Exhibit 10.10
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of February 25, 2004 by
and between FoneFriend, Inc., a Delaware corporation (the "Company"), and
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Dutchess Private Equities Fund, L.P., a Delaware limited partnership (the
"Investor").
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Whereas, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to Three Million
Dollars ($3,000,000) to purchase the Company's Common Stock, .001 par value per
share (the "Common Stock");
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Whereas, such investments will be made in reliance upon the provisions of
Section 4(2) under the Securities Act of 1933, as amended (the "1933 Act"), Rule
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506 of Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the 1933
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder; and
Whereas, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (as amended
from time to time, the "Registration Rights Agreement") pursuant to which the
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Company has agreed to provide certain registration rights under the 1933 Act,
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, in consideration of the foregoing recitals, which shall be
considered an integral part of this Agreement, the covenants and agreements set
forth hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:
SECTION 1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the following
meanings specified or indicated below, and such meanings shall be equally
applicable to the singular and plural forms of such defined terms.
"1933 Act" shall have the meaning set forth in the preamble, above.
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"1934 Act" shall mean the Securities Exchange Act of 1934, as it may be
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amended.
"Affiliate" shall have the meaning specified in Section 5(h), below.
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"Agreement" shall mean this Investment Agreement.
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"Best Bid" shall mean the highest posted bid price of the Common Stock.
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"Buy In" shall have the meaning specified in Section 6, below.
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"Buy In Adjustment Amount" shall have the meaning specified in Section 6.
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"Closing" shall have the meaning specified in Section 2(h).
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"Closing Date" shall mean seven (7) Trading Days following the Put Notice
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Date.
"Common Stock" shall have the meaning set forth in the preamble to this
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Agreement.
"Control" or "Controls" shall have the meaning specified in Section 5(h).
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"Covering Shares" shall have the meaning specified in Section 6.
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"Effective Date" shall mean the date the SEC declares effective under the
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1933 Act the Registration Statement covering the Securities.
"Environmental Laws" shall have the meaning specified in Section 4(m),
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below.
"Execution Date" shall mean the date indicated in the preamble to this
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Agreement.
"Indemnitiees" shall have the meaning specified in Section 11, below.
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"Indemnified Liabilities" shall have the meaning specified in Section 11,
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below.
"Ineffective Period" shall mean any period of time that the Registration
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Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use
for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any
reason (or in the event the prospectus under either of the above is not
current and deliverable) during any time period required under the
Registration Rights Agreement.
"Investor" shall have the meaning indicated in the preamble of this
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Agreement.
"Major Transaction" shall have the meaning specified in Section 2(g),
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above.
"Material Adverse Effect" shall have the meaning specified in Section 4(a).
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"Maximum Common Stock Issuance" shall have the meaning specified in Section
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2(i).
"Minimum Acceptable Price" with respect to any Put Notice Date shall mean
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75% of the lowest closing bid prices for the ten Trading Day period
immediately preceding such Put Notice Date.
"Open Period" shall mean the period beginning on and including the Trading
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Day immediately following the Effective Date and ending on the earlier to
occur of (I) the date which is thirty six (36) months from the Effective
Date; and (II) termination of the Agreement in accordance with Section 9,
below.
"Payment Amount" shall have the meaning specified in Section 2(m), below.
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"Pricing Period" shall mean the period beginning on the Put Notice Date and
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ending on and including the date that is five (5) Trading Days after such
Put Notice Date.
"Principal Market" shall mean the American Stock Exchange, Inc., the
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National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board, the Nasdaq National Market System or the Nasdaq SmallCap Market,
whichever is the principal market on which the Common Stock is listed.
"Prospectus" shall mean the prospectus, preliminary prospectus and
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supplemental prospectus used in connection with the Registration
Statement.
"Purchase Amount" shall mean the total amount being paid by the Investor on
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a particular Closing Date to purchase the Securities.
"Purchase Price" shall mean ninety-four percent (94%) of the lowest Best
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Bid price of the Common Stock during the Pricing Period.
"Put Amount" shall have the meaning set forth in Section 2(b) hereof.
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"Put Notice" shall mean a written notice sent to the Investor by the
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Company stating the Put Amount of Shares the Company intends to sell to
the Investor pursuant to the terms of the Agreement and stating the
current number of Shares issued and outstanding on such date.
"Put Notice Date" shall mean the Trading Day immediately following the day
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on which the Investor receives a Put Notice, however a Put Notice shall be
deemed delivered on (X) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 9:00 am
Eastern Time, or (Y) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 9:00 am Eastern Time on a Trading
Day. No Put Notice may be deemed delivered on a day that is not a Trading
Day.
"Put Restriction" shall mean the days between the end of the Pricing Period
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and the date on which the Put is closed. During this time, the Company
shall not be entitled to deliver another Put Notice.
"Registration Period" shall have the meaning specified in Section 5(c),
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below.
"Registration Rights Agreement" shall have the meaning set forth in the
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recitals, above.
"Registration Statement" means the registration statement of the Company
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filed under the 1933 Act covering the Common Stock issuable hereunder.
"Related Party" shall have the meaning specified in Section 5(h).
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"Repurchase Event" shall have the meaning specified in Section 2(m).
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"Resolution" shall have the meaning specified in Section 8(e).
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"SEC" shall mean the U.S. Securities & Exchange Commission.
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"SEC Documents" shall have the meaning specified in Section 4(f).
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"Securities" shall mean the shares of Common Stock issued pursuant to the
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terms of the Agreement.
"Shares" shall mean the shares of the Company's Common Stock.
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"Sold Shares" shall have the meaning specified in Section 6.
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"Subsidiaries" shall have the meaning specified in Section 4(a).
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"Trading Day" shall mean any day on which the Principal Market for the
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Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.
