NOTE AND WARRANT PURCHASE AGREEMENT
THIS NOTE AND WARRANT PURCHASE AGREEMENT ("AGREEMENT") is made as of
the ___ day of December ___, 2001 by and among ZENASCENT, INC., a Delaware
corporation (the "COMPANY"), and __________________________ (the "PURCHASER").
The parties hereby agree as follows:
1. AMOUNT AND TERMS OF THE LOAN; ISSUANCE OF WARRANTS
1.1 THE LOAN. Subject to the terms of this Agreement, the Purchaser agrees
to lend to the Company the amount set forth in the promissory note in
substantially the form attached hereto as Exhibit A (the "NOTE"). The amount of
the Note is also the "LOAN AMOUNT." Unless otherwise defined, the capitalized
terms herein shall have the meanings assigned to such terms in the Note. The
parties hereto agree that the Note is one of a number of other promissory notes,
which are substantially the same as the Note (the "NOTES"), which Notes are
being issued in connection with the Note and the Warrant (as defined below). The
minimum amount of each Note will be $25,000. The minimum amount of funds to be
raised with respect to Notes shall be $200,000 and the maximum amount shall be
$1,500,000.
1.2 ISSUANCE OF WARRANTS. Subject to the terms of this Agreement, the
Company agrees to sell to the Purchaser and the Purchaser agrees to buy from the
Company, a warrant to purchase 1 share of common stock, par value $.01 per
share, of the Company for every $2.00 of original principal amount of the Note.
The purchase price for the warrant shall be equal to $.01 for each share of
common stock of the Company for which the Warrant can be exercised (the "WARRANT
PURCHASE PRICE"). The warrant shall be in substantially the form attached hereto
as Exhibit B (the "WARRANT"). There will be no warrants for fractional shares.
If fractional shares would occur based upon the mathematical formula used in
this Section to calculate the number of shares to be issued upon the exercise of
the Warrant, the amount of shares will be rounded up to the next highest share.
Pursuant to the Warrant, upon the exercise of the Warrant, an appropriate number
of shares of common stock of the Company will be issued to the Purchaser.
Notwithstanding the foregoing, on the date hereof, there are not sufficient
shares of common stock of the Company reserved to issue such shares of common
stock of the Company if the Warrant were exercised on the date hereof. If such
number of shares of common stock of the Company are for any reason whatsoever
still not available to be issued by the Company at the time of the exercise of
the Warrant, the Company shall so issue such shares of common stock as soon as
practicable.
1.3 The Company and the Purchaser, having adverse interests and as a result
of arm's length bargaining, agree that:
(A) Neither the Purchaser nor any affiliated company has rendered any
services to the Company in connection with this Agreement;
(B) The Warrant is not being issued as compensation;
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(C) The aggregate fair market value of the Note, if issued apart from
the Warrant, is $________________[AMOUNT OF NOTE], and the aggregate fair market
value of the Warrant, if issued apart from the Note, is $0.01 per share covered
by the Warrant; and
(D) All tax returns and other information return of each party relative
to this Agreement and the Note and Warrant issued pursuant hereto shall
consistently reflect the matters agreed to in (a) through (c) above.
2. THE CLOSING
2.1 CLOSING DATE. The closing of the purchase and sale of the Note and the
Warrant (the "CLOSING") shall be held in accordance with Section 5.9 (the
"CLOSING DATE").
2.2 DELIVERY. Prior to the Closing, the Purchaser will execute this
Agreement and deliver the Loan Amount and the Warrant Purchase Price into escrow
pursuant to wire or other instructions to be established. Promptly after the
Closing, the Company shall issue and deliver to the Purchaser a Note in favor of
the Purchaser payable in the principal amount of the Loan Amount and a Warrant
in accordance with Section 1.2.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
Except as set forth in the Schedules attached hereto, the Company represents
and warrants to the Purchaser as follows:
3.1 CORPORATE POWER. The Company will have at the Closing Date all requisite
corporate power to execute and deliver this Agreement and to carry out and
perform its obligations under the terms of this Agreement.
3.2 AUTHORIZATION. All corporate action on the part of the Company, its
directors and its shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder.
