EXECUTION COPY
EQUITY LINE OF CREDIT AGREEMENT dated as of the 14th day of June 2000,
(the "Agreement") between the investors listed on Exhibit A attached hereto,
(collectively referred to as the "Investor") and ▇▇▇▇▇▇▇▇.▇▇▇ INC., a
corporation organized and existing under the laws of the State of Nevada (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase up to Ten
Million ($10,000,000) Dollars of the Company's common stock, par value $0.00001
per share (the "Common Stock"), for a total purchase price of Ten Million
($10,000,000) Dollars; and
WHEREAS, such investments will be made in reliance upon the provisions
of Regulation S ("Regulation S") of the Securities Act of 1933, as amended, and
the regulations promulgated thereunder (the "Securities Act"), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder;
and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Advance" shall mean each occasion the Investor advances
funds to the Company.
Section 1.2 "Advance Notice Date" shall mean each occasion the Company
elects to exercise its right to tender an Advance Notice requiring the Investor
to advance funds to the Company, subject to the terms of this Agreement.
Section 1.3 "Advance Date" shall mean the date of an Advance by the
Investor to the Company.
Section 1.4 "Advance Notice" shall mean a written notice to the
Investor setting forth the Advance Amount that the Company requests from the
Investor.
Section 1.5 "Bid Price" shall mean, on any date, the closing bid price
(as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or
if the Common Stock is not traded on a Principal Market, the highest reported
bid price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc, for the five trading days immediately preceding such
date.
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Section 1.6 "Closing" shall mean one of the closings of a purchase and
sale of the Company's Common Stock pursuant to Section 2.1.
Section 1.7 "Closing Date" shall mean ten (10) Trading Days after each
Advance Notice Date.
Section 1.8 "Commitment Amount" shall mean the $10,000,000 up to which
the Investor has agreed to provide to the Company in order to purchase the
Company's Common Stock pursuant to the terms and conditions of this Agreement.
Section 1.9 "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 Investor shall have made an
Advance pursuant to this Agreement in the amount of at least $10,000,000 unless
such date is extended by the Investor, (y) the date this Agreement is terminated
pursuant to Section 2.6, or (z) the date occurring thirty (30) months from the
Subscription Date.
Section 1.10 "Common Stock" shall mean the Company's common stock, par
value $0.00001 per share.
Section 1.11 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.12 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.13 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.
Section 1.15 "Lock Up Period" shall mean the earliest of twelve (12)
months from the date of the initial Closing, the full utilization of the equity
line described herein, or the Company's election to terminate this Agreement.
Section 1.16 "Market Price" shall mean the average of the five (5)
lowest Closing Bid Prices of the Common Stock over the ten (10) trading day
period beginning on the Advance Notice Date.
Section 1.17 "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to
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enter into and perform any of its obligations under this Agreement or the
Registration Rights Agreement in any material respect.
Section 1.18 "Maximum Advance Amount" on any Advance Date shall be
equal to the difference between (i) the amount indicated opposite the range of
the 10 Day Average Daily Trading Volume on such Advance Date, as set forth in
the table below and (ii) the sum of the Advances made pursuant to this
Agreement, in the 10 calendar days immediately preceding the Advance Notice:
Stock Price
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$ 1.00 $ 1.50 $ 2.00 $ 2.50 $ 3.00
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20,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000
Avg 50,000 $ 75,000 $ 112,500 $ 150,000 $ 187,500 $ 225,000
Daily 100,000 $ 150,000 $ 225,000 $ 300,000 $ 375,000 $ 450,000
Volume 150,000 $ 225,000 $ 337,500 $ 450,000 $ 562,500 $ 675,000
Traded 200,000 $ 300,000 $ 450,000 $ 600,000 $ 750,000 $ 900,000
(1) The 10-Day Average Trading Volume shall be equal to the average of the Bid
Price multiplied by the volume for each of the 10 calendar days preceding the
Advance Date.
(2) Assuming that no Advances have been made pursuant to this Agreement during
the preceding 15 calendar days.
Section 1.19 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.20 "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 1.21 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.22 "Purchase Price" shall mean 85% of the Market Price.
Section 1.23 "Registrable Securities" shall mean the shares of Common
Stock (i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met or (iii) which have
not been otherwise transferred to holder who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend.
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Section 1.24 "Registration Rights Agreement" shall mean the
Registration Rights Agreement dated June 12, 2000, regarding the filing of the
Registration Statement for the resale of the Registrable Securities, entered
into between the Company and the Investor.
Section 1.25 "Registration Statement" shall mean a registration
statement on Form SB-2 or Form S-3 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC 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 there under 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 of the
Registrable Securities under the Securities Act.
Section 1.26 "Regulation S" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27 "SEC" shall mean the Securities and Exchange Commission.
Section 1.28 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.29 "SEC Documents" shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the Subscription Date, filed by the
Company for a period of at twelve (12) months immediately preceding the
Subscription Date or the Advance Date, as the case may be, until such time as
the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.30 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.31 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.32 "U.S. Person" shall have the meaning as set forth in Rule
902 (k) of the Securities Act.
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ARTICLE II
Advances
Section 2.1 Investments.
(a) Advances. Upon the terms and conditions set forth herein
(including without limitation, the provisions of Article VII hereof), on any
Advance Date the Company may request an Advance by the Investor by the delivery
of an Advance Notice. The number of Shares of Common Stock that the Investor
shall receive for each Advance shall be determined by dividing the amount of the
Advance by the Purchase Price on the Advance Date. No fractional shares shall be
issued. Fractional shares shall be rounded to the next higher whole number of
shares. The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed $10,000,000.
Section 2.2 Mechanics.
(a) Advance Notice. At any time during the Commitment Period,
the Company may deliver an Advance Notice to the Investor, subject to the
conditions set forth in Section 2.7; provided, however, the amount for each
Advance as designated by the Company in the applicable Advance Notice shall not
be (i) less than $30,000, or (ii) more than the Maximum Advance Amount. The
aggregate amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount, unless otherwise agreed by the Investor in the Investor"s
sole and absolute discretion. There will be a minimum of fifteen (15) days
between Advance Notices.
(b) Date of Delivery of Advance Notice. An Advance Notice
shall be deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 12:00 noon Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day. No Advance Notice may be deemed
delivered, on a day that is not a Trading Day.