"Transaction Documents" shall mean this Agreement, the Registration Rights
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Agreement, and each of the other agreements entered into by the parties
hereto in connection with this Agreement.
"Valuation Event" shall have the meaning specified in Section 2(j).
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SECTION 2. PURCHASE AND SALE OF COMMON STOCK.
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(A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions
set forth herein, the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, up to that number of Shares having an
aggregate Purchase Price of Three Million Dollars ($3,000,000).
(B) DELIVERY OF PUT NOTICES.
(I) Subject to the terms and conditions of the Transaction Documents,
and from time to time during the Open Period, the Company may, in its sole
discretion, deliver a Put Notice to the Investor which states the Put
Amount which the Company intends to sell to the Investor on a Closing Date.
The Put Notice shall be in the form attached hereto as Exhibit B and
incorporated herein by reference. The amount that the Company shall be
entitled to Put to the Investor in any single Put Notice (the "Put Amount")
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shall be equal to, at the Company's election, either: (A) two hundred
percent (200%) of the average daily volume (U.S. market only) of the Common
Stock for the twenty (20) Trading Days prior to the applicable Put Notice
Date, multiplied by the average of the three (3) daily closing Best Bid
prices immediately preceding the Put Date, or (B) twenty five thousand
($25,000); provided that in no event will the Put Amount be more than One
Million Dollars ($1,000,000) with respect to any single Put. During the
Open Period, the Company shall not be entitled to submit a Put Notice until
after the previous Closing has been completed. The Purchase Price for the
Common Stock identified in the Put Notice shall be equal to 94%
(ninety-four percent) of the lowest Best Bid price of the Common Stock
during the Pricing Period.
(II) If any closing bid price during the applicable Pricing Period
with respect to that Put Notice is less than 75% of the lowest closing Best
Bid prices of the Common Stock for the fifteen Trading Days prior to the
Put Notice Date (the "Minimum Acceptable Price"), the Put Notice will
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terminate at the Company's request sent in accordance with Section 9 of
this Agreement. In the event that the closing bid price for the applicable
Pricing Period is less than the Minimum Acceptable Price, the Company may
elect, by sending written notice to the Investor to cancel the Put Notice.
(III) Within seven calendar days prior the commencement of each
calendar quarter occurring subsequent to the commencement of the Open
Period, the Company shall undertake to notify Investor as to its reasonable
expectations as to the Put Amount it intends to raise during such calendar
quarter, if any, through the issuance of Put Notices. Such notification
shall constitute only the Company's good faith estimate with respect to
such calendar quarter and shall in no way obligate the Company to raise
such amount during such calendar quarter or otherwise limit its ability to
deliver Put Notices during such calendar quarter. The failure by the
Company to comply with this provision may be cured by notifying the
Investor at any time as to the Company's reasonable expectations with
respect to the current calendar quarter.
(C) INTEREST. It is the intention of the parties that any interest that may
be deemed to be payable under this Agreement shall not exceed the maximum amount
permitted under applicable law. If any applicable law sets the maximum interest
amount, and any payment required under this Agreement exceeds such limit, then:
(I) any such interest shall be reduced by the amount necessary to reduce the
interest to the legally permitted limit; and (II) any sums already collected (if
any) from a party which exceed the legally permitted limits will be refunded to
such party.
(D) INVESTOR'S OBLIGATION TO PURCHASE SHARES. Subject to the conditions set
forth in this Agreement, following the Investor's receipt of a validly delivered
Put Notice, the Investor shall be required to purchase from the Company during
the related Pricing Period that number of Shares having an aggregate Purchase
Price equal to the lesser of (i) the Put Amount set forth in the Put Notice, and
(ii) 20% of the aggregate trading volume of the Common Stock during the
applicable Pricing Period times (x) 94% of the lowest bid prices of the
Company's Common Stock during the specified Pricing Period, but only if said
Shares bear no restrictive legend, are not subject to stop transfer
instructions, pursuant to Section 2(h), prior to the applicable Closing Date.
(E) LIMITATION ON INVESTOR'S OBLIGATION TO PURCHASE SHARES. In no event
shall the Investor purchase Shares (whether from the Company or in public or
private secondary transactions) other than pursuant to this Agreement until such
date as this Agreement is terminated.
(F) CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put Notice and the Investor shall not be obligated to purchase any
Shares at a Closing (as defined in Section 2(h)) unless each of the following
conditions are satisfied:
(I) a Registration Statement shall have been declared effective and
shall remain effective and available for the resale of all the Registrable
Securities (as defined in the Registration Rights Agreement) at all times
until the Closing with respect to the subject Put Notice;
(II) at all times during the period beginning on the related Put
Notice Date and ending on and including the related Closing Date, the
Common Stock shall have been listed on the Principal Market and shall not
have been suspended from trading thereon for a period of five consecutive
Trading Days during the Open Period or one day during a Pricing Period, and
the Company shall not have been notified of any pending or threatened
proceeding or other action to de-list or suspend the Common Stock;
(III) the Company has complied with its obligations and is otherwise
not in breach of a material provision of, or in default under, this
Agreement, the Registration Rights Agreement or any other agreement
executed in connection herewith which has not been corrected prior to
delivery of the Put Notice Date;
(IV) no injunction shall have been issued and remain in force, or
action commenced by a governmental authority which has not been stayed or
abandoned, prohibiting the purchase or the issuance of the Securities; and
(V) the issuance of the Securities will not violate any shareholder
approval requirements of the Principal Market.
If any of the events described in clauses (i) through (v) above occurs
during a Pricing Period, then the Investor shall have no obligation to purchase
the Put Amount of Common Stock set forth in the applicable Put Notice.
