PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BY AND BETWEEN
BOAT BASIN INVESTORS LLC
AND
STARUNI CORPORATION
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DATED AS OF SEPTEMBER 28, 2000
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This PRIVATE EQUITY LINE OF CREDIT AGREEMENT is entered into as of the
28th day of September, 2000 (this "Agreement"), by and between Boat Basin
Investors LLC, a limited liability company formed under the laws of Nevis (the
"Investor"), and Staruni Corporation, a corporation organized and existing under
the laws of the State of California (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor
and the Investor shall purchase from time to time as provided herein, up to
$2,000,000 of the Common Stock (as defined below), and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Affiliates" shall have the meaning assigned to such term
in Section 3.4 hereof.
Section 1.2 "Sale Price" shall mean the closing sale price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3 "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of earnings and assets of
the Company.
Section 1.4 "Commitment Amount" shall mean the $2,000,000 up to which
the Investor has agreed to provide to the Company in order to purchase Put
Shares pursuant to the terms and conditions of this Agreement.
Section 1.5 "Commitment Period" shall mean the period commencing on
the Effective Date and expiring on the earliest to occur of (x) the date on
which the Investors shall have purchased Put Shares pursuant to this Agreement
for an aggregate Purchase Price of $2,000,000, or (y) the date occurring
forty-eight (48) months from the date of commencement of the Commitment Period.
Section 1.6 "Common Stock" shall mean the Company's common stock, no
par value per share.
Section 1.7 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
Section 1.8 "Condition Satisfaction Date" shall have the meaning
assigned to such term in Section 7.2 hereof.
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Section 1.9 "Control Persons" shall have the meaning assigned to such
term in Section 12.2 hereof.
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11 "XXXXX" shall mean the SEC's electronic data gathering and
retrieval system.
Section 1.12 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13 "Escrow Agent" shall mean Xxxxxx Xxxxxxxx Xxxxxxx LLP.
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the regulations promulgated thereunder.
Section 1.15 "Floor Price P" shall mean a closing bid price of twenty
cents ($.20) per share or less for any five consecutive Trading Days during the
Valuation Period. "Floor Price C" shall mean fifteen cents ($.15) per share
determined on any Put Date.
Section 1.16 "Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.2) to be invested by the Investor to purchase
Put Shares with respect to any Put Purchase Notice delivered by the Company to
the Investor in accordance with Section 2.2 hereof.
Section 1.17 "Legend" shall have the meaning assigned to such term in
Section 9.1 hereof.
Section 1.18 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance or situation that would prohibit or otherwise
interfere with the ability of the Company to enter into and perform its
obligations under this Agreement and to carry on the business of the Company as
presently conducted.
Section 1.19 "Market Price" shall mean for the purpose of calculating
the Purchase Price of the Put Shares, the lowest closing bid price of the Common
Stock as reported on the Principal Market over the Valuation Period.
Section 1.20 "Maximum Put Amount" shall mean a maximum of 15% of the
aggregate trading volume during the Valuation Period excluding from such
calculation any Trading Day where the lowest bid price is less than 25% of the
Floor Price C.
Section 1.21 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.22 "Outstanding" when used with reference to Common Stock or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
10.5 - 3
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.23 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.24 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq Small-Cap Market, the NASD OTC Bulletin Board, the American Stock
Exchange or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.25 Intentionally omitted.
Section 1.26 "Purchase Price" as used in this Agreement shall mean
seventy-five percent (75%) of the Market Price on the Put Date. The foregoing
percentage is the "Purchase Price Percentage."
Section 1.27 "Put" shall mean each occasion the Company elects to draw
down a portion from the equity line by exercising its right to tender a Put
Purchase Notice requiring the Investor to purchase a discretionary amount of the
Company's Common Stock, subject to the terms of this Agreement which tender must
be given to the Investor.
Section 1.28 "Put Closing" shall mean one of the closings of a purchase
and sale of the Put Shares pursuant to Section 2.3.
