SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
between
AMERICAN MILLENNIUM CORPORATION, INC.
(the "Company")
and
Options Unlimited
(the "Purchaser")
Dated as of April 23, 2001
This SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT provides for the offer, sale,
issuance, and delivery of up to $300,000 in principal amount of Series 1
Convertible Notes with Purchase Warrants. In connection with the Closing under
the Agreement, the Company shall issue $300,000 principal amount of Convertible
Notes convertible into 1,363,636 shares of Common Stock of the Company at $0.22
per share. With such Convertible Notes the Company will issue Purchase Warrants
entitling the holder thereof to purchase up to 1,363,636 shares of the Common
Stock of the Company at an exercise price of $0.27 per share.
These subscription documents do not constitute an offer to sell nor a
solicitation of an offer to buy any security. The securities of the Company (the
"Securities") referred to herein have not been registered under the United
States Securities Act of 1933, as amended (the "Act"), or under the securities
laws of the several states. These Securities may be acquired for investment
purposes only and not with a view to distribution or resale, and may not be
sold, assigned, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such Securities under the Act,
unless exempt under the Act and applicable state securities laws.
THESE MATERIALS HAVE NOT BEEN REVIEWED, APPROVED OR RECOMMENDED BY THE U.S.
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES
ADMINISTRATOR, NOR HAS THE SEC OR ANY STATE SECURITIES ADMINISTRATOR PASSED UPON
THE ACCURACY OR ADEQUACY OF THESE MATERIALS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.
AN INVESTMENT IN THE CORPORATION INVOLVES ALL OF THE RISKS GENERALLY ASSOCIATED
WITH ANY SPECULATIVE BUSINESS VENTURE AND IS OFFERED ONLY TO PERSONS WHO
UNDERSTAND AND WHO CAN AFFORD TO ASSUME SUCH RISKS. SEE "RISK FACTORS".
INVESTORS WILL BE REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND
UNDERSTAND THE TERMS OF THE INVESTMENT. THESE SECURITIES MAY BE OFFERED AND SOLD
BY THE COMPANY ONLY TO ACCREDITED INVESTORS AS DEFINED UNDER FEDERAL AND STATE
SECURITIES LAWS.
TABLE OF SCHEDULES AND EXHIBITS
Exhibit A Form of Warrant
Exhibit B Registration Rights Agreement
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of this 23rd day of April, 2001, by and between AMERICAN
MILLENNIUM CORPORATION, INC., a New Mexico corporation (the "Company"), and
Options Unlimited (the "Purchaser").
Background
The Company has authorized the issuance, sale, and delivery of up to $300,000 in
original principal amount of the Company's Series 1 Convertible Notes. The
Convertible Notes are convertible after 30 days following the Closing into
Common Stock of the Company, par value $.001 per share (the "Common Stock"), at
a conversion price as set forth in the Convertible Notes. The shares of Common
Stock issuable upon conversion of the Convertible Notes are hereinafter referred
to as the "Conversion Shares". In connection with the issuance of the
Convertible Notes, the Company has authorized the issuance of Warrants, in the
form attached hereto as Exhibit A (the "Purchase Warrants"), to purchase Common
Stock. The Purchaser will be issued a Purchase Warrant at closing exercisable
after 30 days following the Closing for ONE SHARE (at exercise price of $0.27
per share) of Common Stock for each twenty two cents ($0.22) in principal amount
of Convertible Notes purchased. The Purchase Warrants are hereinafter
collectively referred to as the "Warrants" and individually as a "Warrant". The
shares of Common Stock issuable upon exercise of the Warrants are hereinafter
referred to as the "Warrant Shares". The proceeds of the Convertible Notes will
be used for general working capital. The Purchaser desires to purchase, upon the
terms and conditions stated in this Agreement, up to $300,000 in principal
amount of the Convertible Notes. Contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights in respect of the Conversion Shares and the
Warrant Shares under the Securities Act of 1993, as amended ("1933 Act"), and
the rules and regulations promulgated thereunder, and applicable state
securities laws. The SB-2 Registration is to become Effective by May 31, 2001
(Effective Deadline.) The Company and the Purchaser are executing and delivering
this Agreement in reliance upon the exemption from securities registration
pursuant to Section 4(2) and/or Section 4(6) of the 1933 Act.
Agreement
For and in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchaser hereby agree as
follows:
Section 1. Convertible Notes.
Section 1.1 Authorization, Issuance, and Sale of Notes. The Company has
authorized the sale and issuance, in accordance with the terms of this
Agreement, of up to $300,000 in principal amount of its Convertible Notes at one
or more closings. The Company agrees to issue and sell to the Purchaser and the
Purchaser agrees to purchase from the Company, at a Closing, a Convertible Note
in the principal amount (the "Purchaser Convertible Notes") set forth adjacent
to the caption "Purchaser Convertible Notes" on the signature page to this
Agreement of the Purchaser hereto at a purchase price (the "Purchase Price") of
100% of the principal amount of the Convertible Notes purchased.
Section 1.2 Authorization and Issuance of Purchase Warrants. The Company has
authorized the issuance and delivery of Purchase Warrants exercisable for up to
1,363,636 shares of Common Stock in connection with the issuance, sale, and
delivery of the Convertible Notes. The Company agrees to issue and deliver to
the Purchaser a Purchase Warrant for ONE SHARE (at exercise price of $0.27 per
share) of Common Stock for each twenty two cents ($0.22) in principal amount of
the Convertible Notes purchased by such Purchaser subject to this Section 1.2.
Section 1.3 Form of Payment. On or before the Closing Date, the Purchaser shall
pay the Purchase Price for the Purchased Convertible Notes to be issued and sold
to such Purchaser at the Closing, by delivering to the company a personal check
of Purchaser, or by wire transfer of immediately available funds to:
Bank: Xxxxx Fargo Bank West, N.A.
000 Xxxxxxx Xxx.
Xxxxxxxxx Xxxxxxx, XX 00000
Routing: 000000000
Account #: 644-0000000 American Millennium Corporation, Inc.
