COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of
August 24, 2000, by and among ObjectSoft Corporation, a corporation organized
under the laws of the State of Delaware (the "Company") (NASDAQ: "OSFT"), and
the Purchaser whose name is set forth on Exhibit A hereto (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and sell to the
Purchaser and the Purchaser shall purchase up to 450,000 shares Company's common
stock, $.0001 par value per share (the "Common Stock"); and
WHEREAS, such purchase and sale will be made in reliance upon
the provisions of Section 4(2) and Rule 506 of Regulation D ("Regulation D") of
the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), or upon such other
exemption from the registration requirements of the Securities Act as may be
available with respect to any or all of the purchases of Common Stock to be made
hereunder.
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.1 Purchase and Sale of Common Shares. Upon the following
terms and subject to the conditions contained herein, the Company shall, on the
date hereof, issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, an aggregate of 450,000 shares of Common Stock (the "Common
Shares"), pursuant to the terms set forth on Exhibit B hereto, which terms are
incorporated herein and shall be considered part of the agreement between the
parties hereto.
Section 1.2 Closing. The closing of the purchase and sale of the Common
Shares (the "Closing") to be acquired by the Purchaser from the Company shall
take place at the offices of Xxxxxx Xxxxxx LLP, The Chrysler Building, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m., eastern time, on the
date hereof (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. In order to
induce the Purchaser to enter into this Agreement and to purchase the Common
Shares, the Company hereby makes the following representations and warranties to
the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted and to enter into this Agreement and to perform its
obligations hereunder.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Escrow Agreement (collectively, the "Transaction Documents") and to issue and
sell the Common Shares in accordance with the terms hereof. The execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required. Each of the Transaction Documents has been duly
executed and delivered by the Company. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a 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,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) Issuance of Shares. The Common Shares to be issued at the Closing
have been duly authorized by all necessary corporate action and, when paid for
or issued in accordance with the terms hereof, the Common Shares shall be
validly issued and outstanding, fully paid and nonassessable.
(d) SEC Documents. As of their respective dates, none of the SEC
Documents (as defined below) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company's Certificate of Incorporation ("Articles") or Bylaws,
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party or by which
any of its respective properties or assets are bound, (iii) create or impose a
lien, mortgage, security interest, charge or encumbrance of any nature
whatsoever on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound, or (iv) result in a violation
of any rule, regulation, order, judgment or decree applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clause (i) above, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. "Material Adverse Effect"
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shall mean any effect on the business, operations, properties, prospects, or
financial condition of the Company that is material and adverse to the Company
and its subsidiaries and affiliates, taken as a whole.
(f) Certain Fees. The Company has not employed any broker or finder
or incurred any liability for any brokerage or investment banking fees,
commissions, finders' or structuring fees, financial advisory fees or other
similar fees in connection with the Transaction Documents.
Section 2.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, the Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, and the Purchaser was not formed for the specific purpose of
acquiring the Common Shares.
(b) Authorization and Power. The Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Common Shares being sold to it hereunder. The execution, delivery
and performance of the Transaction Documents by the Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate, limited liability company or partnership
action, as applicable (if the Purchaser is an entity), and no further consent or
authorization of the Purchaser or its Board of Directors, stockholders, members,
managers or partners, as the case may be, is required. Each of the Transaction
Documents has been duly executed and delivered by the Purchaser on the Closing
Date. Each of the Transaction Documents constitutes a valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies or by other equitable principles
of general application.
(c) No Conflicts. The execution, delivery and performance of the
Transaction Documents and the consummation by the Purchaser of the transactions
contemplated herein and therein do not and will not (i) result in a violation of
the Purchaser's charter documents, bylaws, partnership agreement, operating
agreement or other organizational documents, or (ii) conflict with, 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 Purchaser is a party of by which the Purchaser is bound, or result in a
violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Purchaser or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material adverse effect on the Purchaser).
(d) Acquisition for Investment. The Purchaser is purchasing the
Common Shares solely for its own account for the purpose of investment and not
with a view to or for sale
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in connection with distribution. The Purchaser does not have a present intention
to sell the Common Shares, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of the Common Shares to or
through any person or entity; provided, however, that by making the
representations herein and subject to Exhibit A hereto and Section 2.2(f) below,
the Purchaser does not agree to hold the Common Shares for any minimum or other
specific term and reserves the right to dispose of the Common Shares at any time
in accordance with federal securities laws applicable to such disposition. The
Purchaser acknowledges that it is able to bear the financial risks associated
with an investment in the Common Shares and that it has been given full access
to such records of the Company and to the officers of the Company as it has
deemed necessary or appropriate to conduct its due diligence investigation.