Section 1.29 "Put Closing Date" shall mean, with respect to a Put
Closing the fourth Trading Day following the Put Date related to such Put
Closing, provided all conditions to such Put Closing have been satisfied on or
before such Trading Day.
Section 1.30 "Put Date" shall mean such date as a Put Purchase Notice
has been delivered to the Investor.
Section 1.31 "Put Purchase Notice" shall mean a written notice to the
Investor setting forth the Investment Amount that the Company intends to sell to
the Investor, as such form is attached hereto as Exhibit A.
Section 1.32 "Put Shares" shall mean all shares of Common Stock issued
or issuable pursuant to a Put that has occurred or may occur in accordance with
the terms and conditions of this Agreement.
Section 1.33 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until the Registration Statement has been declared effective by
the SEC and all Put Shares and Warrant Shares have been disposed of pursuant to
the Registration Statement.
Section 1.34 "Registration Statement" shall mean a registration
statement on Form SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
10.5 - 3
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Investor and Placement Agent of the Registrable Securities under the Securities
Act.
Section 1.35 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.36 "SEC" shall mean the Securities and Exchange Commission.
Section 1.37 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.38 "Securities Act" shall have the definition ascribed to it
in the recitals of this Agreement.
Section 1.39 "SEC Documents" shall mean, to the extent applicable, the
Company's latest Form 10-KSB as of the time in question, all Forms 10-QSB and
8-K filed thereafter, and the Proxy Statement for its latest fiscal year as of
the time in question until such time the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement.
Section 1.40 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.41 "Put Cushion" shall mean the mandatory minimum
twenty-five (25) Trading Days between Put Dates.
Section 1.42 "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.43 Intentionally Omitted.
Section 1.44 "Valuation Period" shall mean the period of thirty (30)
days during which the Purchase Price of the Common Stock is determined with
respect to any Put Date, which shall occur during the immediate thirty (30) days
prior to the Put Date.
Section 1.45 "Warrants" shall mean the common stock purchase warrants
of the Company collectively described in Section 2.4, forms of which are annexed
hereto as Exhibits E and F. "Put Warrants" shall mean the common stock purchase
warrants of the Company described in Section 2.4, a form of which is annexed
hereto as Exhibit E.
Section 1.46 "Warrant Shares" shall mean the Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
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Section 2.1 Investments/Puts. Upon the terms and conditions set forth
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herein (including, without limitation, the provisions of Article VII hereof), on
any Put Date the Company may exercise a Put by the delivery of a Put Purchase
Notice. The number of Put Shares that the Investor shall receive pursuant to
such Put shall be determined by dividing the Investment Amount specified in the
Put Purchase Notice by the Purchase Price determined during the Valuation
Period.
Section 2.2 Mechanics.
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(a) Put Purchase Notice. At any time during the Commitment
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Period, the Company may deliver a Put Purchase Notice, in substantially the form
and substance of Exhibit A, to the Investor, subject to the conditions set forth
in Section 7.2; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Purchase Notices shall be
neither less than $50,000 nor more than $100,000, subject further to the Maximum
Put Amount and, provided further, that any amount in excess of $50,000 be
consented to in writing by the Investor.
(b) Date of Delivery of Put Purchase Notice. A Put Purchase
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Notice shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior to 12:00
noon New York time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon New York time on a Trading
Day or at any time on a day which is not a Trading Day. No Put Purchase Notice
may be deemed delivered, on a day that is not a Trading Day.
(c) Determination of Purchase Price and Put Shares Issuable.
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The Purchase Price for any Put shall be the product of the Market Price
multiplied by the Purchase Price Percentage less 10% of the amount stated in any
Put Purchase Notice. The number of Put Shares to be purchased by the Investor
shall be settled on the Put Closing Date
(d) Floor Price Limitation. If the Market Price is less than
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either Floor Price P or Floor Price C the Company shall not sell and the
Investor shall not purchase the Put Shares otherwise to be purchased for such
Put Date, unless the Company and the Investor each consent to such sale in
writing.
