CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
By and Among
WALLSTREET RACING STABLES, INC.
d/b/a
PIPELINE TECHNOLOGIES, INC.
and
GLOBAL ASSETS FUND
Dated as of October 13, 2000
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TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS..................................... 1
Section 1.1. Certain Definitions.................................. 1
ARTICLE II PURCHASE OF SHARES...................................... 3
Section 2.1. Purchase of Shares; Closing.......................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES.......................... 3
Section 3.1. Representations and Warranties of the Company........ 3
Section 3.2. Representations and Warranties of the Purchaser...... 7
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES......................... 9
Section 4.1. Transfer Restrictions................................ 9
Section 4.2. Stop Transfer Instruction............................ 10
Section 4.3. Furnishing of Information............................ 10
Section 4.4. Notice of Certain Events............................. 10
Section 4.5. Copies and Use of Disclosure Materials............... 11
Section 4.6. Modification to Disclosure Materials................. 11
Section 4.7. Blue Sky Laws........................................ 11
Section 4.8. Integration.......................................... 11
Section 4.9. Furnishing of Rule 144A Materials.................... 12
Section 4.10. Solicitation Materials............................... 12
Section 4.11 Subsequent Financial Statements...................... 12
Section 4.12. Right of First Refusal............................... 12
Section 4.13. Listing of Underlying Shares ........................ 13
Section 4.14 Conversion Procedures................................ 13
Section 4.15 No Short Selling .................................... 13
ARTICLE V CONDITIONS PRECEDENT TO CLOSING......................... 14
Section 5.1. Conditions Precedent to Obligations of the Purchaser. 14
Section 5.2. Conditions Precedent to Obligations of the Company... 15
ARTICLE VI TERMINATION............................................. 16
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Section 6.1. Termination by Mutual Consent........................ 16
Section 6.2. Termination by the Company or the Purchaser.......... 16
Section 6.3. Termination by the Company........................... 16
Section 6.4. Termination by the Purchaser......................... 16
ARTICLE VII MISCELLANEOUS........................................... 17
Section 7.1. Fees and Expenses.................................... 17
Section 7.2. Entire Agreement; Amendments......................... 18
Section 7.3. Notices.............................................. 18
Section 7.4. Amendments; Waivers.................................. 18
Section 7.5. Headings............................................. 19
Section 7.6. Successors and Assigns............................... 19
Section 7.7. No Third Party Beneficiaries......................... 19
Section 7.8. Governing Law........................................ 19
Section 7.9. Survival............................................. 19
Section 7.10 Counterpart Signatures............................... 19
Section 7.11. Publicity............................................ 19
Section 7.12 Severability......................................... 20
Section 7.13. Remedies............................................. 20
Exhibit A Certificate of Designation
Exhibit B Registration Rights Agreement
Exhibit C Form of Opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Associate, P.C.
Exhibit D Conversion Procedures
Exhibit E Certificate of Officers of Wallstreet Racing Stables, Inc.
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of October 13,
2000 (this "Agreement"), by and among Wallstreet Racing Stables, Inc., a
Colorado, a corporation (the "Company"), and Global Asset Fund,(the
"Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire shares of the Company's Series A Convertible
Preferred Stock, no par value per share (the "Preferred Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
Colorado are authorized or required by law or other government actions to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.1(b).
"Certificate of Designation" shall have the meaning set forth in Section
2.1(a).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value [$. 001] per
share.
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"Disclosure Materials" means, collectively, the SEC Documents, the
disclosure package delivered to the Purchaser in connection with the offering by
the Company of the Shares and the Schedules to this Agreement furnished by or on
behalf of the Company pursuant to Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"NASD" means the National Association of Securities Dealers, Inc.
"Per Share Consideration" shall have the meaning set forth in Section
2.1(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" shall have the meaning set forth in the recitals hereto.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Registration Rights Agreement" means the registration rights agreement,
substantially in the form of Exhibit B, as the same may be amended, supplemented
or otherwise modified in accordance with its terms.
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
"SEC Documents" shall have the meaning set forth in Section 3.1(l).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Preferred Stock purchased by the Purchaser
pursuant to this Agreement.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Underlying Shares" means the shares of Common Stock into which the Shares
are convertible in accordance with the terms hereof and the Certificate of
Designation.
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ARTICLE II
PURCHASE OF SHARES
--------------------
Section 2.1 Purchase of Shares; Closing.
----------------------------
(a) Subject to the terms and conditions herein set forth, the Company
shall issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company on the Closing Date 200 Shares, which shall
have the respective rights, preferences and privileges set forth in
Exhibit A (the "Certificate of Designation"), at a price per Share of
US$50,000 (the "Per Share Consideration"). The Per Share Consideration
multiplied by the number of Shares to be purchased by the Purchaser
hereunder is hereinafter referred to as the "Purchase Price."
(b) The closing of the purchase and sale of the Shares (the "Closing")
shall take place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Associates, P.C.
immediately following the execution hereof, or at such other time
and/or place as the Purchaser and the Company may agree, provided,
however, in no case shall the Closing take place later than the fifth
day after the last of the conditions listed in Article V is satisfied
or waived by the appropriate party. The date of the Closing is
hereinafter referred to as the "Closing Date".
(c) On or before the tenth consecutive day after the Closing, (i) the
Company shall deliver to the Purchaser (A) one or more stock
certificates representing the Shares purchased hereunder, registered
in the name of the Purchaser and (B) all documents, instruments and
writings required to have been delivered at or prior to Closing by the
Company pursuant to this Agreement, (ii) the Purchaser shall deliver
to the Company (A) the Purchase Price as determined pursuant to this
Article I in United States dollars in immediately available funds by
wire transfer to an account designated in writing by the Company prior
to the Closing and (B) all documents, instruments and writings
required to have been delivered at or prior to Closing by the
Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATION AND WARRANTIES
--------------------------------
Section 3.1 Representations and Warranties of the Company.
----------------------------------------------
The Company hereby represents and warrants to the Purchaser as follows:
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(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the
requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set
forth in the SEC Documents or in Schedule 3.1(a) (collectively,
the "Subsidiaries"). Each of the Subsidiaries is a corporation,
duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the full
corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on
the results of operations, assets, prospects, or financial
condition of the Company and the Subsidiaries, taken as a whole
(a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated hereby and by the Registration Rights
Agreement and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of the Company. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company and each of the Subsidiaries is set forth in
the SEC Documents (as defined in paragraph 3.1(l) herein). No
shares of Common Stock are entitled to preemptive or similar
rights.
Except as specifically disclosed in the SEC Documents, there are
no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or,
except as a result of the purchase and sale of the Shares
hereunder, securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for
or acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, bylaws or other charter
documents.
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(d) Issuance of Shares. The Shares are duly authorized and, when paid
for in accordance with the terms hereof, shall be validly issued,
fully paid and nonassessable. The Company has and at all times
while the Shares are outstanding will maintain an adequate
reserve of shares of Common Stock to enable it to perform its
obligations under this Agreement and the Certificate of
Designation. When issued in accordance with the terms hereof, the
Underlying Shares will be duly authorized, validly issued, fully
paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of its certificate of incorporation
or bylaws or (ii) subject to obtaining the consents referred to
in Section 3.1(f), 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 is a party, or (iii)
to the knowledge of the Company result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company is subject (including Federal and state securities laws
and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of
clauses (ii) and (iii), such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse
Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance
by the Company of this Agreement and the Registration Rights
Agreement, other than the filing of the registration statement
covering the Underlying Shares with the Commission and the making
of the applicable blue-sky filings under state securities laws,
each as contemplated by the Registration Rights Agreement and
other than, in all cases, where the failure to obtain such
consent, waiver, authorization or order, or to give or make such
notice or filing, would not materially impair or delay the
ability of the Company to effect the Closing and deliver to the
Purchaser the Shares free and clear of all Liens (collectively,
the "Required Approvals").
