PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BY AND AMONG
CERTAIN INVESTORS
AND
COMMERCIAL CONCEPTS, INC.
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DATED AS OF JULY 18, 2000
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This PRIVATE EQUITY LINE OF CREDIT AGREEMENT is entered into as of the
18 day of July, 2000 (this "Agreement"), by and between the various investors
identified on Schedule A hereto (each an "Investor" or "Investors"), and
Commercial Concepts, Inc., a corporation organized and existing under the laws
of the State of Utah (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to each Investor,
from time to time as provided herein, and each Investor shall purchase his
Proportionate Share of up to $6,000,000 of the Common Stock (as defined below).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Average Daily Price" shall be the price based on the VWAP.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg Financial) of the Common Stock on the Principal Market.
Section 1.3 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing Date" shall mean, with respect to a Closing at the
election of the Investor made from time to time either the sixth Trading Day
following the Optional Purchase Date related to such Closing or the second
Trading Day following the Valuation Period, provided all conditions to such
Closing have been satisfied on or before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the $6,000,000 up to which
the Investors have agreed to provide to the Company in order to purchase Put
Shares pursuant to the terms and conditions of this Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investors shall have purchased
Put Shares pursuant to this Agreement for an aggregate Purchase Price of
$6,000,000, (y) the date this Agreement is terminated pursuant to Section 2.5,
or (z) the date occurring thirty-six (36) months from the date of commencement
of the Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, $.001
par value per share.
Section 1.9 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
Section 1.10 "Condition Satisfaction Date" See Section 7.2.
[Duplicated in Section 1.17]
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Section 1.11 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the regulations promulgated thereunder.
Section 1.14 "Finder" See Section 13.2.
Section 1.15 Intentionally Omitted.
Section 1.16 "Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.2) to be invested by the Investor to purchase
Put Shares with respect to any Optional Purchase Date as notified by the Company
to the Investor in accordance with Section 2.2 hereof.
Section 1.17 "Legend" See Section 9.1.
Section 1.18 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
its obligations under any of (a) this Agreement and (b) the Registration Rights
Agreement.
Section 1.19 "Maximum Put Amount" shall mean ten percent (10%) of the
daily trading volume of the shares of Common Stock on the Principal Market for
each of the thirty (30) Trading Days preceding but not including the date an
Optional Purchase Notice is given, multiplied by the corresponding Bid Price on
each such date, but in no event more than $1,000,000. The Maximum Put Amount
represents the aggregate of all Proportionate Shares of all Investors.
Section 1.20 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.21 "Optional Purchase Date" shall mean the Trading Day during
the Commitment Period that an Optional Purchase Notice to sell Common Stock to
the Investor is deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.22 "Optional Purchase Notice" shall mean a written notice to
the Investor setting forth the Investment Amount that the Company intends to
sell to the Investor.
Section 1.23 "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
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provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.24 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.25 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq Small-Cap Market, the NASDAQ OTC Bulletin Board, the American Stock
Exchange or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock. As of the date of this
Agreement, the NASD OTC Bulletin Board is the Principal Market.
Section 1.26 "Proportionate Share" shall mean the proportion of the
Commitment Amount agreed to be purchased by each Investor as set forth on
Schedule A.
Section 1.27 "Purchase Price" as used in this Agreement shall mean the
following: For each Trading Day during a Valuation Period (or such other date on
which the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement) the Purchase Price shall be 84% of the VWAP.
Section 1.28 "Put" shall mean each occasion the Company elects to
exercise its right to tender an Optional Purchase Notice requiring the Investor
to purchase a discretionary amount as determined by the Company and as limited
by this Agreement of the Company's Common Stock, subject to the terms of this
Agreement which tender must be given to each Investor for such Investor's
Proportionate Share.
Section 1.29 "Put Shares" shall mean all shares of Common Stock issued
or issuable pursuant to a Put that has occurred or may occur in accordance with
the terms and conditions of this Agreement.
Section 1.30 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC and all Put Shares and Warrant Shares have been disposed of pursuant
to the Registration Statement.
Section 1.31 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investors as of
the Subscription Date.
Section 1.32 "Registration Statement" shall mean a registration
statement on Form SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor and Finder of the Registrable
Securities under the Securities Act.
Section 1.33 "Regulation D" shall mean Regulation D of the Securities
Act.
Section 1.34 "SEC" shall mean the Securities and Exchange Commission.
Section 1.35 "Section 4(2)" shall mean Section 4(2) of the Securities
Act.
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Section 1.36 "Securities Act" shall mean the United States Securities
Act of 1933, as amended, and the regulations promulgated thereunder.
Section 1.37 "SEC Documents" shall mean the Company's latest Form
10-KSB as of the time in question, all Forms 10-Q and 8-K filed thereafter, and
the Proxy Statement for its latest fiscal year as of the time in question until
such time the Company no longer has an obligation to maintain the effectiveness
of a Registration Statement as set forth in the Registration Rights Agreement.
Section 1.38 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.39 "Trading Cushion" shall mean, at any time, the mandatory
thirty (30) calendar days between Optional Purchase Dates.