Section 1.4 Closing. All closings of the purchase and sale of the Purchased
Convertible Notes shall take place at the offices American Millennium
Corporation, 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx, XX. 00000, within five (5)
business days following the date that the consideration is received by American
Millennium Corporation, Inc. subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Section 5 below (such closing
being called the "First Closing" and such date and time being called the "First
Closing Date"). All such Closings may alternatively be conducted by exchange of
documents and signatures by overnight courier.
Section 1.5 Deliveries at Closing. At the Closing the Company shall deliver to
the Purchaser:
(a) the original of this Agreement;
(b) Convertible Notes in definitive form, each registered in the name of each
Purchaser, or the designee of such Purchaser, representing the Purchaser
Convertible Notes purchased by such Purchaser;
(c) Purchase Warrants in definitive form, registered in the name of each
Purchaser, or the designee of such Purchaser;
Section 1.6 TERMS OF THE
CONVERTIBLE NOTE PURCHASE AGREEMENT AND OPTION:
This SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT provides for the offer, sale,
issuance, and delivery of up to $300,000.00 in principal amount of Series 1
Convertible Notes with Purchase Warrants. In connection with the Closing under
the Agreement, the Company shall issue $300,000.00 principal amount of
Convertible Notes convertible into 1,363,636 shares of Common Stock of the
Company at twenty-two ($0.22) cents per share. With such Convertible Notes the
Company will issue Purchase Warrants entitling the holder thereof to purchase up
to 1,363,636 shares of the Common Stock of the Company at an exercise price of
twenty-seven ($0.27) cents per share, for a period of five years from the date
of this Agreement. The $300,000 principle amount will be paid in Three (3)
installments. On or before July 23, 2001 (the "First Closing"), $100,000 will be
delivered to the company as referenced in Section 1.3 herein. On or before
August 23, 2001 (the "Second Closing"), an additional $100,000 will be delivered
to the company as referenced in Section 1.3 herein. On or before September 23,
2001 (the "Third Closing"), and final closing, an additional $100,000 will be
delivered to the company as referenced in Section 1.3 herein. In NO event will
the Purchaser pay more than twenty-two ($0.22) cents per share.
Section 2. Representations and Warranties of the Company.
To induce the Purchaser to purchase the Convertible Notes, the Company
represents and warrants to the Purchaser.
Section 2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation, and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company. The Company has no subsidiaries.
Section 2.2 Authorization, Enforcement, Compliance with Other Instruments.
(a) The Company has the requisite corporate power and authority to enter into
and perform each of this Agreement, the Convertible Notes, the Purchase
Warrants, the Registration Rights Agreement, the Escrow Agreement, the Transfer
Agent Instructions, and any related agreements (collectively, the "Transaction
Agreements" and individually a "Transaction Agreement"), and to issue the
Convertible Notes, the Conversion Shares, the Purchase Warrants and the Warrant
Shares in accordance with the terms hereof and thereof;
(b) the execution and delivery by the Company of each of the Transaction
Agreements and the consummation by it of the transactions contemplated thereby,
including without limitation the issuance of the Convertible Notes, the Purchase
Warrants, and the reservation for issuance and the issuance of the Conversion
Shares upon conversion of the Convertible Notes, the Warrant Shares upon
exercise of the Purchase Warrants (the Convertible Notes, the Conversion Shares,
the Purchase Warrants, and the Warrant Shares are hereinafter collectively, the
"Securities") have been duly authorized by the Company's Board of Directors and
no further consent or authorization is required by the Company, its Board of
Directors, or its stockholders for the due and valid issuance of the Securities;
(c) each of the Transaction Agreements have been duly and validly executed and
delivered by the Company; and
(d) each of the Transaction Agreements constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
Section 2.3 Capitalization. Immediately prior to Closing, the authorized capital
stock of the Company consisted of 70,000,000 shares of capital stock, of which
60,000,000 shares are Common Stock, par value $.001 per share, and 10,000,000
shares are Preferred Stock, par value $.001 per share ("Preferred Stock") of
which no shares are issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. No shares of Common
Stock or Preferred Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company. As of
the effective date of this Agreement, (a) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of capital stock of the Company, 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, (b) there are no outstanding debt securities and (c) there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement. The Company has furnished to the
Purchaser true and correct copies of the Company's Articles of Incorporation, as
amended and as in effect on the date hereof (the "Articles of Incorporation"),
and the Company's Bylaws, as in effect on the date hereof (the "Bylaws"), and
the terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto.
Section 2.4 Issuance of Securities. The Convertible Notes have been duly
authorized and are free from all taxes, liens, and charges with respect to the
issue thereof. The Warrants have been duly authorized and are free from all
taxes, liens, and charges with respect to the issuance thereof. The Conversion
Shares issuable upon conversion of the Convertible Notes have been duly
authorized and reserved for issuance. The Warrant Shares issuable upon exercise
of the Warrants have been duly authorized and reserved for issuance. Upon
conversion of the Convertible Notes and exercise of the Warrants, the Conversion
Shares and the Warrant Shares, respectively, will, be duly and validly issued,
fully paid, and nonassessable, and free from all taxes, liens, and charges, with
respect to the issuance thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.
Section 2.5 No Conflicts. The execution, delivery and performance of this
Agreement and the Transaction Agreements by the Company, and the consummation by
the Company of the transactions contemplated hereby and thereby, will not (a)
result in a violation of the Articles of Incorporation, any Certificate of
Designations, Preferences, and Rights applicable to any Preferred Stock of the
Company, or the Bylaws of the Company or (b) 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 Company is
a party, or result in a violation of any law, rule, regulation, order, judgment,
or decree (including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or by which any property or
asset of the Company is bound or affected. The Company is not in violation of
any term of, or in default under, its Articles of Incorporation or Bylaws or
their organizational charter or Bylaws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree, or
order or any statute, rule, or regulation applicable to the Company. The
business of the Company is not being conducted, and shall not be conducted in
violation of any law, ordinance, or regulation of any governmental entity.