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(g) Litigation; Proceedings. Except as specifically disclosed in the
Disclosure Materials, there is no action, suit, notice of
violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, State, county, local or
foreign) which (i) relates to or challenges the legality,
validity or enforceability of this Agreement, the Registration
Rights Agreement or the Shares (ii) could, individually or in the
aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability
of the Company to perform fully on a timely basis its obligations
under this Agreement or the Registration Rights Agreement.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound,
except such conflicts or defaults as do not have a Material
Adverse Effect, (ii) is in violation of any order of any court,
arbitrator or governmental body, except for such violations as do
not have a Material Adverse Effect, or (iii) is in violation of
any statute, rule or regulation of any governmental authority
which could (individually or in the aggregate) (x) adversely
affect the legality, validity or enforceability of this Agreement
or the Registration Rights Agreement, (y) have a Material Adverse
Effect or (z) adversely impair the Company's ability or
obligation to perform fully on a timely basis its obligations
under this Agreement or the Registration Rights Agreement.
(i) Disclosure Materials. The Disclosure Materials do not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(j) Private Offering. Neither the Company nor any Person acting on
its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under
circumstances which would require the integration of such
offering with the offering of the Shares under the Securities
Act) which might subject the offering, issuance or sale of the
Shares to the registration requirements of Section 5 of the
Securities Act.
(k) SEC Documents. The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents") on a
timely basis, or has received a valid extension of such time of
filing. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
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the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the Commission with respect thereto. Such financial statements
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the
periods involved, except as may be otherwise indicated in such
financial statements or the notes thereto, and fairly present in
all material respects the financial position of the Company as of
and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments. Since
the date of the financial statements included in the Company's
last filed Quarterly Report on Form 10-Q, there has been no
event, occurrence or development that has had a Material Adverse
Effect which is not specifically disclosed in any of the
Disclosure Materials.
Section 3.2 Representations and Warranties of the Purchaser.
------------------------------------------------
The Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly and
validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the
requisite power and authority to enter into and to consummate the
transactions contemplated hereby and by the Registration Rights
Agreement and otherwise to carry out its obligations hereunder
and thereunder. The purchase of the Shares by the Purchaser
hereunder has been duly authorized by all necessary action on the
part of the Purchaser.
Each of this Agreement and the Registration Rights Agreement has
been duly executed and delivered by the Purchaser or on its
behalf and constitutes the valid and legally binding obligation
of the Purchaser, enforceable against the Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights
generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Shares and the
Underlying Shares for its own account (and/or on behalf of
managed accounts who are purchasing solely for their own accounts
for investment) for investment purposes only and not with a view
to or for distributing or reselling such Shares or Underlying
Shares or any part thereof or interest therein, without
prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights
Agreement, at all times to sell or otherwise dispose of all or
any part of such Shares or Underlying Shares under an effective
registration statement under the Securities Act and in compliance
with applicable State securities laws or under an exemption from
such registration.
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(c) Purchaser Status. At the time the Purchaser (and any account for
which it is purchasing) was offered the Shares, it (and any
account for which it is purchasing) was, and at the date hereof,
it (and any account for which it is purchasing) is, and at the
Closing Date, it (and any account for which it is purchasing)
will be, an "accredited investor" as defined in Rule 501(a) under
the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable
of evaluating the merits and risks of the prospective investment
in the Shares, and has so evaluated the merits and risks of such
investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser is
able to bear the economic risk of an investment in the Shares
and, at the present time, is able to afford a complete loss of
such investment.
(f) Prohibited Transactions. The Shares to be purchased by the
Purchaser are not being acquired, directly or indirectly, with
the assets of any "employee benefit plan", within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives
of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in
the Shares; (ii) access to information about the Company and the
Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to
evaluate its investment in the Common Stock; and (iii) the
opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision
with respect to the Shares and to verify the accuracy and
completeness of the information contained in the Disclosure
Materials.
(h) Reliance. The Purchaser understands and acknowledges that (i) the
Shares are being offered and sold, and the Underlying Shares are
being offered, to it without registration under the Securities
Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and that the Company will
rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions
contemplated hereby other than those specifically set forth in
Article III herein.
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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1 Transfer Restrictions.
----------------------
If the Purchaser should decide to dispose of any of the Shares to be
purchased by it hereunder (and upon conversion thereof, any Underlying
Shares), the Purchaser understands and agrees that it may do so only
(i) pursuant to an effective registration statement under the
Securities Act, (ii) to the Company or (iii) pursuant to an available
exemption from registration under the Securities Act. In connection
with any transfer of any Shares other than pursuant to an effective
registration statement or to the Company, the Company may require that
the transferor of such Shares provide to the Company an opinion of
counsel experienced in the area of United States securities laws
selected by the transferor, the form and substance of which opinion
shall be, reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such Shares under the
Securities Act or any State securities laws.
The Purchaser agrees to the imprinting, so long as appropriate, of the
following legend on certificates representing the Shares:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, THEY MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACCEPTANCE HEREOF, THE HOLDER OF THESE SECURITIES AGREES THAT IT WILL
NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THESE SECURITIES OR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR (B) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN
PURSUANT TO CLAUSE (A) OR (B) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 PROMULGATED UNDER THE SECURITIES ACT.
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The legend set forth above may be removed if and when the Shares
represented by such certificate or the Underlying Shares, as the case
may be, are disposed of pursuant to an effective registration
statement under the Securities Act or in the opinion of counsel to the
Company experienced in the area of United States securities laws such
legend is no longer required under applicable requirements of the
Securities Act. The stock certificates representing the Shares and the
Underlying Shares shall also bear any other legends required by
applicable Federal or state securities laws, which legends may be
removed when, in the opinion of counsel to the Company in the
applicable securities laws, such legends are no longer required under
the applicable requirements of such securities laws. The Company
agrees that it will provide the Purchaser, upon request, with a
substitute stock certificate or certificates, free from such legend at
such time as such legend is no longer applicable. The Purchaser agrees
that, in connection with any transfer of Shares or Underlying Shares
by it pursuant to an effective registration statement under the
Securities Act, Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no
representation, warranty or agreement as to the availability of any
exemption from registration under the Securities Act with respect to
any resale of Shares or Underlying Shares.
Section 4.2 Stop Transfer Instruction.
--------------------------
The Purchaser agrees that the Company shall be entitled to make a
notation on its records and give instructions to any transfer agent of
the Company in order to implement the restrictions on transfer set
forth in this Agreement.
Section 4.3 Furnishing of Information.
--------------------------
As long as the Purchaser owns Shares or Underlying Shares, if
requested the Company will promptly furnish to it all reports filed by
the Company pursuant to Section 13(a) or 15(d) of the Exchange Act (or
if the Company is not at the time required to file reports pursuant to
such sections, annual and quarterly reports comparable to those
required by Section 13(a) or 15(d) of the Exchange Act).
Section 4.4 Notice of Certain Events.
-------------------------
The Company shall (i) advise the Purchaser promptly after obtaining
knowledge thereof, and, if requested by the Purchaser, confirm such
advice in writing, of (A) the issuance by any state securities
commission of any stop order suspending the qualification or exemption
from qualification of the Shares or the Common Stock for offering or
sale in any jurisdiction, or the initiation of any proceeding for such
purpose by any state securities commission or other regulatory
authority, or (B) any event that makes any statement of a material
fact made in the Disclosure Materials untrue or that requires the
making of any additions to or changes in the Disclosure Materials in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, (ii) use its
best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of the
Shares or the Common Stock under any state securities or Blue Sky
laws, and (iii) if at any time any state securities commission or
other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Shares or the
Common Stock under any such laws, use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
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Section 4.5 Copies and Use of Disclosure Materials.