3.3 OFFERING. Assuming the accuracy of the representations and warranties of
the Purchaser contained in Section 4 hereof, the offer, issue, and sale of the
Note and Warrant are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "1933
ACT"), and have been registered or qualified (or are exempt from registration
and qualification) under the registration, permit, or qualification requirements
of all applicable state securities laws.
3.4 ORGANIZATION AND QUALIFICATION. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest) (a complete list of which is set forth in SCHEDULE 3.4) are
corporations duly organized and validly existing in good standing under the laws
of the respective jurisdictions of their incorporation, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of
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property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Note, this Agreement
and the Warrant (cumulatively the "Transaction Documents").
3.5 AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS. (i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations in connection with the Transaction Documents, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Warrants pursuant to this
Agreement, have been duly and validly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors, or its shareholders, (iii) the Transaction Documents
have been duly and validly executed and delivered by the Company, and (iv) the
Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
3.6 CAPITALIZATION. The Company has authorized 20,000,000 shares of common
stock, par value $0.01 ("Common Stock") and 5,000,000 shares of preferred stock,
par value $0.01. As of November 25, 2001, there were 8,339,977 shares of Common
Stock issued and outstanding. In addition, the Company has issued 135,000 shares
of Series A Convertible Preferred Stock ("Series A Stock") that are convertible
into 1,350,000 shares of Common Stock and warrants to acquire 1,350,000 shares
of Common Stock. The Company has agreed to issue certain of its Preferred Stock
pursuant to the Merger Agreement. The Company has reserved for issuance
approximately 9,397,905 shares of Common Stock to be issued upon the exercise or
conversion, if any, of all outstanding options, warrants and conversion rights,
other than the Series A Stock, the Series B Convertible Preferred Stock and the
securities issued pursuant to the Merger Agreement. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in SCHEDULE 3.6 which is attached hereto
and made a part hereof, (i) no shares of the Company's capital stock are subject
to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding shares of capital stock, options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its
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Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act, (v) there are no outstanding securities of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement, (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement and (viii)
there is no dispute as to the class of any shares of the Company's capital
stock. The Company has furnished to the Purchaser, or the Purchaser has had
access through XXXXX to, true and correct copies of the Company's Articles of
Incorporation, as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS `), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
3.7 ISSUANCE OF SHARES. Upon issuance in accordance with this Agreement, the
Common Stock will be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof. In the event the
Company cannot issue a sufficient number of shares of Common Stock, due to the
remaining number of authorized shares of Common Stock being insufficient, the
Company will use its best efforts to issue the maximum number of shares it can
based on the remaining balance of authorized shares, if any, and will use its
best efforts to increase the number of its authorized shares as soon as
reasonably practicable.
3.8 NO CONFLICTS. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree, including United States federal and state securities laws and
regulations and the rules and regulations of the principal securities exchange
or trading market on which the Common Stock is traded or listed (the "Principal
Market"), applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in SCHEDULE 3.8, neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, the Articles
of Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or their
organizational charter or by-laws, respectively, or any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not individually or in
the aggregate have a Material Adverse Effect. The business of the
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Company and its Subsidiaries is not being conducted, and shall not be conducted,
in violation of any law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or self-regulatory agency, or
court, except for possible violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
1933 Act, the Company is not required to obtain any consent, authorization,
permit or order of, or make any filing or registration (except the filing of a
registration statement) with, any court, governmental authority or agency,
regulatory or self-regulatory agency or other third party in order for it to
execute, deliver or perform any of its obligations under, or contemplated by,
the Transaction Documents in accordance with the terms hereof or thereof. All
consents, authorizations, permits, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and are in full force and
effect as of the date hereof. Except as disclosed in Schedule 3(e), the Company
and its Subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing. The Company is not, and will not be, in violation
of the listing requirements of the Principal Market as in effect on the date
hereof and on each of the Closing Dates and is not aware of any facts which
would reasonably lead to delisting of the Common Stock by the Principal Market
in the foreseeable future.