Section 1.40 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.41 "Valuation Event" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any
other distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional
Capital Shares"), otherwise than as provided in the foregoing
Subsections (a) and (b) above, at a price per share less, or
for other consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without consideration;
(d) issues any warrants, options or other rights to
subscribe for or purchase any Additional Capital Shares and
the price per share for which Additional Capital Shares may at
any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(e) issues any securities convertible into or
exchangeable for Capital Shares and the consideration per
share for which Additional Capital Shares may at any time
thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the
Bid Price in effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences
of indebtedness to the holders of its Capital Shares as a
dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of
all or substantially all of the Company's assets (other than
under the circumstances provided for in the foregoing
subsections (a) through (e); or
(g) takes any action affecting the number of
Outstanding Capital Shares, other than an action described in
any of the foregoing Subsections (a) through (f) hereof,
inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a materially
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adverse effect upon the rights of the Investor at the time of
a Put or Closing Date.
Section 1.42 "Valuation Period" shall mean the period of ten (10)
Trading Days during which the Purchase Price of the Common Stock is determined,
which period shall be with respect to the Purchase Prices on any Optional
Purchase Date, the ten (10) Trading Days following the Trading Day on which an
Optional Purchase Notice is deemed to be delivered; provided, however, that if a
Valuation Event occurs during any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately after the occurrence of such Valuation
Event and end on the fifth Trading Day thereafter.
Section 1.43 "VWAP" shall mean the daily volume weighted average price
of the Common Stock on the Principal Market as reported by Bloomberg Financial
using the AQR function.
Section 1.44 "Warrants" shall mean the common stock purchase warrants
of the Company described in Section 13.2, a form of which is annexed hereto as
Exhibit E.
Section 1.45 "Warrant Shares" shall mean the Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article III hereof), on any
Optional Purchase Date the Company may exercise a Put by the delivery of an
Optional Purchase Notice. The number of Put Shares that the Investor shall
receive pursuant to such Put shall be determined by dividing the relevant
portions of the Investment Amount specified in the Optional Purchase Notice by
the corresponding Purchase Prices for each Trading Day during the Valuation
Period.
Section 2.2 Mechanics.
(a) Optional Purchase Notice. At any time during the
Commitment Period, the Company may deliver an Optional Purchase Notice to the
Investor, subject to the conditions set forth in Section 7.2; provided, however,
the Investment Amount for each Put as designated by the Company in the
applicable Optional Purchase Notices shall be neither less than $100,000 in the
aggregate to all Investors nor more than the Maximum Put Amount.
(b) Date of Delivery of Optional Purchase Notice. An Optional
Purchase Notice shall be deemed delivered on (i) the Trading Day it is received
by facsimile or otherwise by the Investor if such notice is received prior to
12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it
is received by facsimile or otherwise after 12:00 noon New York time on a
Trading Day or at any time on a day which is not a Trading Day. No Optional
Purchase Notice may be deemed delivered on a day that is not a Trading Day.
(c) Determination of Put Shares Issuable. The Purchase Price
shall be based on the Average Daily Price on each separate Trading Day during
the Valuation Period. The number of Put Shares to be purchased by each Investor
with respect to such Investor's Proportionate Share shall be determined on a
daily basis during each Valuation Period and settled on the Closing Date. The
portion of Investment Amount for which Put Shares may be issued for each Trading
Day during the Valuation Period may not exceed one-tenth (1/10th) of the
Investment Amount.
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(d) Maximum Optional Purchase Notices/Amount. There shall be a
maximum of thirty-six (36) Optional Purchase Notices given during the term of
this Agreement. The Company shall have the right to issue each Optional Purchase
Notice for an Investment Amount up to the Maximum Put Amount.
Section 2.3 Closings. On each Closing Date for a Put the Company shall
deliver to the Investor or to escrow one or more certificates, at the Investor's
option, representing the Put Shares to be purchased by the Investor pursuant to
Section 2.1 herein, after the Optional Purchase Date and on or prior to the
Closing Date, registered in the name of the Investor or, at the Investor's
option, deposit such certificate(s) into such account or accounts previously
designated by the Investor and the Investor shall deliver to escrow the
Investment Amount specified in the Optional Purchase Notice by wire transfer of
immediately available funds to an account designated by the Company on or before
the Closing Date. In addition, on or prior to the Closing Date, each of the
Company and the Investor shall deliver all documents, instruments and writings
required to be delivered or reasonably requested by either of them pursuant to
this Agreement in order to implement and effect the transactions contemplated
herein. Payment of funds to the Company and delivery of the certificates to the
Investor shall occur out of escrow in accordance with the escrow agreement
referred to in Section 7.2(p) following (x) the Company's deposit into escrow of
the certificates representing the Put Shares and (y) the Investor's deposit into
escrow of the Investment Amount; provided, however, that to the extent the
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 13.1, the amount of such fees, expenses and
disbursements shall be paid in immediately available funds drawn out of the
deposited funds, at the direction of the Investor, to Investor's counsel with no
reduction in the number of Put Shares issuable to the Investor on such Closing
Date.
Section 2.4 Liquidated Damages. In the event the Put Shares are not
delivered by the Company on a Closing Date, the Company will pay the Investor,
as liquidated damages for such failure to deliver, and not as a penalty, one
percent (1%) of the applicable Investment Amount for each seven (7) day period,
or part thereof following such failure, in cash, until such Put Shares have been
delivered. The Escrow Agent shall be directed to pay such liquidated damages to
the Investor out of the Investment Amount delivered by the Investor to the
Escrow Agent.
Section 2.5 Termination of Investment Obligation. The obligation of the
Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for a consecutive ten day calendar
period or for an aggregate of thirty (30) Trading Days during the Commitment
Period, for any reason, or (ii) the Company shall at any time fail to comply
with the requirements of Section 6.2, 6.3, 6.4, 6.5 or 6.6.