Except as specifically contemplated by this Agreement and the other Transaction
Agreements, and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization, or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver, and perform any of
its obligations under or contemplated by this Agreement and the Transaction
Agreements in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings, and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.
Section 2.6 Financial Statements. Attached is the July 31, 2000 financial
statements of the Company together with the audit report dated November 15,
2000. The Financial Statements (i) are in accordance with the books and records
of the Company, (ii) present fairly the financial condition of the Company as of
the respective dates indicated and the results of operations for such periods,
and (iii) the audited Financial Statements have been prepared with consistently
applied accounting principles throughout the periods involved. The Financial
Statements do not contain any items of special or nonrecurring income, or other
income not earned in the ordinary course of business, except as specifically set
forth in the notes to the Financial Statements. The financial books, financial
records, and financial accounts of the Company shown to the Purchaser accurately
and fairly reflect, in reasonable detail, all transactions, assets, and
liabilities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any of the funds of the Company, except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of the Company. There is no liability or
indebtedness of the Company for dividends or other distributions declared or
accumulated but unpaid with respect to the Common Stock or the Purchased
Convertible Notes. No other information provided by or on behalf of the Company
to the Purchaser which is not included in the Financial Statements, including,
without limitation, information referred to in Section 2.4 of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
Section 2.7 Absence of Certain Changes. Since the date of the most recent
audited Balance Sheet included in the Financial Statements, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations, or prospects
of the Company. 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 have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
Section 2.8 Absence of Litigation. There is no action, suit, proceeding,
inquiry, or investigation before or by any court, public board, government
agency, self-regulatory organization, or body pending or, to the knowledge of
the Company, threatened against or affecting the Company, the Convertible Notes,
the Common Stock, wherein an unfavorable decision, ruling or finding would (a)
have a material adverse effect on the transactions contemplated hereby, (b)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under the Transaction Agreements, or
any of the other documents contemplated therein, or have a material adverse
effect on the business, operations, properties, financial condition, or results
of operation of the Company taken as a whole.
Section 2.9 Purchase of Purchased Convertible Notes. The Company acknowledges
and agrees that the Purchaser is acting solely in the capacity of an arm's
length purchaser with respect to this Agreement and the other Transaction
Agreements and the transactions contemplated hereby and thereby. The Company
further acknowledges that the Purchaser is not acting as a financial advisor or
agent or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by
such Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser's purchase of the Securities. The Company
further represents to the Purchaser that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation by the
Company and its representatives.
Section 2.10 No Undisclosed Events, Liabilities, Developments, or Circumstances.
No event , liability, development, or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its business, properties,
prospects, operations, or financial condition, which could be material but which
has not been publicly announced or disclosed in writing to the Purchaser.
Section 2.11 No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities. The Company represents that it has not offered the Securities to
Purchasers in the U.S. or, to the best knowledge of the Company, to any person
in the United States or any U.S. person.
Section 2.12 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions.
Section 2.13 Employee Relations. The Company is not involved in any labor
dispute nor, to the knowledge of the Company, is any such dispute threatened.
None of the Company's employees is a member of a union and the Company believes
that its relations with its employees are good.
Section 2.14 Intellectual Property Rights. The Company owns or possesses
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 its business as now conducted. 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
have expired or terminated, or are expected to expire or terminate in the near
future. The Company does not have any knowledge of any infringement by the
Company of the 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,
there is no claim, action, or proceeding being made or brought against, or to
the Company's knowledge, being threatened against, the Company 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 is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company has taken reasonable
security measures to protect the secrecy, confidentiality, and value of all of
its intellectual properties.
Section 2.15 Environmental Laws. The Company is 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, toxic
substances, wastes, pollutants, or contaminants ("Environmental Laws"), (b) has
received all permits, licenses, or other approvals required of it under
applicable Environmental Laws to conduct its business, and (c) is in compliance
with all terms and conditions of any such permit, license, or approval.
Section 2.16 Title. The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by it which is material to the business of the Company, in each case free and
clear of all liens, encumbrances, and defects, or 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. Any real property and facilities
held under lease by the Company is held by it 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.
Section 2.17 Insurance. The Company is 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 business
in which the Company is engaged. The Company has been refused any insurance
coverage sought or applied for, and the Company has no reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial, or otherwise, or the earnings,
business, or operations of the Company.
Section 2.18 Regulatory Permits. The Company possesses all certificates,
authorizations, and permits issued by the appropriate federal, state, or foreign
regulatory authorities necessary to conduct its business, and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization, or permit.
Section 2.19 Internal Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (c) access to assets is
permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
Section 2.20 No Materially Adverse Contracts, Etc. The Company is not subject to
any charter, corporate, or other legal restriction, or any judgment, decree,
order, rule, or regulation which in the judgment of the Company's officers has,
or is expected in the future to have, a material adverse effect on the business,
properties, operations, financial condition, results of operations, or prospects
of the Company. The Company is not 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 on the business, properties, operations, financial condition,
results of operations, or prospects of the Company.
Section 2.21 Tax Status. The Company has made or filed all federal and state
income and all other tax returns, reports, and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company 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 amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
Section 2.22 Certain Transactions. Except as set forth in Section 2.22 of this
Agreement and in the SEC Documents, and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties,
and none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for services as employees,
officers, and directors), including any contract, agreement, or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director, or such employee or, to the knowledge of the
Company, any corporation, partnership, trust, or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, or partner.
Section 2.23 Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Convertible Notes
will increase in certain circumstances. The Company understands and acknowledges
that the number of Warrant Shares issuable upon exercise or conversion of the
Purchase Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Convertible Notes and Warrant Shares upon exercise or conversion of the
Purchase Warrants in accordance with this Agreement, the Convertible Notes and
the Purchase Warrants is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
Section 2.24 Fees and Rights of First Refusal. The Company is not obligated to
offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents, or other third
parties.