(G) MAJOR TRANSACTION. For purposes of this Agreement, a "Major
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Transaction" shall be deemed to have occurred upon the closing of any of the
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following events: (I) the consolidation, merger or other business combination of
the Company with or into another person (other than pursuant to a migratory
merger effected solely for the purposes of changing the jurisdiction of
incorporation of the Company or other than a transaction in which the Company is
the surviving corporation); (II) the sale or transfer of all or substantially
all of the Company's assets; or (III) the consummation of a purchase, tender or
exchange offer made to, and accepted by, the holders of more than 50% of the
economic interest in, or the combined voting power of all classes of voting
stock of, the Company.
(H) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the
satisfaction of the conditions set forth in Sections 2(f), 7 and 8, the closing
of the purchase by the Investor of Shares (a "Closing") shall occur on the date
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which is no later than seven Trading Days following the applicable Put Notice
Date (each a "Closing Date"). Prior to each Closing Date, (I) the Company
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shall deliver to the Investor pursuant to the this Agreement, certificates
representing the Shares to be issued to the Investor on such date and registered
in the name of the Investor; and (II) the Investor shall deliver to the Company
the Purchase Price to be paid for such Shares, determined as set forth in
accordance with the terms of this Agreement. In lieu of delivering physical
certificates representing the Securities and provided that the Company's
transfer agent then is participating in The Depository Trust Company ("DTC")
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Fast Automated Securities Transfer ("FAST") program, upon request of the
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Investor, the Company shall use its commercially reasonable efforts to cause its
transfer agent to electronically transmit the Securities by crediting the
account of the Investor's prime broker (which shall be specified by the Investor
a reasonably sufficient time in advance) with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system.
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The Company understands that a delay in the issuance of Securities beyond
the Closing Date could result in economic loss to the Investor. After the
Effective Date, as compensation to the Investor for such loss, the Company
agrees to pay late payments to the Investor for late issuance of Securities
(delivery of Securities after the applicable Closing Date) in accordance with
the following schedule (where "No. of Days Late" is defined as the number of
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days beyond the Closing Date):
LATE PAYMENT FOR EACH
NO. OF DAYS LATE $10,000 OF COMMON STOCK
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1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
Over 10 $1,000 + $200 for each
Business Day late beyond 10 days
The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue and
deliver the Securities to the Investor, except to the extent that such late
payments shall constitute payment for and offset any such actual damages alleged
by the Investor, and any Buy In Adjustment Amount.
(I) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything
contained herein to the contrary, if during the Open Period the Company becomes
listed on an exchange that limits the number of shares of Common Stock that may
be issued without shareholder approval, then the number of Shares issuable by
the Company and purchasable by the Investor, shall not exceed that number of the
shares of Common Stock that may be issuable without shareholder approval,
subject to appropriate adjustment for stock splits, stock dividends,
combinations or other similar recapitalization affecting the Common Stock (the
"Maximum Common Stock Issuance"), unless the issuance of Shares, in excess of
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the Maximum Common Stock Issuance shall first be approved by the Company's
shareholders in accordance with applicable law and the By-laws and Amended and
Restated Certificate of Incorporation of the Company, if such issuance of shares
of Common Stock could cause a delisting on the Principal Market. The parties
understand and agree that the Company's failure to seek or obtain such
shareholder approval shall in no way adversely affect the validity and due
authorization of the issuance and sale of Securities or the Investor's
obligation in accordance with the terms and conditions hereof to purchase a
number of Shares in the aggregate up to the Maximum Common Stock Issuance
limitation, and that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section 2(i).
(J) For the purpose of this Agreement, the term "Valuation Event" means
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the Company taking any of the following actions at any time during a Pricing
Period:
(I) the subdivision or combinations of the Company's Common Stock;
(II) the payment of a dividend or any other distribution with respect
to shares of the Company's Common Stock;
(III) the issuance of any options or other rights to subscribe for or
purchase Common Stock ("Options") or any securities convertible into or
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exchangeable for Common Stock ("Convertible Securities"), the price per
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share for which Common Stock is shall be less than the bid price in effect
immediately prior to such issuance of such Options or Convertible
Securities;
(IV) the issuance of shares of Common Stock other than as provided in
the foregoing subsections (i) through (iii), at a price per share less, or
for other consideration lower, than the bid price in effect immediately
prior to such issuance, or without consideration; or
(V) the distribution of its assets or evidences of indebtedness to the
holders of Common Stock as a dividend in liquidation or by way of return of
capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to
such holders made in respect of the sale of all or substantially all of the
Company's assets (other than under the circumstances provided for in the
foregoing subsections (i) through (iv)).
(K) The Company agrees that it shall not take any action that would result
in a Valuation Event occurring during a Pricing Period.
SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
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The Investor represents and warrants to the Company, and covenants, that:
(A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it is
capable of (I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II) protecting its own
interest; and (III) bearing the economic risk of such investment for an
indefinite period of time.
(B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the
Investor will comply with the provisions of Section 9 of the 1934 Act, and the
rules promulgated thereunder, with respect to transactions involving the Common
Stock. The Investor agrees not to short, either directly or indirectly through
its affiliates, principals or advisors, the Company's common stock during the
term of this Agreement.
(D) ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term
is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
(E) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor of
the transactions contemplated hereby and thereby will not result in a violation
of Partnership Agreement or other organizational documents of the Investor.
(F) OPPORTUNITY TO DISCUSS. The Investor has had an opportunity to discuss
the business, management and financial affairs of the Company with the Company's
management to a level of satisfactory conditions for this type of investment.
(G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its
own account for investment purposes and not with a view towards distribution and
agrees to resell or otherwise dispose of the Securities solely in accordance
with the registration provisions of the 1933 Act (or pursuant to an exemption
from such registration provisions).