Section 2.6 Illustration. Exhibit 2.6 contains an illustration of the
mechanics of a Put procedure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
its own account and the Investor has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any person
or entity; provided, however, that by making the representations herein, the
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Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer, director
or to Investor's good faith belief, an "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.6 Disclosure; Access to Information. Investor has received
all documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. The Company is
subject to the periodic reporting requirements of the Exchange Act, and Investor
has had access to copies of any such reports that have been requested by it.
Section 3.7 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 Organization of the Company. The Company is a corporation
duly organized and existing in good standing under the laws of the State of Utah
and has all requisite corporate authority to own its properties and to carry on
its business as now being conducted. Except as set forth in the SEC Documents,
the Company does not have any subsidiaries. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
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in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to issue the Put Shares;
(ii) the execution, issuance and delivery of this Agreement and the Registration
Rights Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required; and (iii) this Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company and constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 shares of Common Stock, of
which 26,691,064 shares of Common Stock were issued and outstanding as of May
31, 2000. None of the authorized and issued capital stock of the Company
consists of preferred stock. Except as set forth in the SEC Documents, there are
no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable.
Section 4.4 Common Stock. As of the commencement of the Commitment
Period, the Company will have registered its Common Stock pursuant to Section
12(b) or 12(g) of the Exchange Act and be in full compliance with all reporting
requirements of the Exchange Act, and the Company will have maintained all
requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is then listed or quoted on the Principal Market. As of the
date hereof, the Common Stock is quoted on the NASD OTC "Bulletin Board."
Section 4.5 SEC Documents. The Company has delivered or made available
to the Investor true and complete copies of the SEC Documents (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Investor any information that, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
rules and regulations of the SEC promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
described above and/or included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
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Section 4.6 Valid Issuances. The sale and resale of the Put Shares may
and will be properly accomplished pursuant to Rule 4(2), Regulation D and/or any
applicable state law. When issued, the Put Shares shall be duly and validly
issued, fully paid, and nonassessable. Neither the sales of the Put Shares
pursuant to, nor the Company's performance of its obligations under, this
Agreement or the Registration Rights Agreement will (i) result in the creation
or imposition of any liens, charges, claims or other encumbrances upon the Put
Shares or any of the assets of the Company, or (ii) entitle the holders of
Outstanding Capital Shares to preemptive or other rights to subscribe to or
acquire the Capital Shares or other securities of the Company. The Put Shares
shall not subject the Investor to personal liability by reason of the possession
thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including, without limitation, the issuance of
Common Stock do not and will not (i) result in a violation of the Company's
Articles of Incorporation or By-Laws or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (iii) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect) nor is the Company otherwise in violation of,
conflict with or in default under any of the foregoing; provided that, for
purposes of the Company's representations and warranties as to violations of
foreign law, rule or regulation referenced in clause (iv), such representations
and warranties are made only to the best of the Company's knowledge insofar as
the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby are or may
be affected by the status of the Investor under or pursuant to any such foreign
law, rule or regulation. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations that either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or issue and sell the Common Stock in accordance with the
terms hereof other than any SEC, NASD or state securities filings that may be
required to be made by the Company subsequent to any Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on NASD
OTC Bulletin Board; provided that, for purposes of the representation made in
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this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investor herein.
Section 4.10 No Material Adverse Change. Since the date of the most
recent financial statements included in the SEC Documents, no Material Adverse
Effect has occurred or exists with respect to the Company, except as disclosed
in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
incurred in the ordinary course of the Company's businesses since the date of
the most recent financial statements included in the SEC Documents and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. Since the date of
the most recent financial statements included in the SEC Documents, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.13 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the current management and Board of Directors of the
Company threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which might have a Material Adverse Effect. Except as set forth in the SEC
Documents, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which might result in a Material Adverse
Effect.
Section 4.15 No Misleading or Untrue Communication. The Company, any
Person representing the Company, in connection with the transactions
contemplated by this Agreement, have not made, at any time, any oral
communication in connection with same, which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16 Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
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rules and regulations of the Principal Market on which the Company's Common
Stock is listed including rules and regulations relating to short sales of the
Company's Common Stock.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares; such amount of shares of Common Stock to be reserved shall be calculated
based upon the minimum Purchase Price therefor under the terms of this
Agreement.
Section 6.3 Listing of Common Stock. The Company shall maintain the
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) to list
the Put Shares. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such application
the Put Shares, and shall take such other action as is necessary or desirable in
the opinion of the Investor to cause the Common Stock to be listed on such other
Principal Market as promptly as possible. The Company shall take all action
necessary to continue the listing and trading of its Common Stock on the
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
Section 6.4 Exchange Act Registration. The Company shall cause its
Common Stock to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act. The Company will take all action to continue the
listing and trading of its Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Principal Market.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth in Article IX.
Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company will deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Blackout Period. The Company will immediately notify the
Investor upon the occurrence of any of the following events in respect of a
Registration Statement or related prospectus in respect of an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
12
the Registration Statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Optional Purchase Notice during
the continuation of any of the foregoing events.
Section 6.9 Expectations Regarding Optional Purchase Notices. Within
ten (10) days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the Company undertakes
to notify the Investor as to its reasonable expectations as to the dollar amount
it intends to raise during such calendar quarter, if any, through the issuance
of Optional Purchase Notices. Such notification shall constitute only the
Company's good faith estimate and shall in no way obligate the Company to raise
such amount, or any amount, or otherwise limit its ability to deliver Optional
Purchase Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.10 Disclosure of Material Information. In the event that any
or all of the information set forth on Schedule 8.2(a) hereto becomes material,
the Company shall make full and complete public disclosure in accordance with
all applicable law.