Section 2.25 Disclosure. Neither this Agreement nor any Schedule or Exhibit
hereto, contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
None of the statements, documents, certificates or other items prepared or
supplied by the Company with respect to the transactions contemplated hereby
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading.
Section 2.26 Cashless Exercise. The Company will have the all shares of common
stock underlying the warrants registered under the Securities Act of 1933, as
amended. The warrant holder, whether the undersigned or otherwise, in lieu of
any cash payment required hereunder, shall have the right to exercise the
warrants in whole or in part by surrendering the warrants in exchange for the
number of shares of the Company's common stock equal to (x) the number of shares
as to which the warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined below) of the common stock
less the exercise price of the warrants being exercised, and the denominator of
which is such Market Price. The term "Market Price" means the closing ask price
per share of the common stock on the principal stock exchange or market on which
the common stock is then quoted or traded on the day preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the U.S. Securities and Exchange Commission with
respect to all of the shares underlying this warrants.
Section 2.27 Piggyback Registration Rights. The Purchasers shall each be
entitled to unlimited "piggyback" registration rights in connection with all
registrations of securities by the Company under the Securities Act or in
connection with any demand registration of any security holder of the Company
(except for registrations on Form S-8 or Form S-4). The Company will bear all
registration expenses (exclusive of underwriting discounts and commissions) of
all piggyback registrations by each Investor.
Section 2.28 SB-2. The Company agrees to file an SB-2 Registration Statement
with respect to the Securities and Warrants described herein as required under
SEC Regulation, and to provide a copy thereof to each Purchaser promptly after
such filing. The Company agrees to have the Registration Agreement declared
Effective by the SEC no later than May 31, 2001 (the "Effective Deadline"). The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Purchaser at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Purchaser on or prior to the Closing Date.
Section 3. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company that:
Section 3.1 Investment Purpose. Purchaser is acquiring the Securities for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided however, that by
making the representations herein, Purchaser does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
Section 3.2 Accredited Investor Status. Purchaser is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
Section 3.3 Reliance on Exemptions. Purchaser understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of the federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments,
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire such
securities.
Section 3.4 Information. Purchaser and its advisors, if any, have been furnished
with all materials relating to the business, finances, and operations of the
Company and materials relating to the offer and sale of the Securities, which
have been requested by such Purchaser. Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by Purchaser or
its advisors, if any, or its representatives shall modify, amend, or affect such
Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 hereof. Purchaser understands that its investment in the
Securities involves a high degree of risk. Purchaser has sought such accounting,
legal, and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities. Purchaser
has performed such due diligence as Purchaser has desired prior to purchase of
the Securities and is not relying on the recommendation of Xxxx Xxxxxxxx &
Associates, Inc. in making its investment decision.
Section 3.5 No Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities, or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
Section 3.6 Transfer or Resale; Restricted Securities. Purchaser understands
that except as provided in the Registration Rights Agreement:
(a) the Securities have not been and are not being registered under the 1933 Act
or any state securities laws, and may not be offered for sale, sold, assigned,
or transferred unless;
(i) subsequently registered thereunder;
(ii) Purchaser shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such securities to be sold,
assigned, or transferred may be sold, assigned, or transferred pursuant to an
exemption from such registration; or
(iii) Purchaser provides the Company with reasonable assurance that such
securities can be sold, assigned, or transferred pursuant to Rule 144 or
promulgated under the 1933 Act (or a successor rule thereto);
(b) any sale of such securities made in reliance on Rule 144 promulgated under
the 1933 Act (or a successor rule thereto) ("Rule 144") may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and
(c) neither the Company nor any other person is under any obligation to register
such securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
Section 3.7 Legends. Purchaser understands that the certificates or other
instruments representing the Convertible Notes and the Warrants shall bear a
restrictive legend in substantially the following form (and a stop transfer
order may be placed against transfer of the Convertible Notes and the Warrants):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Convertible Notes and the
Warrants, unless otherwise required by state securities laws if, (a) the sale of
the Convertible Notes and or the Warrants is registered under the 1933 Act, (b)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment, or transfer of the Convertible Notes and or the Warrants may
be made without registration under the 1933 Act, or (c) such holder provides the
Company with reasonable assurances that the Convertible Notes and the Warrants
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold.
Section 3.8 Authorization Enforcement. This Agreement has been duly and validly
authorized, executed, and delivered on behalf of Purchaser and is a valid and
binding agreement of Purchaser enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
Section 3.9 Residence. Purchaser is a resident of the jurisdiction specified in
its address on the Purchaser Signature Page of such Purchaser.
Section 3.10 No Scheme to Evade Registration. Purchaser represents and warrants
to the Company, as to itself only, that the acquisition of the Securities is not
a transaction (or any element of a series of transactions) that is part of a
plan or scheme by the Purchaser to evade the registration provisions of the 1933
Act and that
(a) such Purchaser has sufficient knowledge and experience to evaluate the risks
and merits of its investment in the Company and it is able financially to bear
the risks thereof;
(b) such Purchaser has had an opportunity to ask questions of and receive
answers from and to discuss the Company's business, management, and financial
affairs with the Company's management;
(c) the Securities are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof;
(d) such Purchaser was not offered nor made aware of the Company's interest in
issuing the Convertible Notes by any means of public advertisement or
solicitation;
(e) in connection with such Purchaser's purchase of the Securities, it has been
solely responsible for its own (i) due diligence investigation of the Company
and (ii) investment decision, and has not engaged or relied upon any agent or
"purchaser representative" to review or analyze the Company's business and
affairs or advise Purchaser with respect to the merits of the investment;
(f) such Purchaser has full power and authority to execute, deliver, and perform
this Agreement; and this Agreement constitutes the legal, valid, and binding
obligation of such Purchaser, enforceable against it in accordance with their
respective terms; and agrees that if such Purchaser proposes to sell the
Securities pursuant to Rule 144A under the Securities Act, it will (A) take
reasonable steps to obtain the information required by such Rule to establish a
reasonable belief that the prospective purchaser is a "qualified institutional
buyer" as such term is defined in Rule 144A and (B) advise the prospective
purchaser that the Purchaser is relying on the exemption from the registration
provisions of the Securities Act available pursuant to Rule 144A.