---------------------------------------
The Company shall furnish the Purchaser, without charge, as many
copies of the Disclosure Materials, and any amendments or supplements
thereto, as the Purchaser may reasonably request. The Company consents
to the use of the Disclosure Materials, and any amendments and
supplements thereto, by the Purchaser in connection with resales of
the Shares or the Underlying Shares other than pursuant to an
effective registration statement.
Section 4.6 Modification to Disclosure Materials.
-------------------------------------
If any event shall occur as a result of which, in the reasonable
judgment of the Company or the Purchaser, it becomes necessary or
advisable to amend or supplement the Disclosure Materials in order to
make the statements therein, in the light of the circumstances at the
time the Disclosure Materials were delivered to the Purchaser, not
misleading, or if it is necessary to amend or supplement the
Disclosure Materials to comply with applicable law, the Company shall
promptly prepare an appropriate amendment or supplement to the
Disclosure Materials (in form and substance reasonably satisfactory to
the Purchaser) so that (i) as so amended or supplemented the
Disclosure Materials will not include an untrue statement of material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the
time it is delivered to Purchaser, not misleading and (ii) the
Disclosure Materials will comply with applicable law.
Section 4.7 Blue Sky Laws.
--------------
The Company shall cooperate with the Purchaser in connection with the
qualification of the Shares and the Underlying Shares under the
securities or Blue Sky laws of such jurisdictions as the Purchaser may
request and to continue such qualification at all times through the
third anniversary of the Closing Date; provided, however, that neither
the Company nor its Subsidiaries shall be required in connection
therewith to qualify as a foreign corporation where they are not now
so qualified.
Section 4.8 Integration.
-----------
The Company shall not and shall use its best efforts to ensure that no
Affiliate shall sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or
sale of the Shares or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the
Shares or Underlying Shares to the Purchaser.
11
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Section 4.9 Furnishing of Rule 144A Materials.
----------------------------------
The Company shall, for so long as any of the Shares or Underlying
Shares remain outstanding and during any period in which it is not
subject to Section 13 or 15(d) of the Exchange Act, make available to
any registered holder of Shares or Underlying Shares in connection
with any sale thereof and any prospective purchaser of such Shares or
Underlying Shares from such Person, the following information in
accordance with Rule 144A(d)(4) under the Securities Act: a brief
statement of the nature of the business of the Company and the
products and services it offers and the Company's most recent audited
balance sheet and profit and loss and retained earnings statements,
and similar audited financial statements for such part of the two
preceding fiscal years as the Company has been in operation.
Section 4.10 Solicitation Materials.
------------------------
The Company shall not (i) distribute any offering materials in
connection with the offering and sale of the Shares or Underlying
Shares other than the Disclosure Materials and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit
any offer to buy or sell the Shares or Underlying Shares by means of
any form of general solicitation or advertising.
Section 4.11 Subsequent Financial Statements.
---------------------------------
The Company shall furnish to the Purchaser, promptly after they are
filed with the Commission, a copy of all financial statements for any
period subsequent to the period covered by the financial statements
included in the Disclosure Materials.
Section 4.12 From the date hereof through the Closing Date, the Company
shall not and shall cause the Subsidiaries not to, without the consent
of the Purchaser, (i) amend its Certificate of Incorporation, bylaws
or other charter documents so as to adversely affect any rights of the
Purchaser; (ii) split, combine or reclassify its outstanding capital
stock; (iii) declare, authorize, set aside or pay any dividend or
other distribution with respect to the Common Stock; (iv) redeem,
repurchase or offer to repurchase or otherwise acquire shares of its
Common Stock other than in payment of short swing profits owed to the
Company pursuant to Section 16(b) of the Exchange Act; or (v) enter
into any agreement with respect to any of the foregoing.
12
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Section 4.13 Listing of Underlying Shares.
------------------------------
The Company shall take all steps necessary to cause the Underlying
Shares to be approved for listing on THE NASDAQ OTC Bulletin Board (or
other national securities exchange or market on which the Common Stock
is listed) no later than the first day after which shares may be
converted hereunder by the Purchaser, and shall provide to the
Purchaser evidence of such listing.
Section 4.14 Conversion Procedures.
-----------------------
Exhibit D attached hereto sets forth the procedures with respect to
the conversion of the Shares, including the forms of conversion notice
to be provided upon conversion, instructions as to the procedures for
conversion, the form of legal opinion, if necessary, that shall be
rendered to the Company's transfer agent and such other information
and instructions as may be reasonably necessary to enable the
Purchaser to exercise its right of conversion smoothly and
expeditiously.
Section 4.15 No Short Selling.
------------------
Prior to 90 days following the Original Issue Date or during the
five-day trading period in which the conversion price is calculated,
as defined in the Certificate of Designation for The Series A
Convertible Preferred Stock, Purchaser covenants that neither it nor
its advisors nor any of its affiliates will sell short any shares of
the Company's stock at any time.
13
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ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.1 Conditions Precedent to Obligations of the Purchaser.
-----------------------------------------------------
The obligation of the Purchaser to purchase the Shares is subject to
the satisfaction or waiver by the Purchaser, at or prior to the
Closing, of each of the following conditions:
(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & Associates, P.C., counsel for the Company,
substantially in the form of Exhibit C;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein
and in the Registration Rights Agreement shall be true and
correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except that
representations and warranties that are made as of a specific
date need be true in all material respects only as of such date);
(c) 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 the Closing;
(d) No Material Adverse Effect. Since the date of the financial
statements included in the Company's last filed Quarterly Report
on Form 10-Q, no event which had a Material Adverse Effect shall
have occurred which is not disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the Shares (and
upon conversion thereof, the Underlying Shares) hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently)
by any applicable law or governmental regulation and (ii) shall
not subject the Purchaser to any penalty, or in its reasonable
judgment, other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially
reduce the benefits to the Purchaser of the purchase of the
Shares or the Underlying Shares (provided, however, that such
regulation, law or onerous condition was not in effect in such
form at the date of this Agreement);
14
-30-
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or
an Assistant Secretary of the Company and certifying (i) that
attached thereto is a true, correct and complete copy of (A) the
Company's Certificate of Incorporation, as amended to the date
thereof, (B) the Company's By-Laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of
Directors of the Company authorizing the execution and delivery
of this Agreement and the Registration Rights Agreement and the
issuance and sale of the Shares and the Underlying Shares and
(ii) the incumbency of officers executing this Agreement and the
Registration Rights Agreement;
(g) Registration Rights Agreement. The Company shall have executed
the Registration Rights Agreement;
(h) No Suspensions of Trading in Common Stock. Trading in the Common
Stock shall not have been suspended by the Commission or the NASD
or other exchange or market on which the Common Stock is listed
or quoted (except for any suspension of trading of limited
duration solely to permit dissemination of material information
regarding the Company);
(i) Required Approvals. All Required Approvals shall have been
obtained; and
(j) Delivery of Stock Certificates. The Company shall have delivered
to the Purchaser the stock certificate(s) representing the
Shares, registered in the name of the Purchaser on or before the
tenth day immediately following the closing in form satisfactory
to the Purchaser.
Section 5.2 Conditions Precedent to Obligations of the Company.
---------------------------------------------------
The obligation of the Company to issue and sell the Shares hereunder
is subject to the satisfaction or waiver by the Company, at or to the
Closing, of each of the following conditions:
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and
correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except that
representations and warranties that are made as of a specific
date need be true in all material respects only as of such date);
(b) Performance by the Purchaser. The Purchaser 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 it at or prior to the Closing; and
(c) No Prohibitions. The sale of the Shares (and upon conversion
thereof, the Underlying Shares) hereunder (i) shall not be
prohibited or enjoined (temporarily or permanently) by any
applicable law or governmental regulation and (ii) shall not
subject the Company to any penalty, or in its reasonable
judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially
reduce the benefits to the Company of the sale of Shares or the
Underlying Shares to the Purchaser (provided, however, that such
regulation, law or onerous condition was not in effect in such
form at the date of this Agreement).