Section 6.11 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.12 Issuance of Put Shares. The sale and issuance of the Put
Shares shall be made in accordance with the provisions and requirements of
applicable state law.
ARTICLE VII
CONDITIONS TO DELIVERY OF OPTIONAL
PURCHASE NOTICES AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to the Investor incident to each Closing is subject to
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the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
an Optional Purchase Notice and the Obligation of the Investor to Purchase Put
Shares. The right of the Company to deliver an Optional Purchase Notice and the
obligation of the Investor hereunder to acquire and pay for the Put Shares
incident to a Closing is subject to the satisfaction, on (i) the date of
delivery of such Optional Purchase Notice, (ii) for each day during the
Valuation Period; and (iii) the applicable Closing Date (each a "Condition
Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. As set forth in the
Registration Rights Agreement, the Company shall have filed with the SEC a
Registration Statement with respect to the resale of the Registrable Securities
that shall have been declared effective by the SEC prior to the first Optional
Purchase Date, but in no event later than one hundred and twenty (120) days
after Subscription Date.
(b) Effective Registration Statement. As set forth in the Registration
Rights Agreement, the Registration Statement shall have previously become
effective and shall remain effective on each Condition Satisfaction Date and (i)
neither the Company nor the Investor shall have received notice that the SEC has
issued or intends to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently, or intends or
has threatened to do so, and (ii) no other suspension of the use or withdrawal
of the effectiveness of the Registration Statement or related prospectus shall
exist.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
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(f) Adverse Changes. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock (including without limitation the Put Shares) shall
not have been suspended by the SEC, the Principal Market or the NASD and the
Common Stock (including without limitation the Put Shares) shall have been
approved for listing or quotation on and shall not have been delisted from the
Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(h) Legal Opinions. The Company shall have caused to be delivered to
the Investor and Finders, within five (5) Trading Days of the effective date of
the Registration Statement, an opinion of the Company's independent counsel in
the form of Exhibit B hereto, addressed to the Investor and Finders; provided,
however, that in the event that such an opinion cannot be delivered by the
Company's independent counsel to the Investor, the Company shall promptly revise
the Registration Statement and shall not deliver an Optional Purchase Notice. If
an Optional Purchase Notice shall have been delivered in good faith without
knowledge by the Company that an opinion of independent counsel can not be
delivered as required, at the option of the Investor, either the applicable
Closing Date shall automatically be postponed for a period of up to five (5)
Trading Days until such an opinion is delivered to the Investor, or such Closing
shall otherwise be canceled. Liquidated damages determined pursuant to Section
2.4 shall be calculated and payable on the Closing Date. The Company's
independent counsel shall also deliver to the Investor and Finders upon
execution of this Agreement an opinion in form and substance reasonably
satisfactory to the Investor and Finders addressing, among other things,
corporate matters and the exemption from registration under the Securities Act
of the issuance of the Registrable Securities by the Company to the Investor and
Finders under this Agreement.
(i) Due Diligence. No dispute between the Company and the Investor
shall exist pursuant to Section 8.2(c) as to the adequacy of the disclosure
contained in the Registration Statement.
(j) Ten Percent Limitation. On each Closing Date, the number of Put
Shares then to be purchased by the Investor shall not exceed the number of such
shares that, when aggregated with all other shares of Common Stock then owned by
the Investor beneficially or deemed beneficially owned by the Investor, would
result in the Investor owning more than 9.99% of all of such Common Stock as
would be outstanding on such Closing Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Optional Purchase Notice associated with such Closing Date
is given, the amount of Common Stock outstanding on such Closing Date shall
govern for purposes of determining whether the Investor, when aggregating all
purchases of Common Stock made pursuant to this Agreement and, if any, Shares,
would own more than 9.99% of the Common Stock following such Closing Date.
(k) Cross Default. The Company shall not be in default of a material
term, covenant, warranty or undertaking of any other agreement to which the
Company and Investor are parties, nor shall there have occurred an event of
default under any such other agreement
(l) No Knowledge. The Company shall have no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
15
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen Trading Days following the Trading Day on which such Notice
is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed since the
immediately preceding Optional Purchase Date.
(n) Shareholder Vote. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market or any jurisdiction to which the
Company is subject.
(o) Escrow Agreement. The parties hereto shall have entered into a
mutually acceptable escrow agreement for the Purchase Price due hereunder.
(p) Other. On each Condition Satisfaction Date, the Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2., including, without limitation, a certificate in
substantially the form and substance of Exhibit C hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) Except as set forth on Schedule 8.2(a) hereof, the Company
represents and warrants that the Company and its officers, directors, employees
and agents have not disclosed any non-public information to the Investor or
advisors to or representatives of the Investor. The Company covenants and agrees
that it shall refrain from disclosing, and shall cause its officers, directors,
employees and agents to refrain from disclosing, (including, without limitation,
in connection with the giving of the Adjustment Period Notice pursuant to
Section 2.4), unless prior to disclosure of such information the Company
identifies such information as being non-public information and provides the
16
Investor, such advisors and representatives with the opportunity to accept or
refuse to accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
(b) The Company acknowledges and understands that the Investor
is entering into this Agreement and the Registration Rights Agreement at the
request of the Company and in good faith reliance on (i) the Company's
representation set forth in Section 4.16 that neither it nor its agents have
disclosed to the Investor any material non-public information; and (ii) the
Company's covenant set forth in Section 6.10 that if all or any portion of the
information set forth on Schedule 8.2(a) becomes material, the Company shall
timely make full and complete public disclosure of all or such portion of such
information that shall have become material in accordance with all applicable
law.