3.9 SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 2000, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the Securities and Exchange Commission ("SEC") pursuant
to the reporting requirements of the Securities and Exchange Act of 1934 ("1934
Act") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Purchaser or its representatives,
or they have had access through XXXXX, to true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Purchaser which is
not included in the SEC Documents, including, without limitation, information
referred to in Section 3.7 of this Agreement, contains any untrue
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statement of a material fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstance under which they
are or were made, not misleading.
3.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3.10 or the
SEC Documents filed at least five (5) days prior to the date hereof, since June
1, 2000, there has been no change or development in the business, properties,
assets, operations, financial condition, results of operations or prospects of
the Company or its Subsidiaries which has had or reasonably could have a
Material Adverse Effect. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
3.11 ABSENCE OF LITIGATION. Except as set forth in SCHEDULE 3.11, there is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
3.12 ACKNOWLEDGMENT REGARDING THE INVESTMENT. The Company acknowledges and
agrees that the Purchaser is acting solely in the capacity of arm's length
investor with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and any advice given by the
Purchaser or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Purchaser's investment. The Company further
represents to the Purchaser that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
3.13 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. No
event, liability, development or circumstance has occurred or exists, or to its
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
3.14 EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the
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1933 Act) has notified the Company that such officer intends to leave the
Company's employ or otherwise terminate such officer's employment with the
Company.
3.15 INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth on SCHEDULE 3.15, none of the Company's
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two years
from the date of this Agreement. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule 3(l), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
3.16 ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
3.17 TITLE. The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in SCHEDULE 3.17 or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its Subsidiaries.
Any real property and facilities held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
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3.18 INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
3.19 REGULATORY PERMITS. The Company and its Subsidiaries have in full force
and effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
3.20 INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.21 NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
3.22 TAX STATUS. The Company and each of its Subsidiaries has made or filed
all United States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material
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amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
3.23 CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3.23 and in the
SEC Documents filed at least ten days prior to the date hereof and except for
arm's length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company could
obtain from third parties and other than the grant of stock options disclosed on
SCHEDULE 3.6, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
3.24 DILUTIVE EFFECT. The Company understands and acknowledges that the
number of shares of Common Stock that may be issuable pursuant to the terms of
the Transaction Documents will increase in certain circumstances including, but
not necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines following the maturity date of the Note. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock pursuant to the terms of the
Transaction Documents is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
shareholders of the Company.
3.25 COVENANTS OF THE COMPANY.
A. BEST EFFORTS. The Company shall use its best efforts timely to satisfy
each of the conditions to be satisfied by it as provided in this Agreement.
B. BLUE SKY. The Company shall, at its sole cost and expense take such
action as the Company shall reasonably determine is necessary to qualify the
Common Stock underlying the Warrants for, or obtain exemption for the same for,
sale to the Purchaser under applicable securities or "Blue Sky" laws of such
states of the United States, as specified by Purchaser. The Company shall, at
its sole cost and expense, make all filings and reports relating to the offer
and sale of the Note, the Warrants, the Common Stock underlying the Warrants and
the Common Stock issuable pursuant to the terms of the Transaction Documents
(cumulatively the "SECURITIES") as required under the applicable securities or
"Blue Sky" laws of such states of the United States as specified by the
Purchaser.
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C. REPORTING STATUS. Until the earlier of (i) the date that the Purchaser
may sell all of the Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the date on which
the Purchaser shall have sold all the Securities, the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as a reporting company under the 1934
Act.
D. USE OF PROCEEDS. The net proceeds from the issuance of the Notes shall be
used by the Company to cover escrow fees, to pay Xxxxxx Xxxxxxx & Company,
Inc.'s legal fees of $5,000 to Xxxxxx X. XxXxxxx, to make payment(s) in
accordance with the merger agreement with Xxxxxx Xxxxxxx Boxing, Inc. and for
general working capital purposes.
E. CORPORATE EXISTENCE. The Company shall use its best efforts to preserve
and continue the corporate existence of the Company.
F. RESERVATION OF SHARES. Subject to the following sentence, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the issuance of the Common Stock underlying the Securities. The
Company does not currently have a sufficient number of authorized shares of
Common Stock to reserve and keep available for issuance. Upon closing of the
"MERGER" as defined in Section 4.2, the Company shall use its best efforts to
increase the number of authorized shares of Common Stock by seeking shareholder
approval for the authorization of such additional shares as soon as possible.