Section 2.3 Closings. On each Advance Date, which shall be ten (10)
Trading Days after an Advance Notice Date, (i) the Company shall deliver to the
Investor shares of the Company's Common Stock, representing the amount of the
Advance by the Investor pursuant to Section 2.1 herein, registered in the name
of the Investor and (ii) the Investor shall deliver to the Company the amount of
the Advance specified in the Advance Notice by wire transfer of immediately
available funds. In addition, on or prior to the Advance Date, each of the
Company and the Investor shall deliver to the other 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
Company's Common Stock to the Investor shall occur in accordance with the
conditions set forth above; provided, however, that to the extent the Company
has not paid the fees, expenses, and disbursements of the Investor's counsel and
the Placement Agents in accordance with Section 13.4, the amount of such fees,
expenses, and disbursements may be deducted by the Investor (and shall
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be paid to the relevant party) from the Amount of the Advance with no reduction
in the amount of shares of the Company's Common Stock to be delivered on such
Advance Date.
Section 2.4 Advance Warrants.On each Advance Date, the Company shall
issue a warrant to the Investor (each an "Advance Warrant" and collectively the
"Advance Warrants"), substantially in the form of Exhibit B, with appropriate
insertions, to purchase the number of shares of Common Stock (the "Warrant
Shares") equal to 20% of the number of Advance Shares that are subject to the
Advance (rounded to the nearest whole number) at an exercise price equal to 110%
of the average Bid Price for the five (5) Trading Days preceding the Advance
Date. Each Advance Warrant shall be exercisable at any time in whole or from
time to time in part over the five-year period beginning on the Subscription
Date. The Warrant Shares covered by the Advance Warrants shall be registered for
resale pursuant to the Registration Rights Agreement.
Section 2.5 Suspension of Registration Statement. If Subsequent to any
Closing, the Registration Statement is suspended for any period exceeding ten
(10) days, the Company shall pay a penalty of three percent (3%) of the cost
price of all Common Stock held by the Investor, purchased under the Equity Line
of Credit for each ten (10) day period of portion thereof; provided, that the
Company shall not be required to pay a penalty to any Investor in connection
with any period commencing upon the filing of a post-effective amendment to such
Registration Statement and ending upon the date on which such post-effective
amendment is declared effective by the SEC.
Section 2.6 Termination of Investment. The obligation of the Investor
to make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of thirty
(30) Trading Days during the Commitment Period, or (ii) the Company shall at any
time fail materially to comply with the requirements of Section 6.3, 6.4 or 6.7;
provided, that this termination provision shall not apply to any period
commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the SEC.
Section 2.7 Agreement to Advance Funds.
(a) The Investor agrees to advance the amount specified in the
Advance Notice to the Company after the completion of each of the following
conditions and the other conditions set forth in this Agreement:
(i) the execution and delivery by the Company, and the
Investor, of this Agreement, and all Exhibits and Attachments hereto;
(ii) the Investor shall have received the shares applicable to
the Advance;
(iii) the Investor shall have received the Advance Warrant
applicable to the Advance;
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(iv) the Company"s Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of
the Registration Rights Agreement shall have been declared effective by
the SEC;
(v) the Company shall have obtained all permits and
qualifications required by any applicable state for the offer and sale
of the Registrable Securities, or shall have the availability of
exemptions therefrom. The sale and issuance of the Registrable
Securities shall be legally permitted by all laws and regulations to
which the Company is subject;
(vi) the Company shall have filed with the Commission in a
timely manner all reports, notices and other documents required of a
"reporting company" under the Exchange Act and applicable Commission
regulations; and
(vii) the fees as set forth in Section 13.4 below shall have
been paid or can be withheld as provided in Section 2.3.
Section 2.8 Lock Up Period. During the Lock Up Period, the Company
shall not, without the prior consent of the Investor, issue or sell (i) any
Common Stock without consideration or for a consideration per share less than
its fair market value determined immediately prior to its issuance, or (ii)
issue or sell any warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than such Common Stock's
fair market value determined immediately prior to its issuance..
Section 2.9 Failure to Draw Minimum. If the Company fails to draw a
minimum of $5,000,000 (the "Undrawn Minimum Amount") from the Equity Line of
Credit, whether due to failure to draw or a breach of this Agreement by the
Company or the Company having elected to terminate this Agreement, the Company
shall (i) issue to the Investor, upon termination, warrant coverage for the
remaining full Undrawn Minimum Amount (based on the lowest Closing Bid Price
during three months prior to termination), with an exercise price equal to 100%
of the lowest Closing Bid Price during the three months prior to termination,
and (ii) pay to the Investor an amount equal to the product of the remaining
Undrawn Minimum Amount times (Market Price - Purchase Price).
ARTICLE III
Representations and Warranties of Investor
Investor represents and warrants to, and agrees with, the Company that:
Section 3.1 Organization and Authorization. Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated
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hereby have been duly authorized and requires no other proceedings on the part
of the Investor. The undersigned has all right, power and authority to execute
and deliver this Agreement and all other instruments ( including, without
limitations, the Registration Rights Agreement), on behalf of the Investor. This
Agreement has been duly executed and delivered by the Investor and, assuming the
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section 3.2 Evaluation of Risks. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk. The Investor acknowledges that it has been furnished with,
and has carefully read the applicable form of Advance Warrant and the
Registration Rights Agreement.
Section 3.3. No Legal Advice From the Company. The Investor(s)
acknowledge that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. The Investor is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or
the securities laws of any jurisdiction
Section 3.4 Investment Purpose. The Investor is acquiring the
securities to be issued to it pursuant to this Agreement for its own account,
for investment purposes, and not with a view towards their distribution;
provided, however, the Investor is not agreeing to hold any of those securities
for any definite period of time. The Investor agrees not to transfer any of
those securities in the United States or to a U.S. Person ( as defined by
Regulation S, except that pursuant to an effective registration statement under
the Securities Act, or an exemption from such registration, and in compliance
with any applicable U.S. state securities of blue sky laws.
Section 3.5 Accredited Investor. Each Investor is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act. Each Investor qualifies to make the investment described herein
under the provision of Regulation S.
Section 3.6 Information. Such Investor and its advisors (and his or,
its counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision. Such Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due diligence
investigations conducted by such Investor or its advisors, if any, or its
representatives shall modify, amend or affect such Investors right to rely on
the Company's representations and warranties contained in Section 4 below. Such
Investor understands that its investment involves a high degree of risk.
Investor is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables Investor
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Such Investor has sought such accounting, legal
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and tax advice, as it has considered necessary to make an informed investment
decision with respect to this transaction.
Section 3.7 Receipt of Documents. Such Investor and his or its counsel
has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the Certificate of
Designations, and the Escrow Agreement; (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company's Registration
Statement on Form SB-2 (as most recently amended on April 18, 2000); (iv) the
Company's Forms 10-QSB for the period ended March 31, 2000; and (v) answers to
all questions the Investor submitted to the Company regarding an investment in
the Company; and the Investor has relied on the information contained therein
and has not been furnished any other documents, literature, memorandum or
prospectus.