(H) NO REGISTRATION AS A BROKER OR DEALER. The Investor is not and will not
be required to be registered as a "broker or "dealer" under the 1934 Act, either
as a result of its execution and performance of its obligations under this
Agreement or otherwise.
(I) GOOD STANDING. The Investor is a Limited Partnership, duly organized,
validly existing and in good standing in the State of Delaware.
(J) TAX LIABILITIES. The Investor understands that it is liable for its own
tax liabilities.
(K) REGULATION M. The Investor will comply with Regulation M under the 1934
Act, if applicable.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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Except as set forth in the Schedules attached hereto, or as disclosed on
the Company's SEC Documents, the Company represents and warrants to the Investor
that:
(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authorization to own its
properties and to carry on its business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on the
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business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined in Section 1 and 4(b), below).
(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(I) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement,
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement
(collectively, the "Transaction Documents"), and to issue the Securities
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in accordance with the terms hereof and thereof.
(II) The execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby
and thereby, including without limitation the reservation for issuance and
the issuance of the Securities pursuant to this Agreement, have been duly
and validly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of
Directors, or its shareholders.
(III) The Transaction Documents have been duly and validly executed
and delivered by the Company.
(IV) The Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies.
(C) CAPITALIZATION. As of the date hereof, the authorized capital stock of
the Company consists of (i) 200,000,000 shares of Common Stock, $.001 par value
per share, of which as of the date hereof, 19,184,444 shares are issued and
outstanding; 50,000,000 shares of Preferred Stock, .001 par value per share;
none outstanding; as of January 12, 2004, 1,200,000 shares of common stock
reserved for issuance pursuant to options and warrants; and 500,000 shares of
common stock reserved for issuance pursuant to a convertible note. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as disclosed in the Company's publicly
available filings with Periodic Filings, (I) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (II) there are no
outstanding debt securities; (III) there are no outstanding shares of capital
stock, options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries; (IV) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (V) there are no outstanding securities of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (VI) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement; (VII) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (VIII)
there is no dispute as to the classification of any shares of the Company's
capital stock. The Company has furnished to the Investor, or the Investor has
had access through ▇▇▇▇▇ to, true and correct copies of the Company's Amended
and Restated Certificate of Incorporation, as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as in effect on the
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date hereof (the "By-laws"), and the terms of all securities convertible into or
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exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
(D) ISSUANCE OF SHARES. The Company has reserved 15,000,000 Shares for
issuance pursuant to this Agreement has been duly authorized and reserved for
issuance (subject to adjustment pursuant to the Company's covenant set forth in
Section 5(f) below) pursuant to this Agreement. Upon issuance in accordance with
this Agreement, the Securities will be validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof. In the event the Company cannot register a sufficient number of
Shares for issuance pursuant to this Agreement, the Company will use its best
efforts to authorize and reserve for issuance the number of Shares required for
the Company to perform its obligations hereunder as soon as reasonably
practicable.
(E) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (I) result in a violation
of the Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws; or (II) conflict with, or constitute a material default
(or an event which with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract, indenture
mortgage, indebtedness or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and state securities
laws and regulations and the rules and regulations of the Principal Market or
principal securities exchange or trading market on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected. Except as disclosed in Schedule 4(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or their organizational charter or by-laws, respectively, or any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have a Material Adverse Effect. The business of
the Company and its Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, statute, ordinance, rule, order or
regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or registration (except
the filing of a registration statement) with, any court, governmental authority
or agency, regulatory or self-regulatory agency or other third party in order
for it to execute, deliver or perform any of its obligations under, or
contemplated by, the Transaction Documents in accordance with the terms hereof
or thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal Market as in
effect on the date hereof and on each of the Closing Dates and is not aware of
any facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.
(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since at least February 13, 2004,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). The Company has delivered to the Investor
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or its representatives, or they have had access through ▇▇▇▇▇ to, true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective filing dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (I) as may be
otherwise indicated in such financial statements or the notes thereto, or (II)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 4(d) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstance
under which they are or were made, not misleading. Neither the Company nor any
of its Subsidiaries or any of their officers, directors, employees or agents
have provided the Investor with any material, nonpublic information which was
not publicly disclosed prior to the date hereof and any material, nonpublic
information provided to the Investor by the Company or its Subsidiaries or any
of their officers, directors, employees or agents prior to any Closing Date
shall be publicly disclosed by the Company prior to such Closing Date.
(G) ABSENCE OF CERTAIN CHANGES. Except as set forth in the SEC Documents,
the Company does not intend to change the business operations of the Company.
The Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
its Subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
(H) ABSENCE OF LITIGATION. Except as set forth in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
(I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investor's purchase of the Securities. The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES.
Except as set forth in the SEC Documents, since February 13, 2004, no event,
liability, development or circumstance has occurred or exists, or to the
Company's knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has
notified the Company that such officer intends to leave the Company's employ or
otherwise terminate such officer's employment with the Company.
(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth the SEC Documents, none of the Company's
trademarks, trade names, service marks, service ▇▇▇▇ registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two years
from the date of this Agreement. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service ▇▇▇▇ registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on the SEC Documents, there is no claim, action or proceeding being made
or brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
▇▇▇▇ registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the
knowledge of management of the Company, in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"); (II)
------------------
have, to the knowledge of management of the Company, received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses; and (III) are in compliance, to the
knowledge of the Company, with all terms and conditions of any such permit,
license or approval where, in each of the three foregoing cases, the failure to
so comply would have, individually or in the aggregate, a Material Adverse
Effect.
(N) TITLE. The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in the SEC Documents or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its Subsidiaries.