G. LISTING. The Company hereby grants the Purchaser piggy-back registration
rights to include all of the Common Stock underlying the Securities in the next
registration statement to be filed by the Company other than an S-8 registration
statement. The Company shall maintain the Common Stock's authorization for
quotation on the Principal Market, unless the Purchaser and the Company agree
otherwise. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market (excluding suspensions of not more than
one trading day resulting from business announcements by the Company). The
Company shall promptly provide to the Purchaser copies of any notices it
receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
H. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each
of its Subsidiaries not to, enter into, amend, modify or supplement, or permit
any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two years, shareholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "RELATED PARTY"),
except for (i) customary employment arrangements and benefit programs on
reasonable terms, (ii) any agreement,
10
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, or (iii) any agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors of
the Company. For purposes hereof, any director who is also an officer of the
Company or any Subsidiary of the Company shall not be a disinterested director
with respect to any such agreement, transaction, commitment or arrangement.
"AFFILIATE" for purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a 5% or more
equity interest in that person or entity, (ii) has 5% or more common ownership
with that person or entity, (iii) Controls that person or entity, or (iv) shares
common control with that person or entity. "CONTROL" or "CONTROLS" for purposes
hereof means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
I. FILING OF FORM 8-K. On or before the date which is five (5) business days
after the signing for this Agreement by the Company, or such later date as may
be allowed by applicable law, the Company shall file a Current Report on Form
8-K with the SEC describing the terms of the transaction contemplated by the
Transaction Documents in the form required by the 1934 Act, if such filing is
required.
J. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION. The Company shall
promptly notify Purchaser upon the occurrence of any of the following events in
respect of a registration statement or related prospectus covering the Common
Stock underlying the Securities: (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the registration statement for amendments
or supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of any registration statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Common Stock underlying the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
registration statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the registration statement, related
prospectus or documents so that, in the case of a registration statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the registration statement would be appropriate, and the Company
shall promptly make available to Purchaser any such supplement or amendment to
the related prospectus.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
11
4.1 PURCHASE FOR OWN ACCOUNT. The Purchaser represents that it is acquiring
the Securities solely for its own account and beneficial interest for investment
and not for sale or with a view to distribution of the Securities or any part
thereof, has no present intention of selling (in connection with a distribution
or otherwise), granting any participation in, or otherwise distributing the
same, and does not presently have reason to anticipate a change in such
intention.
4.2 INFORMATION AND SOPHISTICATION. The Purchaser acknowledges that it has
received all the information it has requested from the Company and it considers
necessary or appropriate for deciding whether to acquire the Securities,
including, without limitation, any and all information which it requested
concerning the potential merger (the "MERGER") involving the Company and Xxxxxx
Xxxxxxx Boxing, Inc. The Purchaser acknowledges, understands and agrees that the
terms of the Merger may be changed from the terms that exist on the date hereof
and that the consent and/or the advice of the Purchaser will not be sought with
respect to any such changes. The Purchaser represents that it has had an
opportunity to ask questions and receive answers from the Company and Zenascent
regarding the terms and conditions of the offering of the Securities, the
Merger, any changes with respect to the Merger and to obtain any additional
information necessary to verify the accuracy of any information given the
Purchaser. The Purchaser further represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risk of this investment. The Purchaser further represents that it
has reviewed the SEC filings and press releases of the Company.
4.3 RISK OF LOSS; ABILITY TO BEAR ECONOMIC RISK. The Purchaser acknowledges
that investment in the Securities involves a high degree of risk, and represents
that it is able, without materially impairing its financial condition, to hold
the Securities for an indefinite period of time and to suffer a complete loss of
its investment. The Purchaser understands that if the Merger does not close, the
Purchaser is likely not to be repaid under the Note and any of the other
Securities held by the Purchaser may be of little or no value due to the failure
of the Merger to close. The Purchaser further understands that as of the date
hereof, there are not sufficient shares of Common Stock reserved to issue such
shares of Common Stock if the Warrants are exercised or any other Securities are
converted into Common Stock. Therefore, there is the possibility that such
shares of Common Stock to which the Purchaser would be entitled may never be
issued.