15
-31-
ARTICLE VI
TERMINATION
Section 6.1 Termination by Mutual Consent.
------------------------------
This Agreement may be terminated at any time prior to Closing by the
mutual consent of the Company and the Purchaser.
Section 6.2 Termination by the Company or the Purchaser.
--------------------------------------------
This Agreement may be terminated prior to Closing by either the
Company or the Purchaser, by giving written notice of such termination
to the other party, if:
(a) the Closing shall not have occurred by November 15, 2000;
provided that the terminating party is not then in material
breach of its obligations under this Agreement in any manner that
shall have caused the failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law or regulation
that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable
final judgment, order, decree, ruling or injunction of any court
of or governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, which, in
the reasonable judgment of the terminating party, would
materially adversely affect the transactions contemplated hereby
and by the Registration Rights Agreement.
Section 6.3 Termination by the Company.
---------------------------
This Agreement may be terminated prior to Closing by the Company, by
giving notice of such termination to the Purchaser, if the Purchaser
has materially breached any representation, warranty, covenant or
agreement contained in this Agreement or the Registration Rights
Agreement and such breach is not cured within five business days
following receipt by the Purchaser of notice of such breach.
Section 6.4 Termination by the Purchaser.
-----------------------------
This Agreement may be terminated prior to Closing by the Purchaser, by
giving notice of such termination to the Company, if:
(a) the Company has breached any representation, warranty, covenant
or agreement contained in this Agreement or the Registration
Rights Agreement and such breach is not cured within five
business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the financial
statements included in the Company's last filed Quarterly Report
on Form 10-Q which could reasonably be expected to have a
Material Adverse Effect and which is not disclosed in the
Disclosure Materials; or
(c) trading in the Common Stock has been suspended by the Commission
or the NASD or other exchange or market on which the Common Stock
is listed or quoted (except for any suspension of trading of
limited duration solely to permit dissemination of material
information regarding the Company).
16
-32-
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses.
------------------
Each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the
issuance of the Shares (and upon conversion thereof, the Underlying
Shares) pursuant hereto. The Purchaser shall be responsible for its
own tax liability that may arise as a result of the investment
hereunder or the transactions contemplated by this Agreement. Whether
or not the transactions contemplated by this Agreement are consummated
or this Agreement is terminated, the Company shall pay (i) all costs,
expenses, fees and all taxes incident to and in connection with: (A)
the preparation, printing and distribution of the Disclosure Materials
and all amendments and supplements thereto (including, without
limitation, financial statements and exhibits), and all preliminary
and final Blue Sky memoranda and all other agreements, memoranda,
correspondence and other documents prepared and delivered in
connection herewith (B) the issuance and delivery of the Shares and,
upon conversion thereof, the Underlying Shares, (C) furnishing such
copies of the Disclosure Materials and all amendments and supplements
thereto, as may reasonably be requested for use in connection, with
resales of the Shares and, upon conversion thereof, the Underlying
Shares, and (D) the preparation of certificates for the Shares and,
upon conversion thereof, the Underlying Shares (including, without
limitation, printing and engraving thereof), (ii) all fees and
expenses of the counsel and accountants of the Company and (iii) all
expenses and listing fees in connection with the application for
quotation of the underlying Shares in the American Stock Exchange or
the NASDAQ National Market.
17
-33-
Section 7.2 Entire Agreement; Amendments.
-----------------------------
This Agreement, together with the Exhibits, Annexes and Schedules
hereto, and the Registration Rights Agreement contain the entire
understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or
written, with respect to such matters.
Section 7.3 Notices.
--------
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company:
Pipeline Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With copies to: --------------------------------
--------------------------------
--------------------------------
Attn:
--------------------------------
If to the Purchaser: Global Development Group
--------------------------------
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
With copies to: Law Offices of ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
2404 Hollywood
--------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
or such other address as may be designated in writing hereafter, in
the same manner, by such person.
Section 7.4 Amendments; Waivers.
--------------------
No provision of this Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by both the
Company and the Purchaser, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
18
-34-
Section 7.5 Headings.
--------
The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of
the provisions hereof.
Section 7.6 Successors and Assigns.
-----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. Neither the
Company nor the Purchaser may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
The assignment by a party of this Agreement or any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 7.7 No Third Party Beneficiaries.
-----------------------------
This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
Section 7.8 Governing Law.
--------------
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Colorado without
regard to the principles of conflicts of law thereof.
Section 7.9 Survival.
---------
The representations and warranties of the Company and the Purchaser
contained in Article III and the agreements and covenants of the
parties contained in Article IV and this Article VII shall survive the
Closing (or any earlier termination of this Agreement) and any
conversion of Shares hereunder.
Section 7.10 Counterpart Signatures.
------------------------
This Agreement may be executed in two or more counterparts, all of
which when taken together 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, it being
understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the
same with the same force and effect as if such facsimile signature
page were an original thereof.
Section 7.11 Publicity.
-----------
The Company and the Purchaser shall consult with each other in issuing
any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement
without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
19
-35-
Section 7.12 Severability.
--------------
In case any one or more of the provisions of this Agreement shall be
invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement
shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which
shall be a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
Section 7.13 Remedies.
----------
In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, the Purchaser will
be entitled to specific performance of the obligations of the Company
under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchaser hereunder with respect
to the subsequent transfer of Shares and the Underlying Shares. Each
of the Company and the Purchaser agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of any
breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WALLSTREET RACING STABLES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Presdent
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President and CEO
Global Asset Fund AG
-------------------------------
(PURCHASER)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Authorized Signatory
20
-36-
EXHIBIT A
================================================================================
CERTIFICATE OF DESIGNATION OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
WALLSTREET RACING STABLES, INC.
The undersigned, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, hereby certify that:
I. They are the duly elected and acting President and Chief Financial
Officer, respectively, of Wallstreet Racing Stables, Inc., a Colorado
corporation (the "Company").
II. The Certificate of Incorporation of the Company authorizes
5,000,000 shares of preferred stock, no par value per share.
III. The following is a true and correct copy of resolutions duly
adopted by the Board of Directors at a meeting duly held October 2, 2000,
which constituted all requisite action on the part of the Company for
adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
is authorized to provide for the issuance of the shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Colorado, to establish from time to time the number of shares to be included
in each such series, and to fix the designations, powers, preferences and rights
of the shares of each such series and the qualifications, limitations or
restrictions thereof;
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series, and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
Designation, Amount and Par Value. The series of Preferred Stock shall be
designated as the Series A Convertible Preferred Stock (the "Preferred Stock"),
and the number of shares so designated shall be 200. The par value of each share
of Preferred Stock shall be $0.00. Each share of Preferred Stock shall have a
stated value of $50,000.00 per share (the "Stated Value").
Section 2. Dividends.
---------
-37-
(a) Holders of Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors out of funds legally available therefor, and
the Company shall pay, cumulative dividends at the rate per share (as a
percentage of the Stated Value per share) equal to 12% per annum, payable, in
cash or shares of Common Stock, in arrears quarterly and on the Conversion Date
(as hereinafter defined). Dividends on the Preferred Stock shall accrue daily
commencing the Original Issue Date (as defined in Section 6) and shall be deemed
to accrue on such date whether or not earned or declared and whether or not
there are profits, surplus or other funds of the Company legally available for
the payment of dividends. The party that holds the Preferred Stock on an
applicable record date for any dividend payment will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued prior
to such dividend payment date, without regard to any sale or disposition of such
Preferred Stock subsequent to the applicable record date but prior to the
applicable dividend payment date. Except as otherwise provided herein, if at any
time the Company pays less than the total amount of dividends then accrued to
any class of Preferred Stock, such payment shall be distributed ratably among
the holders of such class based upon the number of shares held by each holder.