(e) Accredited Purchasers. The Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act and is a
resident of the jurisdiction indicated on Exhibit A hereto. The Purchaser has
such knowledge and experience in financial and business matters that the
Purchaser is capable of evaluating the merits and risks of the Purchaser's
investment in the Company.
(f) Rule 144. The Purchaser understands that the Common Shares must
be held indefinitely unless such Shares are registered under the Securities Act
or an exemption from registration is available. The Purchaser acknowledges that
the Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that the Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. The Purchaser understands that to the extent that Rule
144 is not available, the Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(g) No Broker-Dealer Affiliation. The Purchasers is not a
broker-dealer registered with the Commission or an affiliate (as such term is
defined in Rule 144(a) promulgated under the Securities Act) of a broker-dealer
registered with the Commission.
(h) General. The Purchaser understands that the Common Shares are
being offered and sold in reliance on a transactional exemption from the
registration requirement of federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the applicability of such exemptions and the suitability
of such Purchaser to acquire the Common Shares. The Purchaser understands that
no United States federal or state agency or any government or governmental
agency has passed upon or made any recommendation or endorsement of the Common
Shares.
(i) Commission Documents; Opportunities for Additional Information.
The Purchaser acknowledges that the Company has made available to the Purchaser
through the SEC's Xxxxx site or otherwise prior to the date hereof, and that the
Purchaser has reviewed to its satisfaction, copies of the Company's (i) Form
10-KSB for the year ended December 31, 1998, (ii) Form 10-KSB for the year ended
December 31, 1999, (iii) Forms 10-QSB for the quarters ended March 31, 2000 and
June 30, 2000, (iv) Registration Statements on Form S-3 (Registration Nos.
333-92685, 333-92201, 333-30724, 333-36944, 333-41618 and 333-41620),
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(v) Current Report on Form 8-K filed January 4, 2000, and (vi) Definitive Proxy
Statements filed September 15, 1999 and April 26, 2000 (collectively, the "SEC
Documents"). The Purchaser has had full opportunity to review, and has reviewed
to the Purchaser's full satisfaction, the SEC Documents. The Purchaser
acknowledges that the Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of the Purchaser's personal
knowledge of the Company's affairs, the Purchaser has asked such questions and
received answers to the full satisfaction of the Purchaser, and the Purchaser
desires to invest in the Company.
(j) No General Solicitation. The Purchaser acknowledges that the
Common Shares were not offered to the Purchaser by means of any form of general
or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which the Purchaser was invited by any of the foregoing means of communications.
(k) No Commissions or Similar Fees. In connection with the purchase
of the Common Shares by the Purchaser, the Purchaser has not and will not pay,
and has no knowledge of the payment of, any commission or other direct or
indirect remuneration to any person or entity for soliciting or otherwise
coordinating the purchase of such securities, except to such persons or entities
as are duly licensed and/or registered to engage in securities offering and
selling activities (or are exempt from such licensing and/or registration
requirements) under applicable federal laws and the laws of the state(s) in
which such activities have taken place in connection with the transaction
contemplated by this Agreement.
ARTICLE III
REGISTRATION
The Company covenants with the Purchaser that the Company, at its sole
cost and expense, will file a registration statement registering the resale of
the Common Shares no later than forty-five (45) days after the Closing Date and
use its best efforts to cause the registration statement to be declared
effective within ninety (90) days after the Closing Date and will keep such
registration statement effective until the Common Shares may be sold under Rule
144 without regard to the volume limitations thereunder (the "Registration
Period"). If the Common Shares are not registered for resale on or before the
120th day after the date hereof (the "Penalty Date"), or if after the
Registration Statement becomes effective, it is withdrawn, suspended or
otherwise not available for more than 20 days on a cumulative basis for resale
of the Common Shares prior to the expiration of the Registration Period, then
the Company will pay to the Purchaser as liquidated damages a payment for the
first 30 days equal to 2% of the Closing Purchase Price apportioned to the
Common Shares which the Purchaser continues to hold (with a partial period being
pro-rated) and 1% of the Closing Purchase Price apportioned to the Common Shares
which the Purchaser continues to hold for each 30 days thereafter (pro-rated for
a partial period). The foregoing liquidated damages will cease to accrue at such
time that the registration statement is declared effective or becomes available
or the Purchaser may rely on Rule 144 for the resale of the Common Shares
without limitations, whichever is earlier. The provisions
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pertaining to the Company's obligations pursuant to this Article III are set
forth in the Registration Rights Agreement attached hereto as Appendix X. To the
extent there is a conflict between the provisions of this Article III and the
terms of the Registration Rights Agreement, the provisions of this Article III
will control.