Section 2.3 Put Closings. On each Put Closing Date for a Put
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(i) the Company shall deliver in the form required pursuant to Article IX hereof
to the Escrow Agent to be held in escrow, certificates representing the Put
Shares to be purchased by the Investor pursuant to Section 2.1 herein, or if
deliverable without legend pursuant to Article IX and if DTC eligible, deliver
the Put Shares electronically by DTC or DWAC after the Put Date and on or prior
to the Put Closing Date, registered in the name of the Investor or, at the
Investor's option, deposit such certificate(s) into such account or accounts
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previously designated by the Investor (ii) the Company shall deliver to the
Escrow Agent Put Warrants in accordance with Section 2.4, in the form annexed
hereto as Exhibit E, and (iii) the Investor shall deliver to the Escrow Agent to
be held in escrow the Investment Amount specified in the Put Purchase Notice by
wire transfer of immediately available funds on or before the Put Closing Date.
In addition, on or prior to the Put Closing Date, each of the Company and the
Investor shall deliver all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Payment
of funds to the Company and delivery of the certificates and the Put Warrants to
the Investor shall occur out of escrow in accordance with the escrow agreement
referred to in Section 7.2(o) following (x) the Company's deposit into escrow of
the certificates representing the Put Shares and the Put Warrants and (y) the
Investor's deposit into escrow of the Investment Amount.
Section 2.4 Issuance of Warrants. Under the terms of this Agreement,
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the Company shall issue to the Investor Warrants to purchase up to 10% of the
number of Put Shares purchased on each Put Closing Date in the form annexed
hereto as Exhibit E and the Company shall issue to the Investor Warrants to
purchase 1,000,000 Warrant Shares in the form of Warrant annexed hereto as
Exhibit F.
Section 2.5 Termination of Investment Obligation. The obligation of the
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Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Put Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for a consecutive ten day calendar
period or for an aggregate of thirty (30) Trading Days during the Commitment
Period, for any reason, (ii) the Company files a petition in bankruptcy or a
petition in bankruptcy is filed against the Company or the Company is
adjudicated bankrupt, (iii) the Company consolidates with or merges into any
other Person and the Company shall not be the continuing or surviving
corporation, (iv) the Company fails to deliver the Warrants as described in
Section 2.4, (v) the Company effects a reclassification or recapitalization
without the Investor's consent as described in Section 6.11, or (vi) the Company
shall at any time fail to comply with the requirements of Section 6.2, 6.3, 6.4,
6.5 or 6.6.
Section 2.6 Non-Usage Fee. The Company shall have the obligation to
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deliver Put Purchase Notices to the Investor during each six (6) month period of
the Commitment Period having an aggregate dollar amount of $200,000 ("Minimum
Put Commitment"). In the event the Company does not deliver Put Purchase Notices
during any six (6) month period of the Commitment Period for the Minimum Put
Commitment, then the Company shall pay the Investor a non-usage fee of $25,000
less 10% of the actual aggregate dollar amount of Put Purchase Notices during
the subject six (6) month period ("Non-Usage Fee"). The Investor shall give the
Company written notice to pay the Non-Usage Fee 10 days after the end of any six
(6) month period during which the Minimum Put Commitment has not been made. The
Company shall be required to pay the Non-Usage Fee 5 days after the receipt of
such notice. If the Company fails to pay the Non-Usage Fee upon notice, the
Non-Usage Fee may be deducted by the Investor from the Purchase Price of any
subsequent Put Purchase Notice delivered by the Company. Failure of the Investor
to give written notice of a Non-Usage Fee to the Company, shall not waive the
Investor's rights to collect any such fee nor relieve the Company of its
obligation to pay such fee.
10.5 - 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
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its own account and not with a view to the distribution of the Common Stock, and
the Investor has no present arrangement (whether or not legally binding) at any
time to sell the Common Stock to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not agree
to hold the Common Stock for any minimum or other specific term and reserves the
right to dispose of the Common Stock at any time in accordance with federal and
state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
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investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
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validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer, director
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or to Investor's good faith belief, an "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of this
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Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated hereby, and compliance
with the requirements hereof, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (a) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
10.5 - 7
Section 3.6 Disclosure; Access to Information. The Investor has
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received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has had access to copies of any such reports that have
been requested by it.