(b) So long as any Preferred shall remain outstanding, neither the Company
nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly
or indirectly any Junior Securities (as defined in Section 6), except the
redemption of shares in payment of short swing profits payable to the Company
pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended,
nor shall the Company directly or indirectly pay or declare any cash dividend or
make any cash distribution (other than a dividend or distribution described in
Section 5) upon, nor shall any cash distribution be made in respect of, any
Junior Securities, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities, except as described above, unless all dividends on the Preferred
Stock for all past dividend periods shall have been paid.
Section 3. Voting Rights.
--------------
Except as otherwise provided herein and as otherwise provided by law, the
Preferred Stock shall have no voting rights. However, so long as any shares of
Preferred Stock are outstanding, the Company shall not, without the affirmative
vote of the holders of a majority of the shares of the Preferred Stock then
outstanding, (i) alter or change adversely the powers, preferences or rights
given to the Preferred Stock or (ii) authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
below) senior to, prior to or pari passu with the Preferred Stock.
Section 4. Liquidation.
------------
Upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (a "Liquidation"), the holders of shares of Preferred
Stock shall be entitled to receive out of the assets of the Company, whether
such assets are capital or surplus, for each share of Preferred Stock an amount
equal to the Stated Value, plus an amount equal to accrued but unpaid dividends
per share, whether declared or not, but without interest, before any
distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed shall be distributed among the
holders of Preferred Stock ratably in accordance with the respective amounts
-38-
that would be payable on such shares if all amounts payable thereon were paid in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of shall be deemed a Liquidation; provided that, a
consolidation or merger of the Company with or into any other company or
companies shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Section 5. The Company shall mail written notice of any such
liquidation, not less than 30 days prior to the payment date stated therein, to
each record holder of Preferred Stock.
Section 5. Conversion.
----------
(a) The holder of the Preferred Stock shall be granted the right to convert
(i) one hundred percent (100%) of the Preferred Stock into shares of Common
Stock at the Conversion Ratio 90 days after the Original Issue Date. Any
conversion under this Section 5(a) shall be of a minimum amount of at least 1
shares of Preferred Stock. The holder shall effect conversions by surrendering
the certificate or certificates representing the shares of Preferred Stock to be
converted to the Company, together with the form of conversion notice attached
hereto as Annex 1 (the "Holder Conversion Notice") in the manner set forth in
Section 5(j). Each Holder Conversion Notice shall specify the number of shares
of Preferred Stock to be converted and the date on which such conversion is to
be effected, which date may not be prior to the date the Holder delivers such
Notice by facsimile (the "Holder Conversion Date"). Subject to Section 5(c) and,
as to the original Holder (or its sole designee), subject to Section 4.13 of the
Purchase Agreement (as defined in Section 6), each Holder Conversion Notice,
once given, shall be irrevocable. If the holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the holder with the Holder Conversion Notice, the Company shall
promptly deliver to the holder a certificate for such number of shares as have
not been converted. At no time may the holder make a conversion request for
which the number of common shares requested for conversion would result in an
amount equal to or greater than twenty percent (20%) of the total initial number
of Preferred Shares purchased by the holder.
(b) Provided that ten (10) Trading Days shall have elapsed from the date
the Securities and Exchange Commission (the "Commission") declared the
registration statement contemplated by the Registration Rights Agreement
effective under the Securities Act, each share of the Preferred Stock shall be
convertible into shares of Common Stock at the Conversion Ratio at the option of
the Company in whole or in part at any time on or after the expiration of one
year after the Original Issue Date; provided, however, that the Company is not
permitted to deliver a Company Conversion Notice (as defined below) within 10
days of issuing any press release or other public statement relating to such
conversion. The Company shall effect such conversion by delivering to the
holders of such shares of Preferred Stock to be converted a written notice in
the form attached hereto as Annex 2 (the "Company Conversion Notice"), which
Company Conversion Notice, once given, shall be irrevocable. Each Company
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted and the date on which such conversion is to be effected, which date
will be at least one Trading Day after the date the Company delivers such Notice
by facsimile to the holder (the "Company Conversion Date"). The Company shall
-39-
give such Company Conversion Notice in accordance with Section 5(j) below at
least one Trading Day before the Company Conversion Date. Any such conversion
shall be effected on a pro rata basis among the holders of Preferred Stock. Upon
the conversion of shares of Preferred Stock pursuant to a Company Conversion
Notice, the holders of the Preferred Stock shall surrender the certificates
representing such shares at the office of the Company or of any transfer agent
for the Preferred Stock or Common Stock. If the Company is converting less than
all shares of the Preferred, the Company shall, upon conversion of such shares
subject to such Company Conversion Notice and receipt of the certificate or
certificates representing such shares of Preferred Stock deliver to the holder
or holders a certificate for such number of shares of Preferred Stock as have
not been converted. Each of a Holder Conversion Notice and a Company Conversion
Notice is sometimes referred to herein as a "Conversion Notice," and each of a
"Holder Conversion Date" and a "Company Conversion Date" is sometimes referred
to herein as a "Conversion Date."
(c) (i) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those then
required by law and as set forth in the Purchase Agreement), representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock and (ii) one or more certificates representing the number of
shares of Preferred Stock not converted; provided, however that the Company
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon conversion of any shares of Preferred Stock until
certificates evidencing such shares of Preferred Stock are either delivered for
conversion to the Company or any transfer agent for the Preferred Stock or
Common Stock, or the holder notifies the Company that such certificates have
been lost, stolen or destroyed and provides a bond (or other adequate security
reasonably acceptable to the Company) satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon request of the holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section 5(c) electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. In the case of a
conversion pursuant to a Holder Conversion Notice, if such certificate or
certificates are not delivered by the date required under this Section 5(c), the
holder shall be entitled by written notice to the Company at any time on or
before such holder's receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
(d) (i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of X OR
Y; where X is 125% of the average of the closing bid price for the ten (10)
Trading Days immediately preceding the Original Issue Date; and Y = 80% of the
average of the closing bid prices for the five (5) Trading Days immediately
preceding the Conversion Notice Date with a floor of $5.00 per share; provided,
however, if the registration statement to be filed by the Company in accordance
with the Registration Rights Agreement is not declared effective by the
Commission for any reason by the Effective Date (as defined in the Registration
-40-
Rights Agreement), then for each of the first two months after such Effective
Date that such registration statement shall not have been so declared effective,
the Conversion Price shall be decreased by 2% (i.e., a reduction of 2% at the
end of the first such month and 2% at the end of the second such month).
(ii) If the Company, at any time while any shares of Preferred Stock are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities payable in shares of its
capital stock (whether payable in shares of its Common Stock or of capital stock
of any class), (b) subdivide outstanding shares of Common Stock into a larger
number of shares, (c) combine outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of Common Stock any
shares of capital stock of the Company, the Conversion Price designated in
Section 5(d)(i) shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 5(d)(ii) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any shares of Preferred Stock are
outstanding, shall issue rights or warrants to all holders of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Per Share Market Value of Common Stock at the record
date mentioned below, the Conversion Price designated in Section 5(d)(i) shall
be multiplied by a fraction, of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Conversion Price designated in Section
5(d)(i) pursuant to this Section 5(d)(iii), if any such right or warrant shall
expire and shall not have been exercised, the Conversion Price designated in
Section 5(d)(i) shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of this Section 5 after the issuance of such
rights or warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
-41-
(iv) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to holders
of Preferred Stock) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Section 5(d)(iii) above) then in each such case the Conversion Price at which
each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Preferred Stock; and provided, further that the
Company, after receipt of the determination by such Appraiser shall have the
right to select an additional Appraiser, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser. In
either case the adjustments shall be described in a statement provided to all
holders of Preferred Stock of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to Section
5(d)(ii),(iii), (iv) or (v), the Company shall promptly mail to each holder of
Preferred Stock, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the holders of the Preferred Stock then
outstanding shall have the right thereafter to convert such shares only into the
shares of stock and other securities and property receivable upon or deemed to
be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the holders of the
Preferred Stock shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
-42-
to such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled. The terms of any such consolidation, merger,
sale, transfer or share exchange shall include such terms so as to continue to
give to the holder of Preferred Stock the right to receive the securities or
property set forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(viii) If:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(b) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(c) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(d) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock of
the Company (other than a subdivision or combination of the
outstanding shares of Common Stock), any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(e) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding-up of the affairs of the
Company; then the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of Preferred
Stock, and shall cause to be mailed to the holders of Preferred
Stock at their last addresses as they shall appear upon the stock
books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or
winding-up; provided, however, that the failure to mail such
notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be
specified in such notice.