Section 3.8 Registration Rights. The parties have entered into the
Registration Rights Agreement dated June 12, 2000.
Section 3.9 No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Advance Warrants or the Warrant Shares.
Section 3.10 Not an Affiliate. The Investor is not an officer, director
or a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company
("Affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company). The Investor agrees that it will not, and that it will cause its
Affiliates not to, engage in any short sales of or hedging transactions with
respect to the Common Stock in violation of applicable U.S. securities laws and
regulations.
Section 3.11 Authorization, Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Investor and is
a valid and binding agreement of such Investor enforceable in accordance with
its terms, except as such enforceability may be limited by general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
Section 3.12 Due Formation of Corporate and Other Investors. If the
Investor is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of this transaction and is not prohibited
from doing so.
Section 3.13 Further Representations by Foreign Investors. If Investor
is not a U.S. Person (as defined), such Investor hereby represents that such
Investor is satisfied as to full observance of the laws of such Investor
jurisdiction in connection with any invitation to subscribe for the securities
or any use of this Agreement, including: (i) the legal requirements of such
Investor's jurisdiction for
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the purchase of the securities, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any,
which may be relevant to the purchase, holding, redemption, sale, or transfer of
the securities. Such Investor's subscription and payment for, and such
Investor's continued beneficial ownership of, the securities will not violate
any applicable securities or other laws of such Investor's jurisdiction. The
Investor is acquiring the securities in compliance with the applicable U.S.
securities laws and regulations.
ARTICLE IV
Representations and Warranties of the Company
Except as stated below or on the disclosure schedules attached hereto,
the Company hereby represents and warrants to, and covenants with, the Investors
that the following are true and correct as of the Subscription Date and as of
the Advance Date:
Section 4.1 Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement and any
related agreements, and to issue the Advance Warrants (as defined herein), or
Warrant Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement and
any related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Advance Warrants and the reservation for issuance and the
issuance of the Warrant Shares issuable upon exercise thereof, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement and the Registration Rights Agreement and any
related agreements have been duly executed and delivered by the Company, (iv)
this Agreement, the Registration Rights Agreement and any related agreements
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
Section 4.3 Capitalization. As of the Subscription Date, the authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock, par
value $0.00001 per share, of
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which as of June 14, 2000, 14,782,005 shares were issued and outstanding. All of
such outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed on Schedule 4.3, no shares of Common Stock
are subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. except as disclosed on
Schedule 4.3, as of the Subscription Date, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities (other than a $2.5 million 8% convertible debenture, due June 12,
2003) and (iii) there are no agreements or arrangements under which the Company
or any of its subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except pursuant to the Registration Rights
Agreement). There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Advance
Warrants, or the Warrant Shares as described in this Agreement. The Company has
furnished to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto other than stock options issued to employees and consultants.
Section 4.4 No Conflict The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of The
Nasdaq Stock Market Inc.'s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in Disclosure Schedule, neither the Company nor
its subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted, and shall not be
conducted in violation of any material law, ordinance, regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the Securities Act and any applicable state securities laws,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any
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court or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.
Section 4.5 SEC Documents: Financial Statements. Since January 5, 2000,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Exchange Act (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investors or their
representatives, or made available through the SEC's website at
▇▇▇▇://▇▇▇.▇▇▇.▇▇▇., true and complete copies of the SEC Documents. As of their
respective dates, the financial statements of the Company disclosed in the SEC
Documents (the "Financial Statements") complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
Section 4.7 No Default. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of the
exhibits or attachments hereto will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage, deed of trust
or other material agreement applicable to the Company or instrument to which the
Company is a party or by which it is bound, other than anti-dilution provisions
of certain agreements and instruments with respect to warrants and other Common
Stock equivalents, or any statute or the memorandum or Articles of the Company
or any decree, judgment, order rules of regulation of any court or governmental
agency
12
or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is likely to cause a material adverse effect on
the Company"s business and financial condition.
Section 4.8 Absence of Events of Default. Except for matters described
in the SEC Documents and/or this Agreement, no Event of Default, as defined in
the respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (as so defined), has occurred and is continuing, which would have a
material adverse effect on the Company's business, properties, prospects,
financial condition or results of operations.
Section 4.9 Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service ▇▇▇▇ registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
Section 4.10 Employee Relations Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
Section 4.11 Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval
Section 4.12 Title. The Company does not own any real property. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
13
Section 4.13 Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
Section 4.14 Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
Section 4.15 Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.16 No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected in the future to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Neither the Company nor any of its
subsidiaries is in breach of any contract or agreement which breach, in the
judgment of the Company's officers, has or is expected to have a material
adverse effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
Section 4.17 Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or
affecting the Company, the Common Stock or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,
14
have a material adverse effect on the business, operations, properties,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.
Section 4.18 Subsidiaries. Except as disclosed in the SEC Documents,
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, association or other business
entity.
Section 4.19 Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
Section 4.20 Other Outstanding Securities/Financing Restrictions. As of
the Subscription Date only, other than warrants and options to acquire shares of
Common Stock as disclosed in the SEC Documents, there are no other warrants and
options registered with the SEC, which are available for sale as unrestricted
("free trading") stock except as covered by the Company's currently effective
Registration Statement on Form S-8.
Section 4.21 Tax Status. The Company and each of its subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and (unless
and only to the extent that the Company and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
Section 4.22 Certain Transactions. Except as set forth in the SEC
Documents and except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties and other than the grant of
stock options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
15
Section 4.23 Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.
Section 4.24 Use of Proceeds. The Company represents that the net
proceeds from this offering will be used for working capital purposes and/or
general corporate purposes. However, in no event shall the net proceeds from
this offering be used by the Company for the payment (or loaned to any such
person for the payment) of any judgment, or other liability, incurred by any
executive officer, officer, director, or employee of the Company.
Section 4.25 Further Representation and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use commercially reasonable efforts to maintain the listing of its Common
Stock on NASDAQ Bulletin Board and/or the NASDAQ Small Cap Stock Market and/or
the American Stock Exchange.