ARTICLE IV
TRANSFER AGREEMENT; VOTING
Section 4.1 Transfer Restrictions. The Purchaser agrees to be bound by
the terms and conditions set forth in Exhibit B restricting the sale or transfer
of Common Shares.
Section 4.2 Agreement to Vote. For so long as the Company has not
committed a material breach of this Agreement, and this Agreement has not been
terminated, the Purchaser agrees to vote all Common Shares beneficially held by
it in favor of all nominees to the Company's board of directors who are
nominated by the then current Board of Directors of the Company.
ARTICLE V
STOCK CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Common Shares, as
applicable and appropriate, shall be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any legend required
by applicable federal, provincial or state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR OBJECTSOFT CORPORATION (THE "COMPANY") SHALL HAVE
RECEIVED AN OPINION IN FORM, SCOPE AND SUBSTANCE REASONABLY ACCEPTABLE
TO THE COMPANY, OF COUNSEL, WHO IS REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
VOTING, TRANSFER AND OTHER AGREEMENTS SET FORTH IN A COMMON STOCK
PURCHASE AGREEMENT DATED AS OF
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AUGUST 24, 2000 AMONG THE COMPANY AND CERTAIN PURCHASERS.
ARTICLE VI
TERMINATION
This Agreement may be terminated at any time prior to the Closing by
the mutual written consent of the Company and the Purchaser.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, 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.
Section 7.2 Consent to Jurisdiction.
Each of the Company and the Purchaser (i) hereby irrevocably submits to
the jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereunder or thereunder and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law.
Section 7.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding and agreement of the parties with respect to the matters
covered hereby and, except as specifically set forth herein or in the
Transaction Documents, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters,
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended, except by a written instrument signed by the Company
and the Purchaser.
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where
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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: ObjectSoft Corporation
Continental Plaza III
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn.: Xxxxx X.X. Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
with copies to:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchaser: At the address of the Purchaser as set forth
on Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 7.5 Waivers. No waiver by either party 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
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
No rights or obligations hereunder may be assigned by either party hereto,
except that the rights and obligations of the Company may be assigned.
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Section 7.8 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 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 7.10 Survival. The representations, warranties, agreements and
covenants set forth in this Agreement shall survive the execution and delivery
hereof and the Closing hereunder indefinitely.
Section 7.11 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
Section 7.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
OBJECTSOFT CORPORATION
By: /s/ Xxxxx X.X. Xxxxx
-------------------------------
Name: Xxxxx X.X. Xxxxx
Title: Chairman
LA JOLLA COVE INVESTORS, INC.
By: /s/ Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: President
Exhibit B
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1. On the date hereof, the Company will issue and sell to the Purchaser,
and the Purchaser will purchase from the Company, the Common Shares at
$.91265 per Share (the "Closing Price Per Share") (which is 73% of the
lower of (a) the closing bid price of the Common Stock on the last
trading day prior to the date hereof or (b) the average of the closing
bid prices for the five trading days prior to the date hereof), for a
total purchase price for all of the Common Shares of $410690.7 (the
"Closing Purchase Price"). Upon receipt of the shares, 30% of the
Closing Purchase Price shall be paid by wire transfer directly to the
Company and 70% of the Closing Purchase Price shall be paid into escrow
(the "Initial Escrow Amount"). 20% of the original Closing Purchase
Price (the "Initial Release Amount") shall be released from escrow to
the Company on the date that the Company notifies (a) the Purchaser as
to the effectiveness of the registration statement referred to in
Article III (the "Registration Statement") and (b) its transfer agent
that the Common Shares may be freely sold thereunder subject to the
prospectus delivery requirements (the "Registration Date"), provided
that the closing bid price of the Common Stock is at least $0.75 per
share, based on an average of the five trading days preceding the
effective date of the Registration Statement. (In the event that this
$0.75 per share condition is not met, the 20% of the original Closing
Purchase Price shall be released once such condition is met.) The
remaining escrowed 50% of the Closing Purchase Price shall be
distributed pursuant to the provisions of Section 4 hereof.