-43-
(e) If at any time conditions shall arise by reason of action taken
by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of the holders
of Preferred Stock (different than or distinguished from the
effect generally on rights of holders of any class of the
Company's capital stock) or if at any time any such conditions
are expected to arise by reason of any action contemplated by the
Company, the Company shall mail a written notice briefly
describing the action contemplated and the material adverse
effects of such action on the rights of the holders of Preferred
Stock at least 30 calendar days prior to the effective date of
such action, and an Appraiser selected by the holders of majority
in interest of the Preferred Stock shall give its opinion as to
the adjustment, if any (not inconsistent with the standards
established in this Section 5), of the Conversion Price
(including, if necessary, any adjustment as to the securities
into which shares of Preferred Stock may thereafter be
convertible) and any distribution which is or would be required
to preserve without diluting the rights of the holders of shares
of Preferred Stock; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments
recommended by each such Appraiser. The Board of Directors shall
make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action
contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the
opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Conversion Price to
more than the Conversion Price then in effect.
(f) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely
for the purpose of issuance upon conversion of Preferred Stock as
herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the holders of
Preferred Stock, such number of shares of Common Stock as shall
be issuable (taking into account the adjustments and restrictions
of Section 5(b) and Section 5(d) hereof) upon the conversion of
all outstanding shares of Preferred Stock. The Company covenants
that all shares of Common Stock that shall be so issuable shall,
upon issue, be duly and validly authorized, issued and fully paid
and nonassessable.
(g) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment
in respect of any final fraction of a share based on the Per
Share Market Value at such time. If the Company elects not, or is
unable, to make such a cash payment, the holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(h) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that
may be payable in respect of the issue or delivery of such
-44-
certificate, provided that the Company shall not be required to
pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the holder of such
shares of Preferred Stock so converted and the Company shall not
be required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has
been paid.
(i) Shares of Preferred Stock converted into Common Stock shall be
canceled and shall have the status of authorized but unissued
shares of preferred stock.
(j) Each Holder Conversion Notice shall be given by facsimile and by
mail, postage prepaid, addressed to the attention of the Chief
Financial Officer of the Company at the facsimile telephone
number and address of the principal place of business of the
Company. Each Company Conversion Notice shall be given by
facsimile and by mail, postage prepaid, addressed to each holder
of Preferred Stock at the facsimile telephone number and address
of such holder appearing on the books of the Company or provided
to the Company by such holder for the purpose of such Company
Conversion Notice, or if no such facsimile telephone number or
address appears or is so provided, at the principal place of
business of the holder. Any such notice shall be deemed given and
effective upon the earliest to occur of (i)(a) if such Conversion
Notice is delivered via facsimile at the facsimile telephone
number specified in this Section 5(j) prior to 4:30 p.m. (Eastern
Standard Time) on any date, such date (or, in the case of a
Company Conversion Notice, the next Trading Day) or such later
date as is specified in the Conversion Notice, and (b) if such
Conversion Notice is delivered via facsimile at the facsimile
telephone number specified in this Section 5(j) after 4:30 p.m.
(Eastern Standard Time) on any date, the next date (or, in the
case of a Company Conversion Notice, the next Trading Day after
such next day) or such later date as is specified in the
Conversion Notice, (ii) five days after deposit in the United
States mails or (iii) upon actual receipt by the party to whom
such notice is required to be given.
Section 6. Definitions.
------------
For the purposes hereof, the following terms shall have the following meanings:
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, no par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the numerator
is Stated Value plus accrued but unpaid dividends, and of which the denominator
is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity securities
of the Company, except the Company's Series A Convertible Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock. -45-
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on The Nasdaq Stock Market or
other stock exchange on which the Common Stock has been listed or if there is no
such price on such date, then the closing bid price on such exchange on the date
nearest preceding such date, or (b) if the Common Stock is not listed on The
Nasdaq Stock Market or any stock exchange, the closing bid for a share of Common
Stock in the over-the-counter market, as reported by the NASD at the close of
business on such date, or (c) if the Common Stock is not quoted on the NASD, the
closing bid price for a share of Common Stock in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices), or (d) if the Common
Stock is no longer publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser (as defined in Section 5(d)(iv) above)
selected in good faith by the holders of a majority in interest of the shares of
the Preferred Stock; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original holder of the Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is traded on the
NASDAQ or principal stock exchange on which the Common Stock has been listed, or
(b) if the Common Stock is not listed on The NASDAQ or any stock exchange, a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the NASD, or (c) if the Common Stock is not quoted on THE NASDAQ, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
-46-
IN WITNESS WHEREOF, Wallstreet Racing Stables, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its President & Chief Executive Officer, and attested by
▇▇▇▇▇▇ ▇▇▇▇▇, its' Chief Financial Officer, this ____ day of October 2000.
Wallstreet Racing Stables, Inc.
By:
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President & Chief Executive Officer
Attest:
By:
-----------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Chief Financial Officer
-47-
ANNEX 1
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series A Convertible Preferred Stock indicated below, into shares of Common
Stock, no par value per share (the "Common Stock"), of Wallstreet Racing
Stables, Inc. (the "Company") according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations: -----------------------------------
Date to Effect Conversion
-----------------------------------
Number of shares of Preferred Stock
to be Converted
-----------------------------------
Applicable Conversion Price
-----------------------------------
Signature
-----------------------------------
Name:
-----------------------------------
-48-
ANNEX 2
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Wallstreet Racing Stables, Inc.
(the "Company") hereby notifies the addressee hereof that the Company hereby
elects to exercise its right to convert [ ] shares of its Series A
Convertible Preferred Stock held by the Holder into shares of Common Stock, no
par value per share (the "Common Stock") of the Company according to the terms
hereof, as of the date written below. No fee will be charged to the Holder for
any conversion hereunder, except for such transfer taxes, if any which may be
incurred by the Company if shares are to be issued in the name of a person other
than the person to whom this notice is addressed.
Conversion calculations:
-----------------------------------
Date to Effect Conversion
-----------------------------------
Number of Shares of Preferred Stock
to be Converted
-----------------------------------
Applicable Conversion Price
-----------------------------------
Signature
-----------------------------------
Name:
-----------------------------------
Address:
-49-
EXHIBIT B
================================================================================
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of October ____ 2000, by and among Wallstreet Racing Stables, Inc., a
Colorado Corporation (the "Company"), and Global Asset Fund, (the "Purchaser").
This Agreement is made pursuant to the Convertible Preferred Stock Purchase
Agreement, dated as of October ______, 2000 by and among the Company and the
Purchaser (the "Purchase Agreement"). The execution of this Agreement is a
condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used
in this Agreement, the following terms shall have the following
meanings:
"Advice" shall have the meaning as set forth in Section 3(o).