(c) Nothing herein shall require the Company to disclose
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of a material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading.
ARTICLE IX
LEGENDS
Section 9.1 Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
17
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF
THE COMPANY SET FORTH IN A PRIVATE EQUITY LINE OF CREDIT
AGREEMENT AMONG COMMERCIAL CONCEPTS, INC. AND CERTAIN
INVESTORS DATED JULY ____, 2000. A COPY OF THE PORTION
OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS
MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit D hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of
one or more certificates evidencing Common Stock that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement; and
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities. Any of the notices referred to above in this Section 9.1 may be sent
by facsimile to the Company's transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article IX shall
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
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ARTICLE X
CHOICE OF LAW/VENUE
Section 10.1 Choice of Law/Venue. This Agreement and the Registration
Rights Agreement shall be governed by and construed in accordance with the laws
of the State of New York without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the transactions
contemplated by this Agreement or the Registration Rights Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, and be binding upon, any
transferee of any of the Common Stock purchased or acquired by the Investor
hereunder with respect to the Common Stock held by such person unless such
Common Stock is free from restrictions on further transfer of such Common Stock,
and (b) the Investor's obligations and corresponding rights set forth in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any affiliate of the Investor) effective upon written
notice to the Company. The Company shall have the right to require any assignee
to execute a counterpart of this Agreement.
Section 11.2 Termination. This Agreement shall terminate thirty-six
(36) months after the commencement of the Commitment Period; provided, however,
that the provisions of Articles VI, VIII, IX, X, XI, and XII shall survive the
termination of this Agreement.
Section 11.3 Entire Agreement, Amendment. This Agreement and the
Registration Rights Agreement constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth in
this Agreement or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by both parties hereto.
ARTICLE XII
NOTICES; INDEMNIFICATION
Section 12.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
19
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to Commercial Concepts, Inc.:
Commercial Concepts, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which communication shall not constitute notice):
▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Ray, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor:
To the address and telecopier number set forth on Schedule A hereto
with a copy to (which communication shall not constitute notice):
Grushko & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 12.2 Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Investor, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any Damages, joint or several,
and any action in respect thereof to which the Investor, its partners,
Affiliates, officers, directors, employees, and duly authorized agents, and any
such Controlling Person becomes subject to, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment of or
20
failure to perform any covenant or agreement on the part of Company contained in
this Agreement in any event as such Damages are incurred.
(b) The Investor agrees to indemnify and hold harmless the
Company, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any Damages, joint or several,
and any action in respect thereof to which the Company, its partners,
Affiliates, officers, directors, employees, and duly authorized agents, and any
such Controlling Person becomes subject to, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Investor contained
in this Agreement in an aggregate amount not to exceed one-tenth of each such
Investor's Proportionate Share.
Section 12.3 Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 12.2 (an
"Indemnified Party") might seek indemnity under Section 12.2 is asserted against
or sought to be collected from such Indemnified Party by a person other than the
Company, the Investor or any affiliate of the Company or (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of Section 12.2 against any person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under Section 12.2 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
1. If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to this Section 12.3(a),
then the Indemnifying Party will have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
which affects the Indemnified Party, other than the payment of monetary damages
or that provides for the payment of monetary damages as to which the Indemnified
Party will not be indemnified in full pursuant to Section 12.2). The
Indemnifying Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this clause 1, file any motion, answer or other pleadings
21
or take any other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided further, that if
requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause 1, and except as provided in the
preceding sentence, the Indemnified Party will bear its own costs and expenses
with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under Section 12.2 with respect to such Third Party Claim.
2. If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to Section 12.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause 2, if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause 3 below, the Indemnifying
Party will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause 2 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause 2, and
the Indemnifying Party will bear its own costs and expenses with respect to such
participation.
3. If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the Indemnified
Party with respect to the Third Party Claim under Section 12.2 or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes its liability or the amount of its liability to the Indemnified
Party with respect to such Third Party Claim, the Loss in the amount specified
in the Claim Notice will be conclusively deemed a liability of the Indemnifying
Party under Section 12.2 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (c) of this Section 12.3.
(b) In the event any Indemnified Party should have a claim
under Section 12.2 against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under Section 12.2 specifying the nature of and basis for
such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity
22
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 12.2 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
paragraph (c) of this Section 12.3.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the reasonable fees, expenses and
disbursements of the Investor's counsel in an amount not less than $2,500 per
Closing commencing with the third Closing.
Section 13.2 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party
except as described on Schedule 13.2("Finder"). The Company agrees to pay to the
Finder a fee equal to ten percent (10%) ("Finder's Fee") of the Investment
Amount received by the Company as set forth on Schedule 13.2 hereto. Said sum
shall be paid out of the escrow account established for deposit of Investment
Amounts. The Finder shall also receive the Warrants in the aggregate amount set
forth on Schedule 13.2 hereto. A form of Warrant is annexed hereto as Exhibit E.
The number of shares of Common Stock issuable upon exercise of the Warrants
shall be equal to twelve percent (12%) of the number of Put Shares issued or
issuable at each Closing. The Warrants shall be issued at each Closing. The per
share purchase price of the Warrants shall be the lowest Bid Price for the ten
(10) trading days prior to but not including the applicable Closing Date. The
person(s) identified on Schedule 13.2 shall receive a fee of ten percent (10%)
of all cash proceeds received by the Company from exercise of the Warrants
("Warrant Exercise Fee"). The Warrant Exercise Fee must be paid to the intended
recipient not later than the day the Warrant Shares are required to be delivered
pursuant to the Warrant. The Finders are granted the registration rights set
forth in the Registration Rights Agreement with respect to the Warrant Shares.