4.4 ACCREDITED INVESTOR STATUS. The Purchaser is an "ACCREDITED INVESTOR" as
such term is defined in Rule 501 under the Securities Act.
4.5 FURTHER ASSURANCES. The Purchaser agrees and covenants that at any time
and from time to time it will promptly execute and deliver to the Company such
further instruments and documents and take such further action as the Company
may reasonably require in order to carry out the full intent and purpose of this
Agreement.
4.6 RESTRICTION ON TRANSFER OR RESALE. The Purchaser will not sell or
otherwise transfer the Securities without registration under the 1933 Act or
applicable state securities laws or compliance with applicable exemptions
therefrom. The availability of the aforesaid exemptions depends in part upon the
accuracy of certain of the representations, declarations and warranties which
are made by Purchasers herein and in any other information furnished by
12
Purchasers to the Company, and the same may be relied upon in determining the
suitability of any Purchaser to invest in the Company. The Securities have not
been registered under the 1933 Act or under the securities laws of any state.
The Purchaser has not offered or sold any portion of the Securities being
acquired nor does the Purchaser have any present intention of dividing the
Securities with others or of selling, distributing or otherwise disposing of any
portion of the Securities either currently or after the passage of a fixed or
determinable period of time or upon the occurrence or non-occurrence of any
predetermined event or circumstance in violation of the 1933 Act.
4.7 LEGEND. The Purchaser acknowledges that each certificate representing
the Securities shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
4.8 REMEDIES. The Purchaser acknowledges and agrees that it shall not be
entitled to seek any remedies with respect to the Transaction Documents from any
party other than the Company.
4.9 AUTHORIZATION. If this Agreement is executed and delivered on behalf of
a corporation: (i) such corporation has the full legal right and power and all
authority and approval required (a) to execute and deliver, or authorize
execution and delivery of the Transaction Documents executed and delivered by or
on behalf of such corporation in connection with the purchase of the Securities
and (b) to purchase and hold the Securities; and (ii) the signature of the party
signing on behalf of such corporation is binding upon such corporation.
4.10 PRIVATE OFFERING. The Purchaser is not subscribing for the Securities
as a result of, or pursuant to, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or meeting.
4.11 INVESTMENT INTENT. The Purchaser is purchasing the Securities for its
own account for investment, and not with a view toward the resale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided, however, that by making the
representations herein, Purchaser does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in
13
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act. Purchaser is neither an underwriter of, nor a dealer in, the
Securities and is not participating in the distribution or resale of the
Securities.
4.12 PURCHASER'S KNOWLEDGE AND ADEQUACY OF REPRESENTATION. The Purchaser or
the Purchaser's representatives, as the case may be, has such knowledge and
experience in financial, tax and business matters so as to enable the Purchaser
to utilize the information made available to the Purchaser in connection with
the Transaction Documents to evaluate the merits and risks of an investment in
the Securities and to make an informed investment decision with respect thereto.
Xxxxxxxx & Xxxxxxxxxx, LLP has acted as counsel to the Company and Xxxxxx X.
XxXxxxx, Esq. has acted as counsel to Xxxxxx Xxxxxxx & Company, Inc., and
neither attorney has represented the Purchaser. The Purchaser represents and
warrants that it has had ample opportunity to consult with its own legal and
financial advisors concerning and investment in the Securities and the terms set
forth in the Transaction Documents.
4.13 AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER. The Purchaser hereby
acknowledges that it has reviewed or has had sufficient opportunity to review
and discuss with Purchaser's legal and financial advisors, the Amended and
Restated Agreement and Plan of Merger, dated as of September 17, 2001, by and
among the Company, Zenascent Newco, Inc., Xxxxxx Xxxxxxx Boxing, Inc., Xxxxxx
Xxxxxxx Promotions, Ltd., Xxxxxx Xxxxxxx and Xxxxx XxXxxxxxx (as such agreement
may be amended, modified, restated or replaced, the "Merger Agreement"), a copy
of which is attached as an exhibit to a Form 8-K/A filed with the Securities and
Exchange Commission and hereby consents to the transactions contemplated by the
Merger Agreement to the fullest extent required by the Merger Agreement. The
Purchaser hereby understands and acknowledges that the transactions contemplated
by the Merger Agreement shall potentially have a dilutive effect, and that the
Purchaser's obligations pursuant to this Agreement are absolute and
unconditional regardless of the dilutive effect that securities issued under the
Amended and Restated Agreement and Plan of Merger, dated as of September 17,
2001, may have on the Purchaser's ownership interests in the Company.