Notwithstanding anything herein to the contrary, if on the 140th day
from the Closing Date, the Initial Release Amount has not been released
from escrow because the Registration Statement has not become
effective, the Initial Escrow Amount shall be delivered by the escrow
agent to the Purchaser to be held by the Purchaser until the Company
becomes entitled to the Initial Release Amount, at which time the
Initial Release Amount shall be delivered to the Company and the
remaining balance returned to the escrow.
2. The Purchaser agrees that it may not sell or transfer the Common Shares
before the date (the "Effective Date") which is the earlier of (a) the
Registration Date and (b) one year after the date hereof. The Purchaser
also agrees that, on and after the Effective Date, it will not sell or
transfer any of the Common Shares except in accordance with the
following schedule: beginning the Effective Date and on each 30th day
thereafter until the 120th day after the Effective Date (the Effective
Date and each such 30th day, a "Monthly Release Date"), the Purchaser
may sell or transfer one-fifth (1/5th) of the original number of Common
Shares (that is, 450,000 Common Shares) on and after each Monthly
Release Date plus any amounts unsold from the prior month(s).
3. On the 30th day after the Effective Date ("Initial Determination
Date"), provided that (a) the Registration Statement is then effective
or (b) all steps required to be taken on the part of the Company have
been taken to allow Purchaser to effect a sale under Rule 144 which
Purchaser has elected to make (the "Resale Conditions"), the Purchaser
will pay to the Company the amount, if any, by which the Redetermined
Purchase Price (as defined herein) of the Common Shares determined as
of the Initial Determination Date exceeds one-third of the Closing
Purchase Price (provided that such amount shall be paid only if, as of
the Initial Determination Date, the Redetermined Purchase Price per
share of the
Common Shares exceeds the Closing Price Per Share by at least $.50).
Thereafter, on the 75th day after the Effective Date provided that the
Resale Conditions have been satisfied ("Interim Determination Date"),
the Purchaser will pay to the Company the amount, if any, by which the
Redetermined Purchase Price of the Common Shares determined as of the
Interim Determination Date exceeds one-third of the Closing Purchase
Price (provided that such amount shall be paid only if, as of the
Interim Determination Date, the Redetermined Purchase Price per share
of the Common Shares exceeds the Closing Price Per Share by at least
$.50). In no event will the Company be required to make any payment or
issue any shares of stock to the Purchaser as a result of any of the
foregoing determinations (except to the extent provided in Section 4 in
connection with the Final Determination Date (as defined herein)). 40%
of each payment required to be made to the Company under this Section 3
will be paid directly to the Company by wire transfer of immediately
available funds and 60% of each such payment will be paid into the
Escrow to be distributed pursuant to the provisions of Section 4
hereof. For purposes of this Agreement, the "Redetermined Purchase
Price" for the Common Shares as of a particular date of determination
shall mean (a) 73% of the average of the closing bid prices of the
Common Stock for all of the trading days in the 30 calendar days
preceding the date of determination, multiplied by (b) one-third of the
original number of shares of Common Stock representing the Common
Shares.