The Company's obligations to the Finders is binding even if the Registration
Rights Agreement is not signed by the Finders. A default by the Company of the
Company's obligations to the Finders shall be deemed a default under the
Agreement and shall terminate the Investment Obligation. Provided such default
is not due to a failure by an escrow agent to comply with his obligations, the
Investment Obligation shall terminate (i) if the Finder does not receive the
Finder's Fee or Warrants on or before a Closing Date or (ii) if the Warrant
Exercise Fee is not timely paid. The Company on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any other persons claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 13.3 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
23
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 13.4 Entire Agreement. This Agreement, the Exhibits hereto and
the Registration Rights Agreement set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as if fully set forth herein.
Section 13.5 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.6 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.7 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the VWAP, trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of this
Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual
consent of the Investor and the Company shall be required to employ any other
reporting entity.
24
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
COMMERCIAL CONCEPTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/
-----------------------------------------
THE KESHET FUND L.P. - Investor
/s/
-----------------------------------------
KESHET L.P. - Investor
/s/
-----------------------------------------
NESHER LTD. - Investor
/s/
-----------------------------------------
TALBIYA B. INVESTMENTS LTD. - Investor
25
SCHEDULE A
------------------------------------ -----------------------------------------
INVESTOR PROPORTIONATE SHARE
------------------------------------ -----------------------------------------
THE KESHET FUND L.P. $1,260,000.00 (21%)
Ragnall House, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
------------------------------------ -----------------------------------------
KESHET L.P. $1,140,000.00 (19%)
Ragnall House, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
------------------------------------ -----------------------------------------
NESHER LTD. $1,800,000.00 (30%)
Ragnall House, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
------------------------------------ -----------------------------------------
TALBIYA B. INVESTMENTS LTD. $1,800,000.00 (30%)
Ragnall House, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
------------------------------------ -----------------------------------------
TOTAL $6,000,000.00 (100%)
------------------------------------ -----------------------------------------
26
EXHIBIT B
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
WITHIN 5 TRADING DAYS FOLLOWING EFFECTIVE DATE OF
REGISTRATION STATEMENT
TO:
We have acted as counsel to Commercial Concepts, Inc., a Utah
corporation (the "Company"), in connection with the Private Equity Line of
Credit Agreement between the Company and you, dated as of July 18, 2000 (the
"Line of Credit Agreement"), pursuant to which the Company will issue to you
from time to time shares of Common Stock, no par value (the "Put Shares") and
the Registration Rights Agreement between you and the Company, dated July 18,
2000 (the "Registration Rights Agreement," and together with the Line of Credit
Agreement, the "Agreements"). This opinion is rendered to you pursuant to
Section 7.2(h) of the Line of Credit Agreement. Capitalized terms used without
definition in this opinion have the meanings given to them in the Line of Credit
Agreement.
In connection with this opinion, we have assumed the authenticity of all
records, documents, and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents, and instruments submitted
to us as copies. We have also assumed that there are no facts or circumstances
relating to you that might prevent you from enforcing any of the rights to which
our opinion relates. We have based our opinion upon our review of the following
records, documents and instruments:
(a) The Articles of Incorporation of the Company, as amended to date
(the "Articles"), certified by the Utah Secretary of State as of July 2000 and
certified to us by an officer of the Company as being complete and in full force
and effect as of the date of this opinion;
(b) The Bylaws of the Company certified to us by an officer of the
Company as being complete and in full force and effect as of the date of this
opinion (the "Bylaws");
(c) Records certified to us by an officer of the Company as
constituting all records of proceedings and actions of the Board of Directors
and the shareholders of the Company relating to the transactions contemplated by
the Agreement;
(d) The Agreements;
(e) A certificate related to the good standing of the Company issued by
the Secretary of State of the State of Utah dated July 2000;
(f) A Certificate of the Chief Executive Officer of the Company as to
certain factual matters (the "Officer's Certificate");
(g) The SEC Documents.
With your consent, we have based our opinion expressed in paragraph 1
below as to the good standing of the Company solely upon the documents
enumerated in (e) and (f) above.
27
Where our opinion relates to our "knowledge," such knowledge is based
upon our examination of the records, documents, instruments, and certificates
enumerated or described above and the actual knowledge of attorneys in this firm
who are currently involved in substantive legal representation of the Company on
matters related to the Agreements. With your consent, we have not examined any
records of any court, administrative tribunal or other similar entity in
connection with our opinion expressed in paragraph 2 of Part III below. We have
assumed for purposes of our opinion to the effect that the Put Shares are fully
paid and nonassessable that the consideration for such Put Shares will be
received by the Company in accordance with the Line of Credit Agreement.
We express no opinion as to any anti-fraud provisions of applicable
federal or state securities laws, any tax, anti-trust, land use, export, safety,
environmental or hazardous materials laws, rules or regulations.
This opinion is limited to the federal laws of the United States of
America and the laws of the States of Utah and New York. We disclaim any opinion
as to the laws of any other jurisdiction and we further disclaim any opinion as
to any statute, rule, regulation, ordinance, order or other promulgation of any
regional or local governmental body.
Based upon the foregoing and our examination of such questions of law
as we have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed below, it is our opinion
that:
1. The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Utah and has all requisite power
and authority to carry on its business and to own, lease and operate its
properties and assets as described in the SEC Documents. To our knowledge the
Company does not have any subsidiaries other than as set forth in the SEC
Documents.