Any real property and facilities held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(O) INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company reasonably believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force
and effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (I) transactions are executed in accordance with
management's general or specific authorizations; (II) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
(III) access to assets is permitted only in accordance with management's general
or specific authorization; and (IV) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed
all United States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at
least ten days prior to the date hereof and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options disclosed in the SEC Documents, none
of the officers, directors, or employees of the Company is presently a party to
any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(U) DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Shares issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The Board of Directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue Shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
(V) RIGHT OF FIRST REFUSAL. The Company shall not, directly or indirectly,
without the prior written consent of Investor, which shall not be unreasonably
withheld, offer, sell, grant any option to purchase, or otherwise dispose of (or
announce any offer, sale, grant or any option to purchase or other disposition)
any of its Common Stock or securities convertible into Common Stock at a price
that is less than 90% of the market price of the Common Stock at the time of
issuance of such security or investment (a "Subsequent Financing") for a
---------------------
period of one year after the Effective Date, except (I) the granting of options
or warrants to employees, officers, directors and consultants, and the issuance
of Shares upon exercise of options granted, under any stock option plan
heretofore or hereafter duly adopted by the Company or for services rendered or
to be rendered; (II) Shares issued upon exercise of any currently outstanding
warrants or options and upon conversion of any currently outstanding convertible
debenture or convertible preferred stock, in each case disclosed pursuant to
Section 4(c); (III) securities issued in connection with the capitalization or
creation of a joint venture with a strategic partner; (IV) Shares issued to pay
part or all of the purchase price for the acquisition by the Company of another
entity (which, for purposes of this clause (iv), shall not include an individual
or group of individuals); and (V) Shares issued in a bona fide public offering
by the Company of its securities, unless (A) the Company delivers to Investor a
written notice (the "Subsequent Financing Notice") of its intention to
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effect such Subsequent Financing, which Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the person with whom
such Subsequent Financing shall be effected, and attached to which shall be a
term sheet or similar document relating thereto; and (B) Investor shall not have
notified the Company by 5:00 p.m. (New York time) on the fifth Trading Day after
its receipt of the Subsequent Financing Notice of its willingness to provide,
subject to completion of mutually acceptable documentation, financing to the
Company on substantially the terms set forth in the Subsequent Financing Notice.
If Investor shall fail to notify the Company of its intention to enter into such
negotiations within such time period, then the Company may effect the Subsequent
Financing substantially upon the terms set forth in the Subsequent Financing
Notice; provided that the Company shall provide Investor with a second
Subsequent Financing Notice, and Investor shall again have the right of first
refusal set forth above in this Section, if the Subsequent Financing subject to
the initial Subsequent Financing Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Financing Notice within thirty
Trading Days after the date of the initial Subsequent Financing Notice. The
rights granted to Investor in this Section are not subject to any prior right of
first refusal given to any other person disclosed on Schedule 4(c).
(W) LOCK-UP. The Company shall cause its officers, insiders, directors,
affiliates or other related parties to refrain from selling Common Stock during
each Pricing Period.
(X) NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D)
in connection with the offer or sale of the Common Stock offered hereby.
(Y) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS will be
payable by the Company with respect to the transaction contemplated by this
Agreement other than described in Section 12 (m) of this Agreement.
SECTION 5. COVENANTS OF THE COMPANY
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(A) BEST EFFORTS. The Company shall use commercially reasonable efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Section 7 of this Agreement.
(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before
each of the Closing Dates, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to the Investor at each of the Closings pursuant to
this Agreement under applicable securities or "Blue Sky" laws of such states of
the United States, as reasonably specified by Investor, and shall provide
evidence of any such action so taken to the Investor on or prior to the Closing
Date.
(C) REPORTING STATUS. Until the earlier to occur of (I) the first date
which is after the date this Agreement is terminated pursuant to Section 9 and
on which the Holders (as that term is defined in the Registration Rights
Agreement) may sell all of the Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto); and (II) the date
on which (A) the Holders shall have sold all the Securities; and (B) this
Agreement has been terminated pursuant to Section 9 (the "Registration Period"),
-------------------
the Company shall file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as a reporting
company under the 1934 Act.
(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for fees as set forth in the
Transaction Documents) for general corporate and working capital purposes or for
other purposes deemed fit by the Company's Board of Directors.
(E) FINANCIAL INFORMATION. The Company agrees to make available to the
Investor via ▇▇▇▇▇ or other electronic means the following to the Investor
during the Registration Period: (I) within five (5) Trading Days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-KSB, its
Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K and any
Registration Statements or amendments filed pursuant to the 1933 Act; (II) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries; (III) copies of any notices
and other information made available or given to the shareholders of the Company
generally, contemporaneously with the making available or giving thereof to the
shareholders; and (IV) within two (2) calendar days of filing or delivery
thereof, copies of all documents filed with, and all correspondence sent to, the
Principal Market, any securities exchange or market, or the National Association
of Securities Dealers, Inc., unless such information is material nonpublic
information.
(F) RESERVATION OF SHARES. Subject to the following sentence, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, a sufficient number of Shares of Common Stock to
provide for the issuance of the Securities hereunder. In the event that the
Company determines that it does not have a sufficient number of authorized
Shares to reserve and keep available for issuance as described in this Section
5(f), the Company shall use its best efforts to increase the number of
authorized Shares by seeking shareholder approval for the authorization of such
additional shares.
(G) LISTING. The Company shall promptly secure and maintain the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon the Principal Market and each other national securities exchange
and automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. Neither the Company nor any
of its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market (excluding suspensions of not more than one trading day resulting from
business announcements by the Company). The Company shall promptly provide to
the Investor copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 5(g).