Section 4.26 Opinion of Counsel. Investor shall receive an opinion
letter from counsel to the Company (updated where applicable) prior to each
Closing substantially to the effect that:
(a) the Company is incorporated and validly existing in the
jurisdiction of its incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where, to such counsel's knowledge, the Company and/or its
subsidiaries owns or leases properties, maintains employees or conducts
business, except for jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Company, and has all requisite corporate
power and authority to own its properties and conduct its business;
(b) to such counsel's knowledge, except for matters disclosed
in the SEC Documents, there is no action, proceeding or investigation pending,
or threatened against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business or financial
condition of the Company;
(c) to such counsel's knowledge, except for matters disclosed
in the SEC Documents, the Company is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality;
(d) the shares of Common Stock, based on the Bid Price on the
day of such closing, have been duly authorized and upon issuance will be validly
issued under the laws of the Company's state of incorporation;
(e) this Agreement, the issuance of the shares of Common Stock
of the Company and the issuance of the Advance Warrants and the Warrant Shares
on exercise thereof, have been
16
duly approved by all required corporate action and that all such shares of
Common Stock, upon execution and delivery thereof shall be validly issued and
outstanding, fully paid and nonassessable;
(f) the issuance of the shares of the Company's Common Stock,
do not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed;
(g) the authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, $0.00001 par value per share; and
(h) the Common Stock is registered pursuant to Section 12(g)
of the Exchange Act.
Section 4.27 Opinion of Counsel. The Company will obtain for the
Investor, at the Company's expense, any and all opinions of counsel which may be
reasonably required in order to exercise or sell the securities issuable
hereunder, including, but not limited to, obtaining for Investors, at the
Company's expense an opinion of counsel, subject only to receipt of a notice of
exercise, duly executed by the Investor which shall be satisfactory to the
Transfer Agent, directing the Transfer Agent to remove the self-liquidating
legend.
Section 4.28 Dilution. The Company is aware and acknowledges that
issuance of shares of the Company's Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.
ARTICLE V
Representations and Warranties of the Company and Investor
The Investor and the Company represent to the other the following with
respect to itself:
Section 5.1 Equity Line of Credit Agreement. This Agreement has been
duly authorized, validly executed and delivered on behalf of the Company and the
Investor and is a valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
Section 5.2 Non-contravention. Subject to the exceptions referred to
elsewhere in this Agreement (including the disclosure schedule attached hereto)
the execution and delivery of this Agreement along with all exhibits and
attachments hereto, and the consummation of the issuance of the securities and
the transactions contemplated by this Agreement do not and will not conflict
with or result in a breach by the Company or the Investor of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
by-laws of the Company or the Investor, or any indenture, mortgage, deed of
trust of other material agreement or instrument to which the Company or the
Investor is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court,
17
Federal or state regulatory body, administrative agency or other governmental
body having jurisdiction over the Company or Investor or any of its properties
or assets.
Section 5.3 Approvals. Neither the Company nor Investor is aware of any
authorization, approval or consent of any governmental body which is legally
required for the issuance and sale of the securities.
Section 5.4 Indemnification. (a) In consideration of the Investor's
execution and delivery of this Agreement, and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Investor(s), and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Investor Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Investor Indemnitee is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Investor Indemnitees or any of them
as a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement
or the Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Indemnities. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of it's officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Investor(s) in this Agreement or any instrument or document contemplated hereby
or thereby executed by the Investor, (b) any breach of any covenant, agreement
or obligation of the Investor(s) contained in this Agreement, the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Investor, or (c) any cause of action, suit or
claim brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by any of
the Company Indemnities. To the extent that the
18
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.
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 material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. The Company shall take all
action reasonably necessary to at all times have authorized, and reserved for
the purpose of issuance, such number of shares of Common Stock as shall be
necessary to effect the issuance of the Warrant Shares. If at any time the
Company does not have available such shares of Common Stock as shall from time
to time be sufficient to effect the exercise of the Warrant Shares the Company
shall call and hold a special meeting within thirty (30) days of such
occurrence, for the sole purpose of increasing the number of shares authorized.
The Company's management shall recommend to the shareholders to vote in favor of
increasing the number of shares of common stock authorized. Management shall
also vote all of its shares in favor of increasing the number of common shares
authorized.
Section 6.3 Listing of Common Stock The Company shall promptly secure
the listing or quotation of the Warrant Shares upon each national securities
exchange, automated quotation system or over-the-counter bulletin board or other
market, if any, upon which shares of Common Stock are then listed or quoted
(subject to official notice of issuance) and shall use it best efforts to
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Warrant Shares from time to time issuable under the terms of this
Agreement. The Company shall maintain the Common Stock's authorization for
quotation in the over-the counter market
Section 6.4 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(g) of the Exchange
Act, will use its best efforts to file in a timely manner all reports and other
documents required of it as a reporting company under the Exchange Act and to,
and will not take any action or file any document (whether or not permitted by
Exchange Act or the rules there under to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said
Exchange Act.
Section 6.5 Transfer Agent Instructions. Upon Each Closing and the
effectiveness of the Registration Statement the Company will deliver
instructions to its transfer agent to issue shares free of legends upon resale.
Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
19
Section 6.7 Notice of Certain Events Affecting Registration: Suspension
of Right to Make an Advance. The Company will immediately notify the Investor
upon its becoming aware of the occurrence of any of the following events in
respect of a registration statement or related prospectus relating to an
offering of Registrable Securities; (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other Federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) subject to the Registration Rights Agreement the happening of any
event that makes any statement made in the Registration Statement or related
prospectus of 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 Advance Notice during the
continuation of any of the foregoing events.
Section 6.8 Expectations Regarding Advance Notices. Within ten (10)
days after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Advance
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 Advance Notices. The failure
by the Company to comply with this provision can be cured by the Company"s
notifying the Investor, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.
Section 6.9 Consolidation: Merger. The Company shall not, at any time
after the Subscription Date, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all 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.
20
Section 6.10 Issuance of the Company's Common Stock. The sale of the
shares of Commons Stock shall be made in accordance with the provision and
requirements of Regulation S and any applicable state securities law.
ARTICLE VII
Conditions for Advance and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investor incident to each Closing is subject to the satisfaction, or
waiver by the Company, 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 Advance Notice and the Obligation of the Investor to Purchase Shares of
Common Stock. The right of the Company to deliver an Advance Notice and the
obligation of the Investor hereunder to acquire and pay for shares of the
Company's Common Stock incident to a Closing is subject to the satisfaction or
waiver by the Investor, on (i) the date of delivery of such Advance Notice and
(ii) the applicable Advance Date (each a "Condition Satisfaction Date"), of each
of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company
shall have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement. 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 (unless the SEC"s concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist. The Registration Statement must have been declared
effective by the SEC prior to the first Advance Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer
21
and sale of the shares of Common Stock, or shall have the availability of
exemptions therefrom. The sale and issuance of the shares of Common Stock shall
be legally permitted by all laws and regulations to which the Company is
subject.