2. To our knowledge, except as described in the SEC Documents, there
are no claims, actions, suits, proceedings or investigations that are pending
against the Company or its properties, or to our knowledge, any officer or
director of the Company in his or her capacity as such, nor to our knowledge has
the Company received any written threat of any such claims, actions, suits,
proceedings or investigations.
3. To our knowledge, except as described in the Company's
representations and warranties contained in Article IV of the Line of Credit
Agreement, there are no outstanding options, warrants, calls or commitments of
any character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understanding,
or arrangements by which the Company is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock.
4. Subject to the accuracy of your representations in Article III of
the Line of Credit Agreement on the date hereof and on the date of issuance of
any Put Shares, Warrant Shares, and the statement in the Officer's Certificate
that the Company has not offered or sold, and will not offer or sell, any Put
Shares by means of advertising or public solicitation, the issuance of the Put
Shares and Warrant Shares in conformity with the terms of the Line of Credit
Agreement constitutes transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended. The Put Shares when issued
in compliance with the Line of Credit Agreement, and the Warrant Shares when
issued in compliance with the Line of Credit Agreement and Registration Rights
Agreement, will be duly authorized, validly issued, fully paid, and
non-assessable and free of preemptive rights set forth in the Articles, Bylaws
and any agreement filed as an exhibit to the SEC Documents, provided, however,
that
28
the Put Shares and Warrant Shares may be subject to restrictions on transfer
under state and federal securities laws, but only to the extent set forth in the
Line of Credit Agreement.
5. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and to issue the Put
Shares, Warrants and Warrant Shares.
Each of the Agreements has been duly authorized, executed and delivered
by the Company and the consummation by it of the transactions contemplated
thereby has been duly authorized by all necessary corporate action and no
further consent or authorization of the Company's board of directors or
shareholders is required. Each of the Agreements has been duly executed and
delivered on the part of the Company and is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject, as to enforcement, (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other laws of general applicability relating to or
affecting creditors' rights, (ii) to general principles of equity, whether such
enforcement is considered in a proceeding in equity or at law, and (iii) to
limitations imposed by applicable law or public policy on the enforceability of
the indemnification provisions contained in the Agreements.
6. The execution, delivery and performance of and compliance with the
respective terms of each of the Agreements, and issuance of the Put Shares and
Warrant Shares in accordance with the Line of Credit Agreement, will not violate
any provision of the Articles or Bylaws or any law applicable to the Company.
In connection with the registration of the Put Shares and Warrant
Shares, we advised the Company as to the requirements of the Securities Act and
the applicable Rules and Regulations and rendered other legal advice and
assistance in the course of preparation of the Registration Statement and
Prospectus, including review and discussion of the contents thereof. On the
basis of the information that was developed in the course of the performance of
such services considered in the light of our understanding of the Securities
Act, including the requirements of Form SB-2, we have no reason to believe that
(i) the Registration Statement (other than the financial statements and related
statements and schedules, as to which we express no belief) as of its Effective
Date contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (ii) the Prospectus (other than the
financial statements and related statements and schedules, as to which we
express no belief) as of the Effective Date of the Registration Statement
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The limitations inherent in the independent verification of
factual matters and the character of determinations involved in the registration
process are such, however, that except as set forth in this opinion letter we do
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the relief of debtors or the rights
and remedies of creditors generally, including without limitation the effect of
statutory or other law regarding fraudulent conveyances and preferential
transfers.
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants or
other provisions of any applicable agreement
29
and upon the availability of injunctive relief or other equitable remedies,
regardless of whether enforcement of any such agreement is considered in a
proceeding in equity or at law.
C. This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this opinion
letter should be read in conjunction therewith.
This opinion is rendered as of the date first written above, is solely
for your benefit in connection with the Agreement and may not be relief upon or
used by, circulated, quoted, or referred to nor may any copies hereof by
delivered to any other person without our prior written consent. We disclaim any
obligation to update this opinion letter or to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed herein.
Very truly yours,
Ray, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
30
EXHIBIT C
COMPLIANCE CERTIFICATE
COMMERCIAL CONCEPTS, INC.
The undersigned, _______________, hereby certifies, with respect to
shares of common stock of the Commercial Concepts, Inc. (the "Company") issuable
in connection with the Optional Purchase Notice, dated (the "Notice"), delivered
pursuant to Article II of the Private Equity Line of Credit Agreement, dated
July ____, 2000, by and among the Company and certain Investors (the
"Agreement"), as follows:
1. The undersigned is the duly elected Chairman and Chief Executive
Officer of the Company.
2. The representations and warranties of the Company set forth in
Article IV of the Agreement are true and correct in all material respects as
though made on and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VI and Article VII of the
Agreement.
The undersigned has executed this Certificate this ____ day of
________, 2000.
COMMERCIAL CONCEPTS, INC.
By:________________________________
Name:
Chief Executive Officer
31
EXHIBIT D
INSTRUCTIONS TO TRANSFER AGENT
COMMERCIAL CONCEPTS, INC.