5. MISCELLANEOUS
5.1 BINDING AGREEMENT. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
5.2 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of New York as applied to agreements among New York
residents, made and to be performed entirely within the State of New York.
5.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14
5.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
5.5 NOTICES. Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given upon personal delivery or
one (1) business day after deposit with a nationally recognized overnight
delivery service, addressed to the Company at 00 Xxxx 00xx Xxxxxx, Xxxxx 000,
Xxx Xxxx, Xxx Xxxx 00000 or to Purchaser at the address set forth in the
Questionnaire to this Agreement, or at such other address as such party may
designate by ten (10) days advance written notice to the other party.
5.6 MODIFICATION; WAIVER. No modification or waiver of any provision of this
Agreement or consent to departure therefrom shall be effective unless in writing
and approved by the Company and the Purchaser.
5.7 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein.
5.8 TRANSFER. To the extent that the Note and the Warrant may be transferred
by the Purchaser pursuant to the terms of the Note and the Warrant and pursuant
to applicable law, the Note may only be transferred by the Purchaser together
with the Warrant, and each of the Note and Warrant may only be transferred by
the Purchaser in whole and to one party. In addition, each of the Note and the
Warrant may only be transferred by the Purchaser upon the reasonable
satisfaction of the Company that no securities law (or other law) violation
shall occur as a result of the transfer or attempted transfer of the Note and/or
the Warrant. In order to satisfy the sentence immediately preceding this
sentence, prior written consent will need to be obtained from the Company prior
to any transfer of the Note and/or the Warrant.
5.9 EFFECTIVENESS AND CLOSING. The funds delivered by the Purchaser to the
Company pursuant to this Agreement will be held in escrow. If, by or before
December 28, 2001, there shall be received, in escrow, funds with respect to
Notes, with an aggregate original principal amount of at least $200,000, the
Closing may take place. If this minimum amount is not received in escrow by
December 28, 2001, all funds delivered into escrow by such time shall be
returned. The maximum amount of funds to be raised with respect to Notes shall
be $1,500,000. In addition, if for any reason whatsoever, the transaction
involving this Agreement and the documents related hereto shall be altered in
any manner which is materially adverse to the Purchaser, prior to the execution
of the Note and the Warrant by the Company and prior to the Closing, the funds
which will have been deposited into escrow will be returned.
[Balance of this page intentionally left blank.]
15
INVESTOR QUESTIONNAIRE
The information contained in this Questionnaire is being furnished in order
to determine whether the undersigned's investment as described in the Agreement
may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned understands, however, that the Company may
present this Questionnaire to such parties as it deems appropriate if called
upon to establish that the proposed offer and sale of the Securities is exempt
from registration under the 1933 Act, as amended. Further, the undersigned
understands that the offering is required to be reported to the Securities and
Exchange Commission, NASDAQ and to various state securities and "blue sky"
regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED MAY BE REQUESTED
TO COMPLETE A FORM W-9 IF SO REQUESTED BY THE COMPANY.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.
[ ] 1. The undersigned: (a) has total assets in excess of $5,000,000; (b) was
not formed for the specific purpose of acquiring the securities and (c) has
its principal place of business in _____________.
[ ] 2. The undersigned is a natural person whose individual net worth* or joint
net worth with his or her spouse exceeds $1,000,000.
[ ] 3. The undersigned is a natural person who had an individual income* in
excess of $200,000 in each of 1999 and 2000 and who reasonably expects an
individual income in excess of $200,000 in 2001. Such income is solely that
of the undersigned and excludes the income of the undersigned's spouse.
[ ] 4. The undersigned is a natural person who, together with his or her spouse,
has had a joint income* in excess of $300,000 in each of 1999 and 2000 and
who reasonably expects a joint income in excess of $300,000 during 2001.