--------
"Affiliate"
-----------
means, with respect to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used
with respect to any Person, means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms of "affiliated,"
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day"
-------------
means any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the state of
Colorado generally are authorized or required by law or other
government actions to close.
"Closing Date"
--------------
shall have the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock"
--------------
means the Company's Common Stock, par value $.001 per share.
"Effectiveness Date"
--------------------
means the 90th day following the Closing Date.
-50-
"Effectiveness Period"
----------------------
shall have the meaning set forth in Section 2(a)
"Event" shall have the meaning set forth in Section 4.
------
"Event Date" shall have the meaning set forth in Section 4.
------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
--------------
"Filing Date" means the 90th day following the Closing Date.
-------------
"Holder" or "Holders"
---------------------
means the holder or holders, as the case may be, from time to time of
Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 6(c).
------------------
"Indemnifying Party" shall have the meaning set forth in Section 6(c).
--------------------
"Losses" shall have the meaning set forth in Section 6(a).
--------
"Colorado Courts" shall have the meaning set forth in Section 8(i).
-----------------
"Person"
--------
means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding"
------------
means an action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
"Prospectus"
------------
means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated under to the Securities Act), as amended or supplemented
by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to
the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities"
------------------------
means the shares of Series A Preferred purchased by the Purchaser
pursuant to the Purchase Agreement and the shares of Common Stock into
which such shares of Series A Preferred are convertible pursuant to
the Purchase Agreement.
2
-51-
"Registration Statement"
-------------------------
means the registration statement, contemplated by Section 2(a),
including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"Rule 144"
----------
means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 144A"
-----------
means Rule 144A promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158"
----------
means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415"
----------
means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
----------------
"Special Counsel"
-----------------
means any special counsel to the Holders, for which the Holders will
be reimbursed by the Company pursuant to Section 4.
"Underwritten registration or underwritten offering"
----------------------------------------------------
means a registration in connection with which securities of the
Company are sold to an underwriter for re-offering to the public
pursuant to an effective registration statement.
2. Registration
------------
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a Registration Statement covering all
Registrable Securities (which Registrable Securities shall include
3,000,000 shares of Common Stock or such other number of shares agreed
to by the parties to the Purchase Agreement) for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 or another appropriate form permitting
registration of Registrable Securities for resale by the Holders in
the manner or manners designated by them (including, without
limitation, public or private sales and one or more underwritten
offerings). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities
Act as promptly as practicable after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until the
date which is three years after the Closing Date or such earlier date
when all Registrable Securities covered by such Registration Statement
3
-52-
have been sold or may be sold pursuant to Rule 144 as determined by
the counsel to the Company pursuant to a written opinion letter,
addressed to the Holders, to such effect (the "Effectiveness Period");
provided, however, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during
the Effectiveness Period if it voluntarily takes any action that would
result in the Holders not being able to sell the Registrable
Securities covered by such Registration Statement during the
Effectiveness Period, unless such action is required under applicable
law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it
effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an underwritten
offering. In such event, and if the managing underwriters advise the
Company and such Holders in writing that in their opinion the amount
of Registrable Securities proposed to be sold in such offering exceeds
the amount of Registrable Securities which can be sold in such
offering, there shall be included in such underwritten offering the
amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated
pro rata among the Holders proposing to sell Registrable Securities in
such underwritten offering.
(c) If any of the Registrable Securities are to be sold in an
underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected
by the Holders of a majority of the Registrable Securities included in
such offering and shall be approved by the company, which approval
shall not be unreasonably withheld. No Holder may participate in any
underwritten offering hereunder unless such Person (i) agrees to sell
its Registrable Securities on the basis provided in any underwriting
agreements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents required under the terms of such arrangements.
3. Registration Procedures
-----------------------
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission within the time period
set forth in Section 2 a Registration Statement on Form S-3 in
accordance with the method or methods of distribution thereof as
specified by the Holders, and cause the Registration Statement to
become effective and remain effective as provided herein; provided,
however, that not less than 5 Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference), the Company shall
4
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(i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated
by reference) will be subject to the review of such Holders, their
Special Counsel and such managing underwriters, and (ii) cause its
officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
opinion of respective counsel to such Holders and such underwriters,
to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement
or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities, their
Special Counsel, or any managing underwriters, shall reasonably object
in writing on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as
may be necessary to keep the Registration Statement continuously
effective for the applicable time period; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under
the Securities Act; (iii) respond as promptly as practicable to any
comments received from the Commission with respect to the Registration
Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Holders thereof set forth
in the Registration Statement as so amended or in such Prospectus as
so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters immediately (and,
in the case of (i)(A) below, not less than 5 days prior to such
filing) and (if requested by any such Person) confirm such notice in
writing no later than one Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed and, (B) with
respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus
or for additional information; (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time
any of the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated
hereby ceases to be true and correct in all material respects; (v) of
the receipt by the Company 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; and (vi)
of the occurrence of any event that makes any statement made in the
Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration
Statement or the Prospectus, as the case may be, 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 light of the circumstances under which they were made, not
misleading.
5
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(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities
for sale in any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority of the Registrable Securities to be sold in connection with
an underwritten offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement
such information as such managing underwriters and such Holders
reasonably agree should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall
not be required to take any action pursuant to this Section 3(e) that
would, in the opinion of counsel for the Company, violate applicable
law.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one executed copy of
each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to
the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders and any
underwriters in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their respective counsel in connection
with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for
offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and
6
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to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or subject the
Company to any material tax in any such jurisdiction where it is not
then so subject.
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates
shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in
such names as any such managing underwriters or Holders may request at
least two Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each
securities exchange or market, if any, on which similar securities
issued by the Company are then listed.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith
(including those reasonably requested by any managing underwriters and
the Holders of a majority of the Registrable Securities being sold) in
order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered
into, (i) make such representations and warranties to such Holders and
such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when
requested; (ii) obtain and deliver copies thereof to each Holder and
the managing underwriters, if any, of opinions of counsel to the
Company and updates thereof addressed to each selling Holder and each
such underwriter, in form, scope and substance reasonably satisfactory
to any such managing underwriters and Special Counsel to the selling
Holders covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such Special Counsel and underwriters; (iii) immediately
prior to the effectiveness of the Registration Statement, and, in the
case of an underwritten offering, at the time of delivery of any
7
-56-
Registrable Securities sold pursuant thereto, obtain and deliver
copies to the Holders and the managing underwriters, if any, of "cold
comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in
the Registration Statement), addressed to each selling Holder and each
of the underwriters, if any, in form and substance as are customary in
connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling Holders and
the underwriters, if any, than those set forth in Section 6 (or such
other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable
Securities participating in such underwritten offering; and (v)
deliver such documents and certificates as may be reasonably requested
by the Holders of a majority of the Registrable Securities being sold,
their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant
to clause 3(l)(i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant
retained by such selling Holders or underwriters, at the offices where
normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the officers, directors,
agents and employees of the Company and its subsidiaries to supply all
information in each case requested by any such Holder, representative,
underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that
is determined in good faith by the Company in writing to be of a
confidential nature at the time of delivery of such information shall
be kept confidential by such Persons, unless (i) disclosure of such
information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities; (ii)
disclosure of such information, in the opinion of counsel to such
Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such
source is not bound by a confidentiality agreement.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statement, which
statement shall cover said 12-month period, or end shorter periods as
is consistent with the requirements of Rule 158.
8
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(o) Provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Registration Statement.
The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such
Registrable Securities as is required by law to be disclosed in the
Registration Statement and the Company may exclude from such
registration the Registrable Securities of any such Holder who
unreasonably fails to furnish such information within a reasonable
time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the inclusion therein of
language, in form and substance reasonably satisfactory to such
Holder, to the effect that the ownership by such Holder of such
securities is not to be construed as a recommendation by such Holder
of the investment quality of the Company's securities covered thereby
and that such ownership does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) if
such reference to such Holder by name or otherwise is not required by
the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent
to the time that such reference ceases to be required.