Name, address and phone and fax number of Transfer Agent
Dear Sirs:
Reference is made to the Private Equity Line of Credit Agreement (the
"Agreement"), dated as of July ____, 2000 among certain Investors (the
"Investor") and Commercial Concepts, Inc. (the "Company"). Pursuant to the
Agreement, subject to the terms and conditions set forth in the Agreement the
Investor has agreed to purchase from the Company and the Company has agreed to
sell to the Investor from time to time during the term of the Agreement shares
of Common Stock of the Company, $.001 par value (the "Common Stock"). As a
condition to the effectiveness of the Agreement, the Company has agreed to issue
to you, as the transfer agent for the Common Stock (the "Transfer Agent"), these
instructions relating to the Common Stock to be issued to the Investor (or a
permitted assignee) pursuant to the Agreement. All terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file with the
Commission, and maintain the effectiveness of, a registration statement or
registration statements registering the resale of the Common Stock to be
acquired by the Investor under the Agreement. The Company will advise the
Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates evidencing Common Stock which bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered, the Transfer Agent shall deliver to
the Investor the certificates representing the Common Stock not bearing the
Legend, in such names and denominations as the Investor shall request, provided
that:
(a) in connection with such event, the Investor (or its permitted
assignee) shall confirm in writing to the Transfer Agent that (i) the Investor
confirms to the transfer agent that it has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona fide transaction to a designated transferee that is not an affiliate of
the Company; and (ii) the Investor confirms to the transfer agent that the
Investor has complied with the prospectus delivery requirement;
32
(b) the Investor (or its permitted assignee) shall represent that it is
permitted to dispose thereof with limitation as to amount of manner of sale
pursuant to Rule 144(k) under the Securities Act; or
(c) the Investor, its permitted assignee, or either of their brokers
confirms to the transfer agent that (i) the Investor has held the shares of
Common Stock for at least one year, (ii) counting the shares surrendered as
being sold upon the date the unlegended Certificates would be delivered to the
Investor (or the Trading Day immediately following if such date is not a Trading
Day), the Investor will not have sold more than the greater of (a) one percent
(1%) of the total number of outstanding shares of Common Stock or (b) the
average weekly trading volume of the Common Stock for the preceding four weeks
during the three months ending upon such delivery date (or the Trading Day
immediately following if such date is not a Trading Day), and (iii) the Investor
has complied with the manner of sale and notice requirements of Rule 144 under
the Securities Act.
Any advice, notice or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of __________.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor
acquires Common Stock under the Agreement, the Transfer Agent shall deliver
certificates representing Common Stock (with or without the Legend, as
appropriate) as promptly as practicable, but in no event later than three
business days, after such Closing.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees
incurred in connection with these Irrevocable Instructions. The Company agrees
to indemnify the Transfer Agent and its officers, employees and agents, against
any losses, claims, damages or liabilities, joint or several, to which it or
they become subject based upon the performance by the Transfer Agent of its
duties in accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that
the Investor is an express third party beneficiary of these Irrevocable
Instructions and shall be entitled to rely upon, and enforce, the provisions
hereof.
COMMERCIAL CONCEPTS, INC.
By:
------------------------
Name:
Chief Executive Officer
AGREED:
NAME OF TRANSFER AGENT
33
SCHEDULE 13.2
------------------------------ ---------------------------- -------------------
FINDERS CASH FINDERS FEE WARRANTS
------------------------------ ---------------------------- -------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ $120,000 (2%) -0-
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
------------------------------ ---------------------------- -------------------
FOCUS PARTNERS LLC $120,000 (2%) -0-
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
------------------------------ ---------------------------- -------------------
ALON ENTERPRISES LTD. $360,000 (6%) 100%
Ragnall House, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
------------------------------ ---------------------------- -------------------
TOTAL Up to $600,000 (10%) 100%
------------------------------ ---------------------------- -------------------
WARRANT EXERCISE FEE
-------------------------------------- ----------------------------------------
RECIPIENT PROPORTIONATE SHARE OF WARRANT
EXERCISE FEE
-------------------------------------- ----------------------------------------
TALBIYA B. INVESTMENTS LTD. 100%
Ragnall House, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
-------------------------------------- ----------------------------------------
34
EXHIBIT 2.6
Illustration: The following is added solely for the purpose of
illustrating the mechanism for the exercise of the Put and the intention of the
parties as to how this mechanism should be implemented: On Monday, October 1,
2000, the Company delivered an Optional Purchase Notice to the Investor. The
Maximum Put Amount as calculated over the prior thirty Trading Days had been
$800,000. The Optional Purchase Notice specified a put of $400,000. The
Valuation Period began on October 2, 2000, the Trading Day following the
Optional Purchase Date. The VWAP and number of shares to be issued for each of
the ten Trading Days in the Valuation Period were as follows:
Day 1 - $1.00 (84% of VWAP) - 40,000 shares to be issued to the
Investor ($400,000 divided by 10 Trading Days equals $40,000 for each Trading
Day divided by $1 per share equals 40,000 shares);
Day 2 - $1.25 (84% of VWAP) - 32,000 shares to be issued to the
Investor ($40,000 divided by $1.25 equals 32,000 shares);
Etc.
The Valuation period ran for ten Trading Days or from Tuesday, October
2 through Monday, October 15 (assuming that all weekdays will be Trading Days
during this period) and the Closing occurred 2 Trading Days after the end of the
Valuation Period, or on October 17, at which time the Investor delivered
$400,000 to the Escrow Agent and the Company delivered certificates for the
appropriate number of shares to the Escrow Agent. The Escrow Agent then
delivered the stock certificates for the shares to the Investor, and after
payment of its fees and the Finder's Fees, delivered the remaining funds to the
Company. Had the Investor so elected, Closings would have taken place on October
9, 2000 for the October 2 - October 6 Trading Days, and on October 17, 2000 for
the October 9 through October 13 Trading Days.
35