(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.
(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 is not suspended by the SEC or the Principal
Market (if the Common Stock is traded on a 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 (if the
Common Stock is traded on a Principal market). The Company shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).
(h) Maximum Advance Amount. The amount of the advance
requested by the Company does not exceed the Maximum Advance Amount.
(i) No Knowledge. The Company has no knowledge of any event
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than not to
occur within the fifteen (15) Trading Days following the Trading Day on which
such Notice is deemed delivered).
22
(j) 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 executed
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. Prior to the filing of the
Registration Statement the Company shall make available for inspection and
review by the Investor, advisors to and representatives of the Investor, 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) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor"s advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) 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
23
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 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
Choice of Law/Jurisdiction
Section 10.1 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in New York City, New York, and expressly consent to
the jurisdiction and venue of the Supreme Court of New York and the United
States District Court for the Southern District of New York for the adjudication
of any civil action asserted pursuant to this paragraph.
ARTICLE XI
Assignment; 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 insure to the benefit of, and be enforceable by, any permitted transferee
of the Investor with respect to the Common Stock held by such person, and (b)
upon the prior written consent of the Company, which consent shall not
unreasonably be withheld, the Investor's interest in this Agreement may be
assigned at any time, in whole or in part, to any other person or entity
(including any affiliate of the Investor) who agrees to make the representations
and warranties contained in Article III and who agrees to be bound by the
covenants of Article V.
Section 11.2 Termination. The obligations of the Investor to make
Advances under Article II hereof shall terminate 30 months after the
Subscription Date.
24
ARTICLE XII
Notices
Section 12.1 Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to:
▇▇▇▇▇▇▇▇.▇▇▇ INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ - ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇,
President and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Transfer Agent, to:
American Stock Transfer and Trust, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor(s), to its address and facsimile number on
Schedule I, with copies to the Investor's counsel as set forth on
Schedule A. Each party shall provide five (5) days' prior written
notice to the other party of any change in address or facsimile number.
25
ARTICLE XIII
Miscellaneous
Section 13.1 Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof
Section 13.2 Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Investor(s), the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 13.3 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 13.4 Fees and Expenses.
As set forth in the Placement Agency Agreements entered into by the
Company in connection herewith, the Company has agreed to pay the following
fees:
(a) Legal Fees. Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company will pay up to the sum of Thirty
Five Thousand ($35,000) Dollars, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. for legal,
administrative, and escrow fees, and issue to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP warrants to
purchase 25,000 shares of the Company's Common Stock as outlined in the
Placement Agent Agreements. Subsequently on each Advance Date, the Company will
pay ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, the sum of One Thousand Five Hundred ($1,500) Dollars
for escrow fees.
(b) Placement Agent Fees. On each Advance Date the Company shall pay
the May ▇▇▇▇▇ Group an amount equal to 3% of the advance. The Company hereby
agrees that if such payment, as is described above, is not made by the Company
on the Advance Date, such payment will be made at the direction of the Investor
as outlined and mandated by Section 2.3 of this Agreement.
26
Upon the execution of the Agreement the Company will issue warrants to
purchase 250,000 shares of Common Stock to the ▇▇▇▇▇▇▇▇ Kernaghan and Company .
On each Advance Date the Company shall pay the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and Company an
amount equal to 7 % of the advance. The Company hereby agrees that if such
payment, as is described above, is not made by the Company on the Advance Date,
such payment will be made at the direction of the Investor as outlined and
mandated by Section 2.3 of this Agreement.
Section 13.5 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party,
other than the Placement Agent. The Company on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 13.6 Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the
Subscription Date, and except as required by court order) and shall promptly
return to the other parties all schedules, documents, instruments, work papers
or other written information without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
27
IN WITNESS WHEREOF, the parties hereto have caused this Line of Credit
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
COMPANY:
▇▇▇▇▇▇▇▇.▇▇▇ INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Operating Officer
INVESTOR:
CALP II Limited Partnership
BY: /s/ (illegible)
------------------------------
Name:
Title:
28
SCHEDULE 4.3
A. OPTIONS^
-------
Option Holder Options
------------- -------
1. ▇▇▇▇▇ ▇▇▇▇▇ 60,000
2. ▇▇▇ ▇▇▇▇▇▇ 10,000
3. ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Associates, Inc. 65,000
4. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000
5. L. ▇▇▇▇▇▇▇ ▇▇▇ 10,000*
6. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 20,000**
7. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 20,000**
8. ▇▇▇▇ ▇▇▇▇▇▇ 40,000**
9. ▇▇▇▇▇ ▇▇▇▇▇▇ 30,000**
10. ▇▇▇▇▇▇▇ Response Television, Inc. 10,000***
11. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 50,000
12. ▇▇▇ ▇▇▇▇▇▇▇ 200,000
13. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 20,000
14. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000
15. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 7,500****
16. ▇▇▇▇▇ ▇▇▇▇▇ 10,000
17. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 40,000
18. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 10,000
19. Casper Kennerdale 10,000
20. ▇▇▇▇ ▇▇▇▇▇ 5,000
21. ▇▇▇▇ ▇▇▇▇▇▇▇▇ 12,500
22. ▇▇▇▇▇▇ ▇▇▇▇▇ 12,500
23. ▇▇▇▇▇ ▇▇▇▇▇▇ 100,000
24. ▇▇▇▇▇ ▇▇▇▇▇▇ 25,000
25. ▇▇▇▇ ▇▇▇▇▇▇ 25,000
26. ▇▇▇ ▇▇▇▇▇ 3,000
27. ▇▇▇▇▇ ▇▇▇▇▇▇ 200,000
28. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 50,000
29. ▇▇▇▇▇▇ ▇▇▇▇ 80,500
30. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 73,750
31. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 45,750
32. Strategic Growth International, Inc. 500,000*****
33. ▇▇▇▇▇ ▇▇▇▇▇▇▇ 60,000
^ Unless otherwise provided, all options are exercisable at $2.00 per share.
* Plus 15,000 options in year 2 of his commentator agreement.
** Number of shares per year.
*** Plus 1,000 shares per 1,000 infomercial subscription.
**** If the Company opts to extend the term of employment, ▇▇▇▇▇▇▇ will
receive a second option to purchase 10,000 shares.