(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause
each of its Subsidiaries not to, enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two (2) years, shareholders who beneficially own five percent (5%)
or more of the Common Stock, or affiliates or with any individual related by
blood, marriage or adoption to any such individual or with any entity in which
any such entity or individual owns a five percent (5%) or more beneficial
interest (each a "Related Party"), except for (I) customary employment
--------------
arrangements and benefit programs on reasonable terms, (II) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, or (III) any agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors of
the Company. For purposes hereof, any director who is also an officer of the
Company or any Subsidiary of the Company shall not be a disinterested director
with respect to any such agreement, transaction, commitment or arrangement.
"Affiliate" for purposes hereof means, with respect to any person or entity,
---------
another person or entity that, directly or indirectly, (I) has a five percent
(5%) or more equity interest in that person or entity, (II) has five percent
(5%) or more common ownership with that person or entity, (III) controls that
person or entity, or (IV) is under common control with that person or entity.
"Control" or "Controls" for purposes hereof means that a person or entity has
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the power, direct or indirect, to conduct or govern the policies of another
person or entity.
(I) FILING OF FORM 8-K. On or before the date which is three Trading Days
after the Execution Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transaction contemplated by the
Transaction Documents in the form required by the 1934 Act, if such filing is
required.
(J) CORPORATE EXISTENCE. The Company shall use its best efforts to preserve
and continue the corporate existence of the Company.
(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO
MAKE A PUT. The Company shall promptly notify Investor upon the occurrence of
any of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities and shall not deliver any
Put Notice during the continuation of any of the following events: (I) receipt
of any request for additional information by the SEC or any other federal or
state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (II) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose; (III) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (IV) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the related prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (V) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
foregoing events.
(L) REIMBURSEMENT. If (I) Investor becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person (other than as a result
of a breach of the Investor's representations and warranties set forth in this
Agreement); or (II) Investor becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents (other than as a result of a breach of
the Investor's representations and warranties set forth in this Agreement), or
if Investor is impleaded in any such action, proceeding or investigation by any
person, then in any such case, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which Investor is a named
party, the Company will pay to Investor the charges, as reasonably determined by
Investor, for the time of any officers or employees of Investor devoted to
appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearing, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this section shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliates of Investor that are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees, attorneys, accountants, auditors and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors of the Company,
Investor and any such affiliate and any such person.
SECTION 6. COVER. If the number of Shares represented by any Put Notices
-----
become restricted or are no longer freely trading for any reason, and after the
applicable Closing Date, the Investor purchases, in an open market transaction
or otherwise, the Company's Common Stock (the "Covering Shares") in order to
---------------
make delivery in satisfaction of a sale of Common Stock by the Investor (the
"Sold Shares"), which delivery such Investor anticipated to make using the
------------
Shares represented by the Put Notice (a "Buy-In"), the Company shall pay to the
------
Investor the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment
-----------------
Amount" is the amount equal to the excess, if any, of (A) the Investor's
------
total purchase price (including brokerage commissions, if any) for the Covering
Shares over (B) the net proceeds (after brokerage commissions, if any) received
by the Investor from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Investor in immediately available funds
immediately upon demand by the Investor. By way of illustration and not in
limitation of the foregoing, if the Investor purchases Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover a
Buy-In with respect to the Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which the Company will be required to pay to the
Investor will be $1,000.
SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------------
The obligation hereunder of the Company to issue and sell the Securities to
the Investor is further subject to the satisfaction, at or before each Closing
Date, of each of the following conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(A) The Investor shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(B) The Investor shall have delivered to the Company the Purchase Price for
the Securities being purchased by the Investor at the Closing (after receipt of
confirmation of delivery of such Securities) by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
(C) Reserved.
(D) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(E) No Valuation Event shall have occurred since the applicable Put Notice
Date.
(F) The Company shall reserve the right not to deliver a Put to the
Investor, at any time during which the Company's registration statement is
effective, an aggregate interest in the Company's capital stock which is greater
than 9.99% after the consummation of any of the put transactions contemplated by
this Agreement.
SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
-----------------------------------------------------------
The obligation of the Investor hereunder to purchase Securities is subject
to the satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A) The Company shall have executed each of the Transaction Documents and
delivered the same to the Investor.
(B) The Common Stock shall be authorized for quotation on the Principal
Market and trading in the Common Stock shall not have been suspended by the
Principal Market or the SEC, at any time beginning on the date hereof and
through and including the respective Closing Date (excluding suspensions of not
more than one Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
(C) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that time (except for (I) representations and warranties that speak as
of a specific date and (II) with respect to the representations made in Sections
4(g), (h) and (j) and the third sentence of Section 4(k) hereof, events which
occur on or after the date of this Agreement and are disclosed in SEC filings
made by the Company at least ten Trading Days prior to the applicable Put Notice
Date) and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company on or before such Closing
Date. The Investor may request an update as of such Closing Date regarding the
representation contained in Section 4(c) above.
(D) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the Securities (in such denominations as such Investor shall request) being
purchased by the Investor at such Closing.
(E) The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4(b)(ii) above (the "Resolutions") and such Resolutions
-----------
shall not have been amended or rescinded prior to such Closing Date.
(F) The Company shall not cause the purchase of shares subject to the Put
Notice by the Investor to be greater than 9.99% of the Company's capital stock,
as determined by the Company.
(G) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(H) The Registration Statement shall be effective on each Closing Date and
no stop order suspending the effectiveness of the Registration statement shall
be in effect or shall be pending or threatened. Furthermore, on each Closing
Date (I) neither the Company nor Investor shall have received notice that the
SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action), and (II) no other suspension of the
use or withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.
(I) At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or which would require public
disclosure or an update supplement to the prospectus.
(J) If applicable, the shareholders of the Company shall have approved the
issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2(i).
(K) The conditions to such Closing set forth in Section 2(f) shall have
been satisfied on or before such Closing Date.