Section 4. Conditions of Initial Closing.
The Purchaser's obligation to purchase and pay for the Securities is subject to
the satisfaction prior to or at the Closing of the following conditions:
Section 4.1 Transaction Agreements. The Company shall have delivered to
Purchaser the Transaction Agreements as provided in Section 1.5, above, executed
by all the parties thereto.
Section 4.2 Opinion of Counsel. Purchaser shall have received from counsel for
the Company, an opinion in the form of Exhibit E, addressed to Purchaser, dated
the Closing Date. To the extent that the opinion referred to in the preceding
sentence is rendered in reliance upon the opinion of any other counsel,
Purchaser shall have received a copy of such opinion of such other counsel,
dated the Closing Date and addressed to Purchaser, or a letter from such other
counsel, dated the Closing Date and addressed to Purchaser, authorizing
Purchaser to rely on such other counsel's opinion.
Section 4.3 Representations and Warranties; No Default. The representations and
warranties of the Company contained in this Agreement and those otherwise made
in writing by or on behalf of the Company in connection with the transactions
contemplated by this Agreement shall be true in all material respects, except to
the extent of changes caused by the transactions contemplated herein; provided
however, that there shall exist at the time of the Closing and after giving
effect to such transactions no Event of Default (as such term is defined in the
Convertible Notes hereinafter an "Event of Default"), nor any event which with
notice, the passage of time, or both would constitute an Event of Default.
Section 4.4 Purchase and Loan Permitted by Applicable Laws. The purchase of, and
payment for, all the Securities evidenced by or attendant to the Convertible
Notes shall not violate any applicable domestic law or governmental regulation
(including, without limitation, Section 5 of the Securities Act) and shall not
subject Purchaser to any tax, penalty, liability, or other onerous condition
under, or pursuant to, any applicable law or governmental regulation or order.
Section 4.5 No Adverse Litigation. There shall be no action, suit, arbitration,
investigation, or proceeding, pending or, to the best of Purchaser's or the
Company's knowledge, threatened, against or affecting Purchaser, the Company,
any of Purchaser's or the Company's properties or rights, or any of Purchaser's
or the Company's Affiliates, officers, or directors, by or before any court,
arbitrator, or administrative or governmental body which (i) seeks to restrain,
enjoin, prevent the consummation of, or otherwise affect the transactions
contemplated by this Agreement or (ii) questions the validity or legality of any
such transactions, or (iii) seeks to recover damages or obtain other relief in
connection with any such transactions, and, to the best of Purchaser's and the
Company's knowledge, there shall be no valid basis for any such action,
proceeding, or investigation, and Purchaser shall have received a certificate
executed by the chief executive officer of the Company, dated the Closing Date,
to such effect.
Section 4.6 Approvals and Consents. The Company shall have duly received all
authorizations, waivers, consents, approvals, licenses, franchises, permits, and
certificates (collectively, "Consents") by or of all federal, state, and local
governmental authorities and all material consents by or of all other persons
necessary or advisable for the issuance of the Convertible Notes, all such
consents shall be in full force and effect at the time of Closing, and Purchaser
shall have received a certificate executed by the chief executive officer of the
Company, dated the Closing Date, to such effect.
Section 4.7 No Material Adverse Change. Since April 23, 2001, there shall not
have been any material adverse change in the business, condition (financial or
other), assets, properties, operations, or prospects of the Company, and
Purchaser shall have received a certificate executed by the chief executive
officer of the Company, dated the Closing Date, to such effect. Since April 23,
2001, there shall have been no amendment to the Charter or Bylaws except as
described in the Disclosure Schedule.
Section 4.8 Proceedings. All proceedings taken or to be taken in connection with
the transactions contemplated hereby, and all documents incident thereto shall
be reasonably satisfactory in form and substance to Purchaser and Purchasers
counsel, and Purchaser and Purchasers counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
Purchaser or Purchasers' counsel may reasonably request.
Section 4.9 Secretary Certificate. Purchaser shall have received a Secretary
Certificate from the Secretary or an Assistant Secretary of the Company dated
the Closing Date and certifying: (A) that attached thereto is a true and
complete copy of the Articles of Incorporation as then in effect, certified or
bearing evidence of filing by the Corporation Commission of the State of New
Mexico, and (B) a certificate of said Corporation Commission of the State of New
Mexico, dated as of a recent date as to the due incorporation and good standing
of the Company, the payment of all franchise taxes by the Company, and listing
all documents of the Company on file with said Corporation Commission of the
State of New Mexico; (C) that attached thereto is a true and complete copy of
the Bylaws of the Company as in effect on the date of such certification; (D)
that attached thereto is a true and complete copy of all resolutions adopted by
the Board of Directors or the shareholders of the Company authorizing the
execution, delivery, and performance of Transaction Agreements and the issuance,
sale, and delivery of the Securities, and that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the
foregoing agreements and the transactions contemplated thereby; (E) that the
Charter has not been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (A) above; and (F) to the
incumbency and specimen signature of each officer of the Company executing all
Transaction Agreements and any certificate or instrument furnished pursuant
hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate.
Section 4.10 Transfer Agent Instructions. The Transfer Agent Instructions, in
form and substance satisfactory to the Purchaser, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
Section 5. Conditions to Subsequent Closings.
Section 5.1 Representations and Warranties; No Default The representations and
the warranties of the Company contained in this Agreement and those otherwise
made in writing by or on behalf of the Company in connection with the
transactions contemplated by this Agreement shall be true in all material
respects, except to the extent of changes caused by the transactions
contemplated herein; provided however, that there shall exist no Event of
Default nor any event which with notice, lapse of time, or both would constitute
an Event of Default under the Convertible Notes at the time of the Subsequent
Closing.