* For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities. In determining "income", an
investor should add to his or her adjusted gross income any amounts attributable
to tax-exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion, contributions to XXX or
Xxxxx retirement plan, alimony payments and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross income.
[ ] 5. The undersigned is:
(a) a bank as defined in Section 3(a)(2) of the 1933 Act; or
16
(b) a savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the 1933 Act whether acting in its individual or
fiduciary capacity; or
(c) a broker or dealer registered pursuant to Section 15 of the 1934
Act; or
(d) an insurance company as defined in Section 2(13) of the 1933 Act;
or
(e) An investment company registered under the Investment Company Act
of 1940 or a business development company as defined in Section
2(a)(48) of the Investment Company Act of 1940; or
(f) a small business investment company licensed by the U.S. Small
Business Administration under Section 301 (c) or (d) of the Small
Business Investment Act of 1958; or
[ ] 6. The undersigned is an entity in which all of the equity owners are
"Accredited Investors" as that term is defined in Rule 501(a)(3) of
Regulation D of the 1933 Act
17
II. INVESTOR INFORMATION.
IF THE UNDERSIGNED IS AN INDIVIDUAL:
Name
-------------------------------------------------
Xxxxxx Xxxxxxx
---------------------------------------
Xxxx, Xxxxx, Zip Code
--------------------------------
Phone, Fax
-------------------------------------------
Social Security Number (or Taxpayer Identification Number)
------------------------------------------------------
Send Correspondence to:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
IF THE UNDERSIGNED IS A PARTNERSHIP OR OTHER ENTITY:
Contact Name
-----------------------------------------
State of Organization
--------------------------------
Principal Business Address
---------------------------
City, State, Zip Code
--------------------------------
Taxpayer Identification Number
-----------------------
Phone, Fax
-------------------------------------------
18
INVESTOR SIGNATURE PAGE
Your signature on this Signature Page evidences your agreement to be bound
by the Questionnaire and related Transaction Documents.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the undersigned will
notify ZENASCENT, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned's subscription and
will promptly send ZENASCENT, INC. written confirmation of such change.
2. The undersigned signatory hereby certifies that he/she has read and
understands the Agreement and Questionnaire, and the representations made by the
undersigned in the Agreement and Questionnaire are true and accurate.
3. Upon closing please deliver the Warrants to Xxxxxx Xxxxxxx &
Company, Inc.
---------------------------------- ----------------------------------
Number of Warrants being purchased Date
By:
-------------------------------
(Signature)
Name:
-----------------------------
(Please Type or Print)
Title:
----------------------------
(Please Type or Print)
THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT.
19
COMPANY ACCEPTANCE PAGE
IN WITNESS WHEREOF, the Company has executed this NOTE AND WARRANT
PURCHASE AGREEMENT as of the date first written above.
COMPANY:
ZENASCENT, INC.
By:
--------------------------------
Name:
Title:
SCHEDULE 3.4 - SUBSIDIARIES
20
Zenascent Newco, Inc., a Delaware corporation, formed solely for the purpose of
completing the merger with Xxxxxx Xxxxxxx Boxing, Inc.
21
SCHEDULE 3.6 - CAPITALIZATION
In February and March 2001 the Company borrowed an aggregate of $40,000
from two individuals. The notes representing such indebtedness bear interest at
a rate of 8.5% per annum.
The Company has reserved for issuance approximately 9,397,905 shares of
Common Stock to be issued upon the exercise or conversion, if any, of all
outstanding options, warrants and conversion rights, other than the Series A
Stock, the Series B Convertible Preferred Stock and the securities issued
pursuant to the Merger Agreement. Certain of the warrants outstanding are
subject to piggy-back registration rights.
22
SCHEDULE 3.8 - CONFLICTS
None.
23
SCHEDULE 3.10 - MATERIAL CHANGES
None.
24
SCHEDULE 3.11 - LITIGATION
None.
25
SCHEDULE 3.15 - INTELLECTUAL PROPERTY
None.
26
SCHEDULE 3.17 - LIENS
None.
27
SCHEDULE 3.23 - CERTAIN TRANSACTIONS
None.
28