(L) The Company shall have certified to the Investor the number of Shares
of Common Stock outstanding when a Put Notice is given to the Investor.
SECTION 9. TERMINATION. This Agreement shall terminate upon any of the
-----------
following events:
(I) when the Investor has purchased an aggregate of Three Million Dollars
($3,000,000) in the Common Stock of the Company pursuant to this Agreement;
provided that the Company's representations, warranties and covenants contained
in this Agreement insofar as applicable to the transactions consummated
hereunder prior to such termination, shall survive the termination of this
Agreement for the period of any applicable statute of limitations;
(II) on the date which is thirty-six (36) months after the Effective Date;
(III) if the Company shall file or consent by answer or otherwise to the
entry of an order for relief or approving a petition for relief, reorganization
or arrangement or any other petition in bankruptcy for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or shall make
an assignment for the benefit of its creditors, or shall consent to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of itself or of any substantial part of its property, or shall be
adjudicated a bankrupt or insolvent, or shall take corporate action for the
purpose of any of the foregoing, or if a court or governmental authority of
competent jurisdiction shall enter an order appointing a custodian, receiver,
trustee or other officer with similar powers with respect to the Company or any
substantial part of its property or an order for relief or approving a petition
for relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law, or an
order for the dissolution, winding up or liquidation of the Company, or if any
such petition shall be filed against the Company;
(IV) if the Company shall issue or sell any equity securities or securities
convertible into, or exchangeable for, equity securities or enter into any other
equity financing facility during the Open Period, other than in compliance with
Section 4(v);
SECTION 10. SUSPENSION. This Agreement shall be suspended upon any of the
following events, and shall remain suspended until such event is rectified:
(I) the trading of the Common Stock is suspended by the SEC, the Principal
Market or the NASD for a period of five consecutive Trading Days during the Open
Period;
(II) the Company shall not have filed with the SEC the initial Registration
Statement with respect to the resale of the Registrable Securities in accordance
with the terms of the initial Registration Rights Agreement within 60 calendar
days of the date hereof or the Registration Statement has not been declared
effective within 180 calendar days of the date hereof; or
(III) The Common Stock ceases to be registered under the 1934 Act or listed
or traded on the Principal Market. Upon the occurrence of one of the
above-described events, the Company shall send written notice of such event to
the Investor.
SECTION 11. INDEMNIFICATION. In consideration of the parties mutual
---------------
obligations set forth in the Transaction Documents, each of the parties (in such
capacity, an "Indemnitor") shall defend, protect, indemnify and hold harmless
----------
the the other and all of the other party's shareholders, officers, directors,
employees, counsel, and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
-----------
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
------------------------
arising out of, or relating to (I) any misrepresentation or breach of any
representation or warranty made by the Indemnitor or any other certificate,
instrument or document contemplated hereby or thereby; (II) any breach of any
covenant, agreement or obligation of the Indemnitor contained in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby; or (III) any cause of action, suit or claim brought or made against
such Indemnitee by a third party and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
except insofar as any such misrepresentation, breach or any untrue statement,
alleged untrue statement, omission or alleged omission is made in reliance upon
and in conformity with written information furnished to Indemnitor which is
specifically intended for use in the preparation of any such Registration
Statement, preliminary prospectus, prospectus or amendments to the prospectus.
To the extent that the foregoing undertaking by the Indenitor may be
unenforceable for any reason, the Indemnitor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights Indemnitor may
have, and any liabilities the Indemnitor or the Indemnitees may be subject to.
SECTION 12. GOVERNING LAW; MISCELLANEOUS.
------------------------------
(A) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts without regard to
the principles of conflict of laws. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
Boston, County of Suffolk, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in
the Transaction Documents, the Company shall pay the fees and expenses of its
advisers, counsel, the accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys' fees and
expenses incurred by either the Company or by the Investor in connection with
the preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of any Securities.
(C) COUNTERPARTS. This Agreement may be executed in two (2) or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.
(E) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other prior
oral or written agreements between the Investor, the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed herein,
and this Agreement and the instruments referenced herein (including the other
Transaction Documents) contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as specifically
set forth herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.
(G) NOTICES. Any notices or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (I) upon receipt, when delivered personally; (II) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (III) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
FoneFriend, Inc
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With Copy to:
Law Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.A
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Investor:
Dutchess Private Equities Fund, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Each party shall provide five days' prior written notice to the other party
of any change in address or facsimile number.
(H) NO ASSIGNMENT. This Agreement may not be assigned.
(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(J) SURVIVAL. The representations and warranties of the Company and the
Investor contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4 and 5, and the indemnification provisions set forth in Section 11,
shall survive each of the Closings and the termination of this Agreement.
(K) PUBLICITY. The Company and Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties with prior notice of such public statement. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of Investor without
the prior written consent of such Investor, except to the extent required by
law. Investor acknowledges that this Agreement and all or part of the
Transaction Documents may be deemed to be "material contracts" as that term is
defined by Item 601(b)(10) of Regulation S-B, and that the Company may therefore
be required to file such documents as exhibits to reports or registration
statements filed under the 1933 Act or the 1934 Act. Investor further agrees
that the status of such documents and materials as material contracts shall be
determined solely by the Company, in consultation with its counsel.
(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(M) PLACEMENT AGENT. The Company agrees to pay Charleston Capital
Corporation ("Charleston") a registered broker dealer, an aggregate fee of
$10,000 for all transactions contemplated under this Agreement. The $10,000 fee
shall be payable from 1% (one percent) of the Put Amount on each draw toward the
fee. Charleston will also act as an unaffiliated broker dealer. The Investor
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other persons or entities for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by the Transaction Documents. The Company shall indemnify and hold
harmless the Investor, their employees, officers, directors, agents, and
partners, and their respective affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses incurred in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(N) NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(O) REMEDIES. The Investor and each holder of the Shares shall have all
rights and remedies set forth in this Agreement and the Registration Rights
Agreement and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any default
or breach of any provision of this Agreement, including the recovery of
reasonable attorneys fees and costs, and to exercise all other rights granted by
law.