Section 5.2 No Suspensions. There shall be no suspensions of trading in or in
delisting (or pending delisting) of the Common Stock.
Section 5.3 Opinion of Counsel. Purchaser shall have received from counsel for
the Company, addressed to Purchaser, dated as of each Additional Closing Date.
To the extent that the opinion referred to in the preceding sentence is rendered
in reliance upon the opinion of any other counsel, Purchaser shall have received
a copy of such opinion of such other counsel, dated the Additional Closing Date
and addressed to Purchaser, or a letter from such other counsel, dated the
Additional Closing Date and addressed to Purchaser, authorizing Purchaser to
rely on such other counsel's opinion.
Section 5.4 Due Diligence. Purchaser shall be satisfied with the results of
periodic due diligence investigations and shall have received a "comfort" letter
from the Company's auditors with respect to the financial statements filed by
the Company in its quarterly and annual securities filings.
Section 5.5 Shareholder Approval. The Company, if required, must obtain
shareholder approval on placement so as to address the NASD 20% rule. As of the
date of the First Closing, no such shareholder approval is required.
Section 5.6 No Material Adverse Change. Since the date hereof, there shall not
have been any material adverse change in the business, condition (financial or
other), assets, properties, operations, or prospects of the Company, and
Purchaser.
Section 6. Affirmative Covenants.
The Company covenants that from and after the date of this Agreement through the
Closing and thereafter so long as any of the Convertible Notes remain
outstanding:
Section 6.1 Financial Information. The Company shall furnish to Purchaser the
information required below, at the times required below:
(a) within five (5) days after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K, and any registration statements or amendments filed
pursuant to the 1933 Act;
(b) within one (1) day after release thereof, copies of all press releases
issued by the Company;
(c) copies of the same notices and other information given to the stockholders
of the Company generally, contemporaneously with the giving thereof to the
stockholders;
(d) promptly upon any officer of the Company obtaining knowledge (i) of any
condition or event which constitutes an Event of Default, (ii) that the holder
of any Convertible Notes has given any notice or taken any other action with
respect to a claimed Event of Default under this Agreement, (iii) of any
condition or event which, in the opinion of management of the Company would have
a material adverse effect on the business, condition (financial or other),
assets, properties, operations, or prospects of the Company, other than
conditions or events applicable to the economy as a whole, (iv) that any person
has given any notice to the Company or taken any other action with respect to a
claimed Event of Default, or (v) of the institution of any litigation involving
claims against the Company, unless such litigation is defended by the insurance
carrier without any reservation of rights and is reasonably expected to be fully
covered by a creditworthy insurer, in an amount equal to or greater than
$250,000 with respect to any single cause of action or of any adverse
determination in any litigation involving a potential liability to the Company
equal to or greater than $100,000 with respect to any single cause of action, a
certificate executed by the chief executive officer of the Company specifying
the nature and period of existence of any such condition or event, or specifying
the notice given or action taken by such holder or person and the nature of such
claimed Event of Default, event or condition, and what action the Company has
taken, is taking, or proposes to take with respect thereto; and
(e) with reasonable promptness, such other information and data with respect to
the Company as Purchaser may reasonably request.
Section 6.2 SB-2. The Company agrees to file an SB-2 Registration Statement with
respect to the Securities and Warrants described herein as required under SEC
Regulation, and to provide a copy thereof to each Purchaser promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for, or obtain exemption for the Securities for, sale to the Purchaser at the
Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of any such
action so taken to the Purchaser on or prior to the Closing Date.
Section 6.3 Reporting Status. Until the earlier of (a) the date as of which the
Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Conversion Shares and Warrant Shares without restriction
pursuant to Rule l44(k) promulgated under the 1933 Act (or successor thereto),
or (b) the date on which (i) the Investors shall have sold all the Conversion
Shares and Warrant Shares and (ii) none of the Convertible Notes is outstanding
(the "Registration Period"), 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 an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.
Section 6.4 Inspection of Property. The Company will permit any Person
designated by any Purchaser in writing, at Purchaser's expense, to visit and
inspect any of the properties of the Company, to examine the books and financial
records of the Company and make copies thereof or extracts therefrom and to
discuss its affairs, finances, and accounts with its officers and its
independent public accountants, all at reasonable times and upon reasonable
prior notice to the Company.
Section 6.5 Maintenance of Properties; Insurance. The Company will maintain or
cause to be maintained in good repair, working order, and condition all
properties used or useful in the business of the Company, and from time to time
will make or cause to be made all appropriate repairs, renewals, and
replacements thereof. The Company will maintain or cause to be maintained, with
financially sound and reputable insurers (or, as to workers' compensation or
similar insurance, in an insurance fund or by self-insurance authorized by the
laws of the jurisdiction in question), insurance with respect to their
respective properties and businesses against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar businesses and similarly situated, of such type and in such
amounts as are customarily carried under similar circumstances by such other
corporations and as are in good faith believed by the Company to be sufficient
to prevent the Company from becoming a co-insurer within the terms of the
policies in question.
Section 6.6 Expenses. The Company shall pay all costs and expenses incurred by
such party in connection with the negotiation, investigation, preparation,
execution, and delivery of this Agreement, the Convertible Notes, the Escrow
Agreement, the Registration Rights Agreement, and other documents executed in
connection with the issuance of the Convertible Notes. The costs and expenses of
Purchaser, including all legal fees and expenses of the Purchaser, shall be paid
for by the Company at the First Closing and the fees and expenses for all
subsequent Closings shall be paid at each subsequent Closing.
Section 6.7 Authorized Shares of Common Stock, Reservation of Shares. The
Company shall at all times, so long as any of the Convertible Notes are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Convertible Notes and the exercise of the Purchase Warrants, such number of
shares of Common Stock equal to or greater than 150% of the number of Conversion
Shares and Warrant Shares issuable upon conversion of the Convertible Notes and
the conversion or exercise of the Warrants which are then outstanding or which
could be issued at any time in the transactions contemplated by this Agreement.