***** These options are exercisable at $3.50 per share.
B. WARRANTS
--------
Warrant Holder Warrants
-------------- --------
1. S.A.C. Capital Associates, LLC 225,000
2. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 3,800
3. Circle T International, Ltd. 25,800
4. Circle T Partners L.P. 50,000
5. ▇▇▇▇▇▇ Street Partners 41,670
6. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 2,050
7. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1,025
8. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇ 1,025
9. ▇▇▇▇▇▇ ▇. ▇▇▇▇ 4,170
10. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 66,670
11. ASC Capital Partners 41,670
12. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇. 380
13. ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 380
14. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ 8,340
15. ▇▇▇▇ ▇▇▇▇▇▇ 8,340
16. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 3,800
17. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 4,170
18. ▇▇▇▇▇▇ Capital Management L.P. 3,500
19. Apex Limited Partners L.P. 15,200
20. AIG Trading Group Inc. Deferred Compensation Plan Trust 33,340
21. ▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,000
22. Delaware Charter Guarantee & Trust TTE FBO
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ SEP ▇▇▇ 2,200
23. ▇▇▇▇▇ ▇▇▇▇▇ 7,500
24. ▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,100
25. L. ▇▇▇▇▇▇▇ ▇▇▇▇ 1,000
26. ▇.▇. ▇▇▇▇▇▇▇ & Co., Inc. 750,000
Warrants issued in connection with the sale of $2,500,000 8% Convertible
Debentures Due June 2003, including (i) warrants to purchase shares of common
stock of the Company equal to 30% of the number of initial conversion shares,
(ii) 250,000 warrants issued to ▇▇▇▇▇▇▇▇ Kernaghan and Company, Ltd. as
placement agent and (iii) 25,000 warrants issued to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP as
attorneys to The May ▇▇▇▇▇ Group.
C. REGISTRATION RIGHTS
-------------------
1. Registration rights with respect to 2,468,520 shares of common
stock already registered pursuant to the ▇▇▇▇▇▇▇▇.▇▇▇ Inc.
("JagNotes") Registration Statement on Form SB-2, effective
January 5, 2000, and with respect to which there may be an
obligation to continue registration.
2. Registration rights with respect to 500,000 shares of common
stock in favor of Strategic Growth International, Inc. ("SGI")
pursuant to an Agreement, dated March 14, 2000, between
JagNotes and SGI.
3. Registration rights with respect to 750,000 warrants in favor
of ▇.▇. ▇▇▇▇▇▇▇ & Co., Inc. ("MSF") pursuant to a Consulting
Agreement, dated March 15, 2000, between JagNotes and MSF.
4. Registration rights of certain employees and commentators of
JagNotes named in Part A of this Schedule 3(c) to have stock
options and/or underlying shares of JagNotes registered on a
Registration Statement on Form S-8, if available.
D. DEBT SECURITIES
---------------
1. $2.5 million 8% Convertible Debenture Due 2003.
EXHIBIT A
SCHEDULE OF INVESTORS
CALP II Limited Partnership
c/o Thomson Kernaghan & Co. Limited,
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇; Fax: (▇▇▇) ▇▇▇-▇▇▇▇.
29
EXHIBIT B
FORM OF ADVANCE WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW
TOWARD RESALE OR DISTRIBUTION. THIS WARRANT MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT.
▇▇▇▇▇▇▇▇.▇▇▇ INC.
-----------------
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares Issuable:
Date of Issuance:
▇▇▇▇▇▇▇▇.▇▇▇ Inc., a Nevada corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, _______________, the registered holder hereof
or its permitted assigns, is entitled, subject to the terms set forth below, to
purchase from the Company upon surrender of this Warrant, at any time or times
on or after the date hereof, but not after 5:00 P.M. Eastern Standard Time on
the Expiration Date (as defined herein) _______________ (_________) fully paid
nonassessable shares of Common Stock (as defined herein) of the Company (the
"Warrant Shares") at the Warrant Exercise Price per share provided in Section
l(b) below;
Section 1.
(a) Letter Agreement. This Warrant is one of the warrants (the
"Warrants") issued pursuant to the terms of the Equity Credit Line Agreement
between the Company and ____________- dated June 14, 2000.
(b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:
(i) "Common Stock" means (i) the Company's common stock, par value
$0.0001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(ii) "Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock
1
deemed to be outstanding pursuant to Sections 8(b)(i) and 8(b)(ii) hereof
regardless of whether the Options (as defined below) are actually exercisable or
convertible at such time, but excluding any shares of Common Stock owned or held
by or for the account of the Company or issuable upon exercise of the Warrants.
(iii) "Convertible Securities" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for Common
Stock.
(iv) "Expiration Date" means the date five (5) years from the date of
the issuance of the Warrant or, if such date falls on a Saturday, Sunday or
other day on which banks are required or authorized to be closed in the City of
New York or the State of New York (a "Holiday"), the next preceding date that is
not a Holiday.
(v) "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
(vi) "Other Securities" means other Warrants.
(vii) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(viii) "Principal Market" means the Nasdaq Bulletin Board System,
Nasdaq Small-Cap Market, or American Stock Exchange.
(ix) "Securities Act" means the Securities Act of 1933, as amended.
(x) "Warrant" shall mean this warrant and all warrants issued in
exchange, transfer or replacement of any thereof.
(xi) "Warrant Exercise Price" shall be equal to $_______, subject to
adjustment as hereinafter provided.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's
successors and (B) to any applicable law defined or referred to herein,
shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the
words "Section," "Schedule," and "Exhibit" shall refer to Sections of,
and Schedules and Exhibits to, this Warrant unless otherwise specified.