Each Purchaser covenants and agrees that (i) it will not offer or
sell any Registrable Securities under the Registration Statement until
it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(g) and notice from the
Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section
3(c) (ii) the Purchaser and its officers, directors or Affiliates, if
any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Registration Statement and it
will promptly inform the company if any of the information supplied by
the purchaser for inclusion in the Registration Statement ceases to be
correct or omits any information which causes the supplied information
to be misleading.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c)(ii),
3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities until such
Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(j), or until
it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement.
9
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4. Liquidated Damages.
-------------------
The Company acknowledges and agrees that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Company fails to fulfill its obligations
hereunder and (a) a Registration Statement is not filed with the Commission
on or prior to the Filing Date, (b) a Registration Statement is not
declared effective by the Commission on or prior to the Effectiveness Date,
(c) a Registration Statement is filed and declared effective but thereafter
ceases to be effective at any time during the Effectiveness Period without
being succeeded within 30 days by a subsequent Registration Statement or
supplement filed with and declared effective by the Commission.
Upon the occurrence of an Event, the Company agrees to decrease the
Conversion Price applicable to a conversion of Series A Preferred in
accordance with Section 5(d) (I) of the Certificate of Designation by two
percent (2%) per month for each of the first two months after each Event
Date. Commencing on the third month after an Event Date, the two percent
(2%) monthly penalty shall be paid to the Holder in cash or stock at the
companies option. Such increase in discount and/or payment in cash, as the
case may be, shall be paid as liquidated damages, and not as a penalty, to
each Holder; provided, that such liquidated damages will, in each case,
cease to accrue (subject to the occurrence of another Event) on the date in
which the applicable Registration Statement is no longer subject to an
order suspending the effectiveness thereof or Proceedings relating thereto
or a subsequent Shelf Registration is declared effective.
The Company shall notify each Holder within ten days of each Event and
Event Date. The Company shall pay the liquidated damage due on the
Registrable Securities to each Holder of record as at the Event Date on the
third Business Day of each month in which such liquidated damages shall
accrue by check delivered to the address for notice of such Holder set
forth herein.
5. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the
Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred
to in the foregoing sentence shall include, without limitation, (i)
all registration and filing fees (including, without limitation, fees
and expenses (A) with respect to filings required to be made with the
Commission. and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of
the Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or Holders of a
majority of Registrable Securities may designate, not to exceed a
total of $5,000)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by
the holders of a majority of the Registrable Securities included in
the Registration Statement), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company and
10
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Special Counsel for the Holders (subject to the provisions of Section
5(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 3(1)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Company so desires such insurance, and
(vii) fees and expenses of all other Persons retained by the Company
in connection with the consummation of the transactions contemplated
by this Agreement. In addition, the Company shall be responsible for
all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in
connection with the listing of the Registrable Securities on any
securities exchange on which similar securities issued by the Company
are then listed.
6. Indemnification
---------------
(a) Indemnification by the Company.
-------------------------------
The Company shall, notwithstanding termination of this Agreement
and without limitation as to time, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers, investment
advisors and employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable
law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus
or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by or
on behalf of such Holder expressly for use therein, which
information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the
Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
11
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(b) Indemnification by Holders.
---------------------------
In connection with the Registration Statement, each Holder shall
furnish to the Company in writing such information as the Company
reasonably requests for use in connection with the Registration
Statement or any Prospectus and agrees, jointly and not severally, to
indemnify and hold harmless the Company, their directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court
of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or arising solely out of or
based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in
writing by such Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus and that such
information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus or such form of prospectus or
to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount
of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings.
---------------------------------------
If any Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party promptly shall notify the Person from whom indemnity
is sought (the "Indemnifying Party") in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal
or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed to pay such fees and expenses; or (2)
the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense thereof and such counsel shall be
at the expense of the Indemnifying Party). The Indemnifying Party
12
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shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within 10 Business Days of written notice thereof
to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may
require such Indemnified Party to undertake to reimburse all such fees
and expenses to the extent it is finally judicially determined that
such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution.
-------------
If a claim for indemnification under Section 6(a) or 6(b) is
unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this
Section would apply by its terms (other than by reason of exceptions
provided in this Section), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or
made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to
the limitations set forth in Section 6(c), any attorneys' or other
fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this
Section was available to such party.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 6(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 6(d), the Purchaser shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the
proceeds actually received by the Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of
any damages that the Purchaser has otherwise been required to pay by
13
-62-
reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
7. Rule 144
--------
The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The
Company further covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided
by Rule 144. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to
whether it has complied with such requirements.
8. Miscellaneous
-------------
(a) Remedies.
---------
In the event of a breach by the Company or by a Holder, of any of
their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights
granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under
this Agreement. The Company and each Holder agree that monetary
damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action
for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements.
---------------------------
Except as specifically set forth in Schedule 3.1 to the Purchase
Agreement, none of the Company nor any of its subsidiaries has, as of
the date hereof, nor shall the Company or any of its subsidiaries, on
or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as set specifically forth in Schedule 3.1 to
the Purchase Agreement, none of the Company nor any of its
subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the
right to request the Company to register any securities of the Company
under the Securities Act unless the rights so granted are subject in
all respects to the prior rights in full of the Holders set forth
herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement.
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(c) Entire Agreement; Amendments.
-----------------------------
This Agreement, together with the Exhibits, Annexes and Schedules
hereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
(d) Amendments and Waivers.
-----------------------
The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not
be given, unless the same shall be in writing and signed by the
Company and the Holders of at least a majority of the then outstanding
Registrable Securities; provided, however, that, for the purposes of
this sentence, Registrable Securities that are owned, directly or
indirectly, by the Company, or an Affiliate of the Company are not
deemed outstanding. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to
which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
(e) Notices.
--------
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
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If to the Company:
Pipeline Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With copies to: --------------------------------
--------------------------------
--------------------------------
Attn:
--------------------------------
If to the Purchaser: --------------------------------
--------------------------------
--------------------------------
Attn:
--------------------------------
With copies to: --------------------------------
--------------------------------
--------------------------------
Attn:
--------------------------------
(f) Successors and Assigns.
-----------------------
This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of
each Holder.
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(g) Counterparts.
-------------
This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed)
the same with the same force and effect as if such facsimile signature
were the original thereof.
(h) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
----------------------------------------------------------------
This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado, without regard to principles
of conflicts of law. Each of the purchasers and the company hereby
irrevocably submits to the jurisdiction of any Colorado state court or
any federal court sitting in the State of Colorado collectively, (the
"Colorado Courts") in respect of any Proceeding arising out of or
relating to this Agreement, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction
of the Colorado Courts. The Company and each of the purchasers
irrevocably waives to the fullest extent it may effectively do so
under applicable law any objection that it may now or hereafter have
to the laying of the venue of any such Proceeding brought in any
Colorado Court and any claim that any such Proceeding brought in any
Colorado Court has been brought in an inconvenient forum. Nothing
herein shall affect the right of any party to serve process in any
manner permitted by law or to commence legal proceedings or otherwise
proceed against the company in any other jurisdiction.
(i) Cumulative Remedies.
--------------------
The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
(j) Severability.
-------------
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and
employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or
unenforceable.
(k) Headings.
---------
The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(l) Shares held by The Company and its Affiliates.
----------------------------------------------
Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its Affiliates (other
than the Purchaser or transferees or successors or assigns thereof if
such Persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders
of such required percentage.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WALLSTREET RACING STABLES, INC.
By:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President and CEO
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(PURCHASER)
By:
-------------------------------
Authorized Signatory
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