Section 6.8 Corporate Existence, Etc. The Company s will at all times preserve
and keep in full force and effect its corporate existence, and rights, licenses,
and franchises material to its business, and will qualify to do business as a
foreign corporation in each jurisdiction where the failure to so qualify would
have a material adverse effect on the business, condition (financial or other),
assets, properties, or operations of the Company.
Section 6.9 Transfer Agents. The Company covenants and agrees that, in the event
that the Company's agency relationship with the transfer agent should be
terminated for any reason prior to a date which is three (3) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the transfer agent execute and agree to be bound by the terms
of the Irrevocable Instructions to Transfer Agent.
Section 6.10 Shareholder Approval; Proxy. The Company covenants to ratify the
issuance of the Convertible Notes and Warrants, if and as required by the rules
of the National Association of Securities Dealers, Inc. (the "NASD") applicable
to the transaction (collectively the "Shareholder Proposals"). All officers and
directors will execute a proxy authorizing Xxxxxx X. Xxxxxxx or Xxxxxxx X.
Xxxxxxx or either of them to vote and exercise all consensual rights in respect
of all shares of Common Stock, the voting of which is controlled by such officer
or director, at any meeting (or any adjournment thereof) at which Shareholder
action is proposed to effect the Shareholder Proposals.
Section 6.11 Transfer Agent Instructions. The Company shall issue Transfer Agent
Instructions to its transfer agent to issue certificates, registered in the name
of the Purchaser or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by the Purchaser
to the Company upon conversion of the Convertible Notes and the conversion or
exercise of the Warrants, except as provided in Section 6.7 of this Agreement.
Prior to registration of the Conversion Shares and the Warrant Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 3.7 of this Agreement. The Company warrants that no instruction other
than the Transfer Agent Instructions referred to in this Section 6.11, and stop
transfer instructions to give effect to Section 3.7 hereof (in the case of the
Conversion Shares and the Warrant Shares, prior to registration of such shares
under the 0000 Xxx) will be given by the Company to its transfer agent and that
the Conversion Shares and the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 6.11 shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable securities laws upon resale of the
Convertible Notes, the Conversion Shares or the Warrant Shares. If the Purchaser
provides the Company with an opinion of counsel, reasonably satisfactory in
form, and substance to the Company, that registration of a resale by the
Purchaser of any of the Convertible Notes, the Conversion Shares or the Warrant
Shares is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Purchaser. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchaser by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 6.11 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 6.11, that the Purchaser shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
Section 6.12 Payment of Taxes. The Company will pay all taxes, assessments, and
other governmental charges imposed upon it or any of its properties or assets or
in respect of any of its franchises, business, income, or properties before any
penalty or significant interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials, and supplies) for
sums which have become due and payable and which by law have or may become a
lien upon any of its properties or assets, provided that no such charge or claim
need be paid if such claim is (i) being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, and (ii) the amount of
such claim is accrued on the financial statements of the Company or other
appropriate provision is made as shall be required by generally accepted
accounting principles.
Section 6.13 Compliance with Laws, Etc. The Company will comply with the
requirements of all applicable laws, rules, regulations, and orders of any court
or other governmental authority (including, without limitation, those related to
environmental or ERISA compliance), noncompliance with which could materially
adversely affect the business, condition (financial or other), assets, property,
operations, or prospects of the Company.
Section 6.14 Use of Proceeds. The Company will use the proceeds from the sale
and issuance of the Convertible Notes for general corporate purposes only.
Section 6.15 Registration Statement. The Company shall (a) have an SB-2
Registration Statement declared Effective by the SEC covering the Conversion
Shares and the Warrant Shares by the Effective Deadline, (b) keep such
Registration Statement current and effective for a period twelve (12) months
from the Effective Date of such Registration Statement. In the Registration
Rights Agreement, the Company has agreed that if it does not have an SB-2
Registration Statement declared Effective by the SEC covering the Conversion
Shares and the Warrant Shares on or before the Effective Deadline, that it will
forfeit certain shares of the Common Stock to the Purchasers as a penalty as
provided in Section 11 of the Registration Rights Agreement.
Cashless Exercise. The Company will have all shares of common stock underlying
the warrants registered under the Securities Act of 1933, as amended. The
warrant holder, whether the undersigned or otherwise, in lieu of any cash
payment required hereunder, shall have the right to exercise the warrants in
whole or in part by surrendering the warrants in exchange for the number of
shares of the Company's common stock equal to (x) the number of shares as to
which the warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined below) of the common stock
less the exercise price of the warrants being exercised, and the denominator of
which is such Market Price. The term "Market Price" means the closing ask price
per share of the common stock on the principal stock exchange or market on which
the common stock is then quoted or traded on the day preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the U.S. Securities and Exchange Commission with
respect to all of the shares underlying this warrants.
Section 6.16 Listings. The Company shall promptly after the effective date of
the Registration Statement secure the listing of the Conversion Shares and the
Warrant Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listings of all Conversion Shares from
time to time issuable pursuant to terms of the Convertible Notes and Warrant
Shares from time to time issuable under the terms of the Warrants, and the
Registration Rights Agreement. The Company shall maintain the Common Stock's
authorization for quotation in the over-the-counter market. The Company shall
promptly provide to Purchaser copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading in the over-the-counter
market.
Section 6.17 Indemnification. In consideration of the Purchaser's execution and
delivery of this Agreement and acquiring the Securities hereunder and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify, and hold harmless each Purchaser and
each other holder of the Securities and each officer, director, employee, and
agent of each Purchaser (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities, and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in any Transaction Agreement or
any other certificate, instrument, or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement, or obligation of the Company
contained in the Transaction Agreements, or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit, or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance, or enforcement of this Agreement or
any other instrument, document, or agreement executed pursuant hereto by any of
the Indemnitees, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Convertible
Notes, or the status of the Purchaser or holder of the Convertible Notes, the
Conversion Shares, the Warrants or the Warrant Shares, as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
Section 6.18 Inspection, Consultation, and Advice. The Company shall permit any
holder of at least $100,000 in principal amount of Convertible Notes (a
"Significant Holder") and such persons as a Significant Holder may designate, to
visit and inspect any of the properties of the Company, examine its books and
take copies and extracts therefrom, discuss the affairs, finances, and accounts
of the Company with their officers, employees, and public accountants (and the
Company hereby authorizes said accountants to discuss with any Significant
Holder and the representatives of any Significant Holder such affairs, finances,
and accounts), and consult with and advise the management of the Company as to
their affairs, finances, and accounts, all at reasonable times, upon reasonable
notice and as is reasonably necessary to permit any such Significant Investor to
monitor its investment in the Company. Each party shall bear their own expenses
in connection with the above activities.