2
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes
the plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any business day or after the opening of
business on the date hereof and prior to 11:59 P.M. Eastern Standard Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) (A) payment to the Company of an amount equal to the
Warrant Exercise Price multiplied by the number of Warrant Shares as to which
the Warrant is being exercised (plus any applicable issue or transfer taxes)
(the "Aggregate Exercise Price") in cash or by check or wire transfer, or (B) by
notifying the Company that it should subtract from the number of Warrant Shares
Issuable to the holder upon such exercise an amount of Warrant Shares having a
last reported sale price (as reported by Bloomberg) or fair market value on the
date immediately preceding the date of the subscription notice equal to the
Aggregate Exercise Price of the Warrant Shares for which this warrant is being
exercised (a "Cashless Exercise"), and (iii) the surrender of this Warrant, to a
common carrier for delivery to the Company as soon as practicable following such
date, this Warrant (or an indemnification undertaking with respect to this
Warrant in the case of its loss, theft, or destruction); provided that if such
Warrant Shares are to be issued in any name other than that of the registered
holder of this Warrant, such issuance shall be deemed a transfer and the
provisions of Section 7 shall be applicable. In the event of any exercise of the
rights represented by this Warrant in compliance with this Section 2, a
certificate or certificates for the Warrant Shares so purchased, in such
denominations as may be requested by the holder hereof and registered in the
name of, or as directed by, the holder, shall be delivered at the Company's
expense to, or as directed by, such holder as soon as practicable after such
rights shall have been so exercised, and in any event no later than five (5)
business days after the Company's receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction) Upon delivery of the
Exercise Notice and Aggregate Exercise Price referred to in clause (ii) (A)
above or notification to the Company of a Cashless exercise referred to in
clause (ii) (B) above, the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of this Warrant as required by clause (iii) above or the
certificates evidencing such Warrant Shares. In the case of a dispute as to the
determination of the Warrant Exercise Price or the Average Market Price of a
security or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the holder the number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic calculations
to the holder via facsimile within five (5) business days of receipt of the
holder's subscription notice. If the holder and the Company are unable to agree
upon the determination of the Warrant Exercise Price or Average Market Price or
arithmetic calculation of the Warrant Shares within five (5) business days of
such disputed determination or arithmetic calculation being submitted to the
holder, then the Company shall immediately submit via facsimile (i) the disputed
determination of the Warrant Exercise Price or the Average Market Price to an
independent, reputable investment banking firm or (ii) the disputed arithmetic
calculation of the Warrant Shares to its independent, outside accountant. The
Company shall cause the investment banking firm or the accountant, as the case
may be, to perform the determinations or calculations and notify the
3
Company and the holder of the results no later than forty-eight (48) hours from
the time it receives the disputed determinations or calculations. Such
investment bank's or accountant's determination or calculation, as the case may
be, shall be deemed conclusive absent manifest error and the Company shall be
liable for the costs and expenses related to such determination or calculation.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in any event no later than five (5) business days after any exercise and at its
own expense, issue a new Warrant identical in all respects to the Warrant
exercised except (i) it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised, and (ii) the holder thereof shall be deemed for all corporate
purposes to have become the holder of record of such Warrant Shares immediately
prior to the close of business on the date on which the Warrant is surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes is made, irrespective of the date of delivery of certificates evidencing
such Warrant Shares, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are properly closed, such
person shall be deemed to have become the holder of such Warrant Shares at the
opening of business on the next succeeding date on which the stock transfer
books are open. Upon presentation of a duly executed Subscription Form in the
Form of Exhibit A to this Warrant, the holder shall be entitled to exercise this
Warrant in whole or in part, if the holder shall have previously exercised and
surrendered this Warrant and the Company shall not have issued a new Warrant
representing the number of shares issuable following such prior exercise.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.
(d) If the Company shall fail for any reason or for no reason to issue
to holder on a timely basis as described under this Section 2, a certificate for
the number of shares of Common Stock to which the holder is entitled upon the
holder's exercise of this, the Company shall, in addition to any other remedies
under this Agreement or otherwise available to such holder pay as additional
damages in cash to such holder for each day such issuance is not timely effected
an amount equal to .25% of the product of (A) the sum of the number of shares of
Common Stock not issued to the holder on a timely basis and to which the holder
is entitled, and (B) the sum derived by subtracting (1) the Warrant exercise
price then in effect, from (2) the average of the closing bid price of the
Common Stock on the last possible date which the Company could have issued
Common Stock, as the case may be, to the holder without violating this Section
2.
(e) The Company shall not effect any exercise of any Warrant and no holder
of any Warrant shall have the right to exercise any Warrant pursuant to Section
2 to the extent that after giving to such exercise such person (together with
such Persons affiliates) (A) would beneficially owned in excess of 4.9% of the
outstanding shares of Common Stock following such conversion and (B) would have
acquired, through exercise of any Warrant or otherwise, in excess of 4.9% of the
outstanding shares of the Common Stock following such exercise during the 60-day
period ending on and including such exercise date. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by a person
and its affiliates or acquired by a person and its affiliates, as the case may
be, shall include the number of shares of Common Stock issuable upon the
exercise of the Warrants
4
with respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon
(i) exercise of the remaining, non exercisable Warrants beneficially owned by
such person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
subject to limitation on conversion or exercise analogous to the limit contained
herein beneficially owned by such Person and its affiliates. Except as set forth
in the preceding sentence, for purposes of this section 2(e), beneficial
ownership shall be calculated in accordance with Section 13 (d) of the
Securities Exchange Act of 1934, as amended. Notwithstanding anything to the
contrary contained herein, each Exercise Notice shall constitute a
representation by the holder submitting such Exercise Notice that, after giving
effect to such Exercise Notice (A) the holder will not beneficially own (as
determined in accordance with this Section 2(e)) and (B) during the 60-day
period ending on and including such exercise date, the holder will not have
acquired, through exercise of any Warrant or otherwise, a number of shares of
Common Stock in excess of 4.9% of the outstanding shares of Common Stock as
reflected in the Company's most recent Form 10-QSB or Form 10-KSB, as the case
may be, or more recent public release or other public notice by the Company
setting forth the number of Shares of Common Stock outstanding, but after giving
effect to exercise of any Warrant by such holder since the date as of which such
numbers of outstanding shares of the Common Stock was reported.
Section 3. Covenants as to Common Stock. The Company hereby covenants
and agrees as follows:
(a) This Warrant is, duly authorized and validly issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.
(d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, or
over-the-counter-bulletin board upon which shares of Common Stock are then
listed or quoted (subject to official notice of the over-the-counter bulletin
board of issuance upon exercise of this Warrant) and shall maintain, so long as
any other shares of Common Stock shall be so listed or quoted, such listing or
quotation of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list or obtain quotation on
each such national securities exchange, automated quotation system or
over-the-counter bulletin board, as the case may be, and shall maintain such
listing in quotation of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange, automated
quotation system or over-the-counter bulletin board.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any
5
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent with the
tenor and purpose of this Warrant. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
(g) If at any time the Company proposes to file with the Securities and
Exchange Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its
securities (other than on Form S-4 or Form S-8 (or their equivalents at such
time relating to securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
promptly send to the Holder's written notice of the Company's intention to file
a registration statement and of the holder's rights under this section and, if
within five (5) days after receipt of such notice, the holder hereof shall so
request in writing, the Company shall include in such registration statement all
or any part of the Common Stock underlying this Warrant the holder requests to
be registered. If a registration pursuant this section is to be an underwritten
public offering and the managing underwriters advise the Company in writing,
that in their reasonable good faith opinion, marketing or other factors dictate
that a limitation on the number of shares of Company common stock which may be
included in the registration statement is necessary to facilitate and not
adversely affect the proposed offering, then the Company shall include in such
registration : (1) first, all securities the Company proposes to sell for its
own account, (2) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to inclusion of
their securities requested to be registered by the holder hereof and other
holders of securities entitled to participate in the registration, as of the
date hereof, drawn from them pro rata based on the number each has requested to
be included in such registration.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to
6
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant.