4. On the 120th day after the Effective Date ("Final Determination Date"),
a final determination will be made as of such date based upon the
following formula. The "Final Price" for the Common Shares will be 73%
of (a) the average of all the closing bid prices for the Common Stock
for all trading days in the 120 day period prior to the Final
Determination Date, multiplied by (b) the original number of shares of
Common Stock representing the Common Shares. If the Final Price for the
Common Shares is less than the sum of the Closing Purchase Price and
all amounts, if any, previously paid to the Company (including amounts
paid into the Escrow) under Section 3 hereof, then the Company will pay
to the Purchaser, no later than 10 days after the Final Determination
Date, the amount of such difference (the "Deficiency") as follows: the
amount in the Escrow shall first be used to pay the Deficiency and any
Escrow balance shall be paid immediately to the Company. If the total
amount in Escrow is insufficient to pay the Deficiency, then the
Company shall pay the balance of the Deficiency, after the remaining
escrowed amount is used, at the Company's sole discretion, either in
cash, or in shares of Common Stock valued at 73% of the average of all
of the closing bid prices of the Common Stock for the 15 trading days
preceding the date of such payment (such discounted valuation herein
referred to as the "Deficiency Share Price"), or by combination of cash
and shares of Common Stock valued as aforesaid. (Notwithstanding
anything herein to the contrary, the Company will not be permitted to
issue shares of Common Stock under this Section 4 to the extent such
issuance would exceed the maximum number of shares which the Company
may issue under this Agreement without breaching the Company's
obligations under Section 4310(c)(25)(H) of the Nasdaq Marketplace
Rules or other similar requirement and, to such extent, the balance of
the Deficiency must be paid in cash.) If the Final Price for the Common
Shares is more than the sum of the Closing Purchase Price and all
amounts, if any, previously paid to the Company (including amounts paid
into the Escrow) under Section 3 hereof, then, Purchaser will pay to
the Company, no later than 10 days after the Final Determination
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Date or, if the Resale Conditions have not been satisfied as of the
Final Determination Date, ten days after the Resale Conditions have
been satisfied, the amount of such difference in full and the remaining
escrowed amount will be immediately released and paid to the Company.
5. On the date hereof, the Company, the Purchaser and Loeb & Loeb LLP, as
Escrow Agent (the "Escrow Agent"), have entered into an Escrow
Agreement (the "Escrow Agreement") providing for the escrow to hold a
portion of the cash otherwise payable to the Company. The parties
hereto agree to give the Escrow Agent the joint instructions necessary
to implement the provisions of Section 4 hereof. Income earned on
escrowed amounts will be distributed along with the escrowed amount to
the party receiving the distribution. The Company agrees, no later than
10 days after the Final Determination Date, to reimburse the Purchaser
for one-half of the Escrow Agent's fees actually paid by the Purchaser
in connection with the performance of the Escrow Agent's obligations
under the Escrow Agreement, in an amount not to exceed $1,750; to the
extent any amounts are payable to the Company by the Purchaser or the
Escrow Agent under Section 4, this reimbursement obligation will be
paid from, and offset against, the amounts so payable under Section 4.
6. The Company covenants with the Purchaser that, if the Company elects to
issue shares of Common Stock to the Purchaser under Section 4
("Deficiency Shares"), the Company, at its sole cost and expense, will
file a registration statement registering the resale of the Deficiency
Shares no later than forty-five (45) days after the Final Determination
Date and use its best efforts to cause the registration statement to be
declared effective within ninety (90) days after the Final
Determination Date and will keep such registration statement effective
until the Deficiency Shares may be resold under Rule 144 without regard
to the volume limitation rules thereunder (the "Registration Period").
If the Deficiency Shares are not registered for resale on or before the
120th day after the Final Determination Date (the "Non-Registration
Penalty Date") or if after the registration statement becomes
effective, it is withdrawn, suspended or otherwise not available for
more than twenty days on a cumulative basis for resale of the
Deficiency Shares prior to the expiration of the Registration Period,
then the Company will pay to the Purchaser as liquidated damages a
payment for the first 30 days after the Non-Registration Penalty Date
equal to 2% of the Deficiency Share Price apportioned to the Deficiency
Shares which the Purchaser continues to hold (with a partial period
being pro-rated) and 1% of the Deficiency Share Price apportioned to
the Deficiency Shares which the Purchaser continues to hold for each 30
days thereafter (pro-rated for a partial period). The foregoing
liquidated damages will cease to accrue at such time that the
registration statement is declared effective or becomes available or
the Purchaser may rely on Rule 144 for the resale of the Deficiency
Shares without limitations, whichever is earlier. The provisions
pertaining to the Company's obligations pursuant to this paragraph 6
are set forth in the Registration Rights Agreement.
7. Examples illustrating the foregoing are set forth on Exhibit C to the
Common Stock Purchase Agreement.
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8. All share and dollar amounts set forth herein shall be appropriately
adjusted for any stock splits, stock dividends, recapitalizations and
similar events.
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