Section 7 Adjustments.
Section 7.1 Sale of Additional Securities. From and after the date hereof, in
the event that the Company in any non-public offering sells any Common Stock, or
other securities convertible into or exercisable for shares of Common Stock, at
a price per share that is less than the purchase price paid by the investors
pursuant to Section 1 hereof, then for no additional consideration, the Company
shall immediately transfer to the Investors that number of shares of Common
Stock of the Company equal to the difference between (a) the number of shares
which would have been issued to the Investors at the lesser price per share of
such subsequently sold securities and (b) the number of the shares issued to the
Investors hereunder.
Section 7.2 Certificate as to Adjustments. Whenever the provisions of Section
7.1 require that the Company issue to the Investors an additional number of
shares of Common Stock, the Company shall promptly compute such adjustment and
furnish to the Investors a certificate setting forth such adjustment and showing
in reasonable detail the facts requiring such adjustment and the number of
shares of Common Stock to be forthwith issued.
Section 8. Negative Covenants.
The provisions of this Section 7 shall remain in effect so long as any of the
Convertible Notes shall remain outstanding.
Section 8.1 Restrictions on Dividends. The Company will not (a) pay any
dividends, in cash or otherwise, on, (b) make any distributions to holders of,
or (c) purchase, redeem, or otherwise acquire any of its outstanding Common
Stock or Preferred Stock or set apart assets for a sinking or other analogous
fund for the purchase, redemption, retirement, or other acquisition of, any
shares of its Common Stock or Preferred Stock; provided however, that the
Company may, so long as at the time of and after giving effect thereof no Event
of Default has occurred and is continuing: (i) pay dividends on its outstanding
Preferred Stock in accordance with the Charter; (ii) with prior written approval
of each Purchaser, repurchase shares of its Common Stock issued or to be issued
by the Company upon exercise of stock options granted to employees and directors
of the Company pursuant to the terms of plans adopted by the Board of Directors
of the Company; and (iii) pay cash in lieu of fractional shares of its Common
Stock on the exercise of outstanding warrants to purchase its Common Stock,
pursuant to the terms of such warrants.
Section 9. Miscellaneous.
Section 9.1 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
Section 9.2 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 9.3 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
Section 9.4 Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Purchaser, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant, or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 9.5 Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (a) upon receipt, when
delivered personally, (b) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested, (c) three (3) days
after being sent by U.S. certified mail, return receipt requested, or (d) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
American Millennium Corporation, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Purchaser, to its address and facsimile number on the signature page
of such Purchaser hereto, with copies to such Purchaser's counsel as set forth
on the signature page of such Purchaser hereto. Each party shall provide five
(5) days prior written notice to the other party of any change in address or
facsimile number.
Section 9.6 Interest. In no event shall the amount of interest due or payable
hereunder or under the Convertible Notes exceed the maximum rate of interest
allowed by applicable law, and if any such payment is inadvertently made by the
Company or is inadvertently received by any holder of Convertible Notes, then
such excess sum shall be credited as a payment of principal, unless the
applicable holder of a Convertible Notes shall notify the Company in writing
that it elects to have such excess sum returned forthwith. It is the express
intent hereof that the Company not pay and the holder of the Convertible Notes
not receive, directly or indirectly in any manner whatsoever, interest in excess
of that which may legally be paid by the Company under applicable law.
Section 9.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Any Purchaser may
assign its rights hereunder without the consent of the Company, provided
however, that any such assignment shall not release such Purchaser from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.
Section 9.8 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 9.9 Publicity. The Company and Purchasers shall have the right to
approve, before issuance, any press releases or any other public statements with
respect to the transactions contemplated hereby; provided however, that the
Company shall be entitled, without the prior approval of Purchasers, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
Section 9.10 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments, and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.11 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
Section 9.12 Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Louisiana without regard to the
principles of conflict of laws.
Section 9.13 Joint, Several and In Solido Liability. If Purchasers consist of
more than one person and/or entity, each such person and/or entity agrees that
its liability herein is joint, several and In Solido.
COMPANY SIGNATURE PAGE
TO
SERIES 1 CONVERTIBLE NOTE
Purchase agreement
IN WITNESS WHEREOF, Purchaser and the Company have caused this Series 1
Convertible Note Purchase Agreement to be duly executed as of the date first
written above.
COMPANY
AMERICAN MILLENNIUM CORPORATION, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
[Signature of Purchaser on following page]
purchaser signature page
to
SERIES 1 CONVERTIBLE NOTE
Purchase agreement
PURCHASER
Options Unlimited
By:
===================================== =========================================
Purchaser Name ("Purchaser") Options Unlimited
Address and
Facsimile Number Alpha & Omega Law Xxxxxxxx
Atlantis Building, Shallow Draught
Bridgetown, Barbados
------------------------------------- ---------------------------------------
------------------------------------- ----------------------------------------
Securities Purchased Convertible Note
------------------------------------- -----------------------------------------
------------------------------------- -----------------------------------------
Purchase Price $300,000
===================================== =========================================
Exhibit A
to
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
AMERICAN MILLENNIUM CORPORATION, INC.
COMMON STOCK PURCHASE WARRANT
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
TO
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
between
AMERICAN MILLENNIUM CORPORATION, INC.
(the "Company")
and
Options Unlimited
(the "Purchaser")