In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 5, the Company will
provide the holder of this Warrant with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents (and any assignor shall represent) that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
purposes and not with a view to, or for sale in connection with, any
distribution hereof, and not with any present intention of distributing any of
the same. The holder of this Warrant further represents (and any assignor shall
represent), by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor"). Upon exercise of this Warrant, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
exercise of the Warrant that the Company receive such other representations as
the Company considers reasonably necessary to assure the Company that the
issuance of its securities upon exercise of the Warrant shall not violate any
United States Federal or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each permissible transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted to the holder hereof are
transferable, in whole or in part, upon surrender of this Warrant, together with
a properly executed warrant power in the form of Exhibit B attached hereto;
provided, however, that any transfer or assignment shall subject to the
conditions set forth in Section 6 above and Section 7(c) below.
(c) The holder of this Warrant understands that this Warrant has not
been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) such holder shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the securities to be
sold, assigned or
7
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration. Any sale of such securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Securities and
Exchange Commission thereunder; and neither the Company nor any other person is
under any obligation to register the Series A Preferred Share Warrants under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder except as set forth in Section 7(d)
below.
(d) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Registration Rights Agreement dated as
of June 12 , 2000, by and between the Company and the Buyers listed on the
signature page thereto (the "Registration Rights Agreement") and the initial
holder of this Warrant (and certain assignees thereof) is entitled to the
registration rights in respect of the Warrant Shares as set forth in the
Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price. In order to prevent
dilution of the rights granted under this Warrant, the Warrant Exercise Price
shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant, subdivides (by any stock split, stock dividend,
re-capitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any re-capitalization, reorganization reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other similar transaction which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as in "Organic Change." Prior to the consummation of any
Organic Change, the Company will make appropriate provision to insure that, upon
the consummation of such Organic Change, each of the holders of the Warrants
will thereafter have the right to acquire and receive in lieu of the Common
Stock, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of the Warrants
had such Organic Change not taken place. In any such case, the Company will make
appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 8(b) will thereafter be applicable to
the Warrants.
8
(c) Notices.
(i) Immediately upon any adjustment of the Warrant Exercise
Price pursuant to this Section 8, the Company will give written notice thereof
to the holder of this Warrant, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Company will give written notice to the holder of
this Warrant at least twenty (20) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation, except that
in no event shall such notice be provided to such holder prior to such
information being made known to the public.
(iii) The Company will also give written notice to the holder
of this Warrant at least twenty (20) days prior to the date on which any Organic
Change, dissolution or liquidation will take place.
Section 9. (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the holder of this Warrant
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking, issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile, provided a
copy is mailed by U.S. certified mail, return receipt requested; (iii) three (3)
days after being sent by U.S. certified mail, return receipt requested; or (iv)
one (1) day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company: ▇▇▇▇▇▇▇▇.▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Operating Officer
9
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to a holder of this Warrant, to it at the address set forth below
such holder's signature on the signature page hereof. Each party shall provide
five (5) days' prior written notice to the other party of any change in address
or facsimile number.
Section 12. Amendments. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the Company or holder.
Section 13. Date. The date of this Warrant is June 12 , 2000. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
Section 14. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omitted to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants then outstanding, provided that no such
action may increase the Warrant Exercise Price of the Warrants or decrease the
number of shares or class of stock obtainable upon exercise of any warrants with
out the written consent of the holder of such warrant.
Section 15. Descriptive Headings; Governing Law. The descriptive
headings of the several sections of this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. This
Warrant shall be governed by and interpreted under the laws of the State of New
York, without giving effect to any choice of law or conflict of law provision .
This Warrant has been duly executed by the Company as of the date first
set forth above.
▇▇▇▇▇▇▇▇.▇▇▇ INC.
By:
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Operating Officer
10
[HOLDER]
By: _________________________________
Name: _________________________________
Title:_________________________________
Address:_______________________________
_______________________________________
_______________________________________
11
EXHIBIT A
FORM OF SUBSCRIPTION
(Complete and sign only exercise of the Warrant in whole or in part.)
TO: ▇▇▇▇▇▇▇▇.▇▇▇ Inc.
The undersigned, the holder of the attached Warrant to which this Form
of Subscription applies, hereby irrevocably elects to exercise the purchase
rights represented by such warrant for and to purchase thereunder _______ shares
of Common Stock, par value $0.00001 per share (the "Shares"), from ▇▇▇▇▇▇▇▇.▇▇▇
Inc., (or such other securities issuable pursuant to the terms of the Warrant)
and either: (i) herewith makes payment of $_______ therefor in cash or by
certified or official bank check or (ii) elects to make payment upon a cashless
basis pursuant to Section 2 (a)(ii)(B) of the Warrant and hereby exercises
______ Warrants and the Average Market Price Per Share for purposes hereof is
$_______. The undersigned hereby requests that the certificate(s) representing
such securities be issued in the name(s) and delivered the address(es) as
follows:
Name:
---------------------------------------------
Address:
---------------------------------------------
Social Security Number:
---------------------------------------------
Deliver to:
---------------------------------------------
Address:
---------------------------------------------
This the foregoing subscription evidences an exercise of the Warrant to
purchase fewer than all of the Shares (or other securities issuable pursuant to
the terms of the Warrant) to which the undersigned is entitled under such
warrant, please issue a new warrant, of like tenor, relating to the remaining
portion of the securities issuable upon exercise of such warrant (or other
securities issuable pursuant to the terms of such warrant) in the name(s), and
deliver the same to the address(es), as follow:
Name:
---------------------------------------------
Address:
---------------------------------------------
---------------------------------------------
Dated:
---------------------------------------------
----------------------------- ---------------------------------
(Name of Holder) (Social Security or Taxpayer
Identification Number of Holder, if applicable)
----------------------------------
(Signature of Holder or Authorized
Signatory)
Signature Guaranteed:
-----------------------------------------
12
EXHIBIT B
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
____________________________________________ Federal Identification No.______, a
warrant to purchase shares of the capital stock of ▇▇▇▇▇▇▇▇.▇▇▇ Inc., a Nevada
corporation, represented by warrant certificate No._________, standing in the
name of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint ____________________________, attorney
to transfer the warrants of said corporation, with full power of substitution in
the premises.
Dated: _______________________
By: _________________________
Its: ________________________
13