the Person
asserting the existence of an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Investor or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by the
Investor.
6.2 Indemnification by the Investor. The Company may require, as a
--------------------------------
condition to including any Registrable Securities in any Registration Statement
filed pursuant to this Agreement, that the Company shall have received an
undertaking satisfactory to it from the Investor, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in Paragraph 6.1 hereof)
the Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the 1933
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such Registration Statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Investor specifically stating that it is for use in the preparation of such
Registration Statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by the Investor.
6.3 Notices of Claims, Etc. Promptly after receipt by an indemnified
------------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in Paragraph 6.1 and Paragraph 6.2 hereof, such indemnified
party will, if claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under
Paragraph 6.1 and Paragraph 6.2 hereof, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to ▇▇▇, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
6.4 Other Indemnification. Indemnification similar to that specified
----------------------
in Paragraph 6.1 and Paragraph 6.2 hereof (with appropriate modifications) shall
be given by the Company and the Investor (but only if and to the extent required
pursuant to the terms hereof) with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority, other than the 1933 Act.
6.5 Indemnification Payments. The indemnification required by
-------------------------
Paragraph 6.1 and Paragraph 6.2 hereof shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred.
8
6.6 Contribution. If the indemnification provided for in Paragraph 6.1
------------
and Paragraph 6.2 hereof is unavailable to an indemnified party in respect of
any expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such expense, loss, claim, damage or liability:
(a) In such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Investor or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities; or
(b) If the allocation provided by clause (a) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (a) above but also the relative
fault of the Company on the one hand and of the Investor or underwriter, as the
case may be, on the other in connection with the statements or omissions which
resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor or underwriter, as the case may be, on the other in connection with the
distribution of the Registrable Securities shall be deemed to be in the same
proportion as the total net proceeds received by the Company from the initial
sale of the Registrable Securities by the Company to the purchasers bear to the
gain, if any, realized by all selling holders participating in such offering or
the underwriting discounts and commissions received by the underwriter, as the
case may be. The relative fault of the Company on the one hand and of the
Investor or underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission to state a material fact relates to information
supplied by the Company, by the Investor or by the underwriter and the parties'
relative intent, knowledge, access to information supplied by the Company, by
the Investor or by the underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, provided that the foregoing contribution agreement shall not inure to
the benefit of any indemnified party if indemnification would be unavailable to
such indemnified party by reason of the provisions contained hereof, and in no
event shall the obligation of any indemnifying party to contribute under this
Paragraph 6.6 exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
hereunder had been available under the circumstances.
The Company and the Investor agree that it would not be just and equitable
if contribution pursuant to this Paragraph 6.6 were determined by pro rata
allocation (even if the Investor and any underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
herein, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Paragraph 6.6, the Investor and an
underwriter shall not be required to contribute any amount in excess of the
amount by which (i) in the case of any the Investor, the net proceeds received
by the Investor from the sale of Registrable Securities or (ii) in the case of
an underwriter, the total price at which the Registrable Securities purchased by
it and distributed to the public were offered to the public exceeds, in any such
case, the amount of any damages that the Investor or underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
ARTICLE VII
RULE 144
7.1 Rule 144. The Company shall timely file the reports required to be
--------
filed by it under the 1933 Act and the 1934 Act (including but not limited to
the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the SEC under the ▇▇▇▇ ▇▇▇) and the
rules and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, will, upon the request of the Investor, make
publicly available other information) and will take such further action as the
Investor may reasonably request,
9
all to the extent required from time to time to enable the Investor to sell
Registrable Securities without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of the Investor, the
Company will deliver to the Investor a written statement as to whether it has
complied with the requirements of this Paragraph 7.1.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments and Waivers. This Agreement may be amended and the
------------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51 percent or more of the shares of (a) Registrable
Securities issued at such time, plus (b) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Paragraph 8.1, whether or not such Registrable Securities shall have been marked
to indicate such consent.
8.2 Nominees for Beneficial Owners. In the event that any Registrable
-------------------------------
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by a holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership or such Registrable Securities.
8.3 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been given (a) on the date they are
delivered if delivered in person; (b) on the date initially received if
delivered by facsimile transmission followed by registered or certified mail
confirmation; (c) on the date delivered by an overnight courier service; or (d)
on the third business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid, if to the Company
addressed to ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and if to the Investor addressed to Mr. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party
hereto may change its address upon 10 days' written notice to any other party
hereto.
8.4 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of and be enforceable by the parties hereto. In addition, and whether
or not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. The Investor agrees, by accepting any portion of the
Registrable Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of the Investor's
Representative to act on behalf of the Investor pursuant to the terms hereof
which such actions shall be made in the good faith discretion of the Investor's
Representative and be binding on all persons for all purposes.
8.5 Descriptive Headings. The descriptive headings of the several
---------------------
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
8.6 Law Governing; Jurisdiction. This Agreement shall be governed by
-----------------------------
and construed in accordance with the laws of the State of California, without
regard to any conflicts of laws provisions thereof. Each party hereby
irrevocably submits to the personal jurisdiction of the United States District
Court for the Central District of California, as well as of the Superior Courts
of the State of California in Riverside County, California over any suit, action
or proceeding arising out of or relating to this Agreement. Each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such mediation,
arbitration, suit, action or proceeding brought in any such county and any claim
that any such mediation, arbitration, suit, action or proceeding brought in such
county has been brought in an inconvenient forum.
10
8.7 Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the Company and each other party hereto relating to the
subject matter hereof and supercedes all prior agreements and understandings
relating to such subject matter.
8.8 Severability. If any provision of this Agreement, or the
------------
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
8.9 Binding Effect. All the terms and provisions of this Agreement
---------------
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and assignees.
8.10 Preparation of Agreement. This Agreement shall not be construed
--------------------------
more strongly against any party regardless of who is responsible for its
preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
-----------------------------------------------------
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement herein, nor
shall nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.12 Controlling Agreement. In the event of any conflict between the
----------------------
terms of this Agreement or the Stock Purchase Agreement, the terms of the Stock
Purchase Agreement shall control.
8.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto.
IN WITNESS WHEREOF, the Investor and the Company have as of the date first
written above executed this Agreement.
CYBER PUBLIC RELATIONS, INC.
By
------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
▇▇▇▇▇▇ PARTNERS LP
By
------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, President, ▇▇▇▇▇▇ Capital
Advisors LLC, General Partner
11