(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to the Investor hereunder or the Registration Rights Agreement or the
Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the bid price
of the Common Stock in this Agreement shall be as reported on ▇▇▇▇▇▇▇▇▇.▇▇▇.
The signature of the authorized representative of the on this Signature
Page evidences the Company's agreement to be bound by the terms and conditions
of the Investment Agreement and the Registration Rights Agreement as of the date
first written above.
The undersigned signatory hereby certifies that he or she has read and
understands the Investment Agreement, and the representations made by the
Company in this Investment Agreement are true and accurate, and on behalf of the
Company, agrees to be bound by its terms.
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER,
DUTCHESS CAPITAL MANAGEMENT, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Member
FONEFRIEND, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
LIST OF EXHIBITS
----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B [reserved]
EXHIBIT C [reserved]
EXHIBIT D Broker Representation Letter
EXHIBIT E Board Resolution
EXHIBIT F Put Notice
EXHIBIT G Put Settlement Sheet
LIST OF SCHEDULES
-----------------
Schedule 4(a) Subsidiaries
Schedule 4(c) Capitalization
Schedule 4(e) Conflicts
Schedule 4(g) Material Changes
Schedule 4(h) Litigation
Schedule 4(l) Intellectual Property
Schedule 4(n) Liens
Schedule 4(t) Certain Transactions
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
-----------------------------
EXHIBIT D
BROKER REPRESENTATION LETTER
----------------------------
[BROKER'S LETTERHEAD]
Date
Via Facsimile
Attention:
______________________
______________________
______________________
Re: FoneFriend, Inc.
Dear __________________:
It is our understanding that the Form ______ Registration Statement bearing SEC
File Number ( ___-______) filed by FoneFriend, Inc. on Form _____ on __________,
2003 was declared effective on _________, 2003.
This letter shall confirm that ______________ shares of the common stock of
FoneFriend, Inc. are being sold on behalf of __________________ and that we
shall comply with the prospectus delivery requirements set forth in that
Registration Statement by filing the same with the purchaser.
If you have any questions please do not hesitate to call.
Sincerely,
______________________
cc: .
EXHIBIT E
BOARD RESOLUTION
----------------
EXHIBIT F
PUT NOTICE
----------
Date:
RE: Put Notice Number __
Dear ▇▇. ▇▇▇▇▇▇▇▇,
This is to inform you that as of today, FoneFriend, Inc., a Delaware corporation
(the "Company"), hereby elects to exercise its right pursuant to the Investment
Agreement to require Dutchess Private Equities Fund, LP. to purchase shares of
its common stock. The Company hereby certifies that:
The amount of this put is $__________.
The Pricing Period runs from ________ until _______.
The current number of shares issued and outstanding as of the Company are:
____________________
Regards,
________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
FoneFriend, Inc.
EXHIBIT G
PUT SETTLEMENT SHEET
--------------------
Date:
Gentlemen:
Pursuant to the Put given by FoneFriend, Incto Dutchess Private Equities Fund,
L.P. on _________________ 200x, we are now submitting the amount of common
shares for you to issue to Dutchess.
Please have a certificate baring no restrictive legend totaling __________
shares issued to Dutchess Private Equities Fund, LP immediately and send via
DWAC to the following account:
XXXXXX
If not DWAC eligible, please send Fedex Priority Overnight to:
XXXXXX
Once these shares are received by us, we will break have the funds wired to the
Company.
Regards,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
DATE PRICE
Date of Day 1 Closing Bid of Day 1
Date of Day 2 Closing Bid of Day 2
Date of Day 3 Closing Bid of Day 3
Date of Day 4 Closing Bid of Day 4
Date of Day 5 Closing Bid of Day 5
LOWEST 1 (ONE) BID IN PRICING PERIOD
PUT AMOUNT
AMOUNT WIRED TO COMPANY
PURCHASE PRICE (94%)
AMOUNT OF SHARES DUE
The undersigned has completed this Put as of this ___th day of _________, 200x.
FoneFriend, Inc.
By: ___________________
SCHEDULES
---------
SCHEDULE 4(A) SUBSIDIARIES
The Company has no subsidiaries.
SCHEDULE 4(C) CAPITALIZATION
In addition to disclosures set forth in the Company's SEC Documents, the
Company's registration statement on Form S-3 contains a listing of additional
securities with registration rights. A copy of the Company's Form S-3 has been
supplied to the Investor prior to the date of this Agreement.
SCHEDULE 4(E) CONFLICTS
To the best of our knowledge and belief, we are aware of no exceptions as of the
date hereof other than that as may be set forth in the Company's SEC Documents.
SCHEDULE 4(G) MATERIAL CHANGES
To the best of our knowledge and belief, we are aware of no exceptions as of the
date hereof.
SCHEDULE 4(H) LITIGATION
To the best of our knowledge and belief, we are aware of no exceptions as of the
date hereof other than disclosures that are set forth in the Company's SEC
Documents.
SCHEDULE 4(L) INTELLECTUAL PROPERTY
To the best of our knowledge and belief, we are aware of no exceptions as of the
date hereof other than that as may be set forth in the Company's SEC Documents.
SCHEDULE 4(N) LIENS
To the best of our knowledge and belief, we are aware of no exceptions as of the
date hereof.
SCHEDULE 4(T) CERTAIN TRANSACTIONS
To the best of our knowledge and belief, we are aware of no exceptions as of the
date hereof other than that as may be set forth in the Company's SEC Documents.