Section 3.7 Manner of Sale. At no time was Investor presented with or
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solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor, except as may be
set forth in the disclosure schedule delivered in connection herewith, that:
Section 4.1 Organization of the Company. The Company is a corporation
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duly organized and existing in good standing under the laws of the State of
California and has all requisite corporate authority 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 every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, other than those in which the failure so
to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
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power and authority to enter into and perform its obligations under this
Agreement to issue the Put Shares; (ii) the execution, issuance and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required; and (iii) this Agreement has been duly executed and
delivered by the Company and constitutes 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, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Section 4.3 Capitalization. As of the date hereof, the authorized
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capital stock of the Company consists of 250,000,000 shares of Common Stock, of
which 15,526,839 shares are issued and outstanding and 50,000,000 shares of
preferred stock, of which no shares are issued and outstanding. Except as set
forth in Schedule 4.3, there are no options, warrants, or rights to subscribe
to, securities, rights or obligations convertible into or exchangeable for or
giving any right to subscribe for any shares of capital stock of the Company.
All of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable.
10.5 - 8
Section 4.4 Common Stock. As of the commencement of the Commitment
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Period, the Company will have registered its Common Stock pursuant to Section
12(b) or 12(g) of the Exchange Act and be in full compliance with all reporting
requirements of the Exchange Act, if any, and the Company will have maintained
all requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is then listed or quoted on the Principal Market. As of the
date hereof, the Common Stock is quoted on the OTC Bulletin Board.
Section 4.5 Financial Statements. The Company has delivered or made
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available to the Investor true and complete copies of unaudited financial
statements (without footnotes) as of and for the period ending June 30, 2000
("Financial Statements"). The Company has not provided to the Investor any
information that, according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company, but which has
not been so disclosed. The Financial Statements fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations for the periods then ended, subject to normal year-end
audit adjustments.
Section 4.6 Valid Issuances. Assuming the accuracy of the
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representations and warranties contained in Sections 3.1, 3.2 and 3.7 hereof
both at the date hereof and at the time of sale and issuance, the sale and
issuance of the Put Shares will be exempt from registration under the Securities
Act in reliance upon Section 4(2) thereof and/or Regulation D thereto and when
issued, the Put Shares shall be duly and validly issued, fully paid, and
nonassessable. Neither the sales of the Put Shares pursuant to, nor the
Company's performance of its obligations under this Agreement will (i) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Put Shares or any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
to or acquire the Capital Shares or other securities of the Company. The Put
Shares shall not subject the Investor to personal liability by reason of the
possession thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
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Transaction. Neither the Company nor any of its affiliates nor any distributor
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or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
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available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
10.5 - 9
Section 4.9 No Conflicts. The execution, delivery and performance of
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this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including, without limitation, the issuance of
Common Stock do not and will not (i) result in a violation of the Company's
Certificate or By-Laws or (ii) conflict with, or constitute a default (or an
event that 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 material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party, or (iii) result in a violation of any federal, state, local
or foreign law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (iii), no such representations and warranties
are being made insofar as the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby are or may be affected by the status of the Investor under
or pursuant to any such foreign law, rule or regulation. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either
individually or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under federal, state or local law, rule or
regulation 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 or perform any of its obligations under this Agreement or issue
and sell the Common Stock in accordance with the terms hereof (other than any
SEC, NASD or state securities filings that may be required to be made by the
Company subsequent to any Put Closing, any registration statement that may be
filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on any Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.10 No Material Adverse Change. Since the date of the
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Financial Statements described in Section 4.5, no Material Adverse Effect has
occurred or exists with respect to the Company.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
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or obligations which are material, individually or in the aggregate, and are not
disclosed to the Investor in the Financial Statements or otherwise in writing,
other than those incurred in the ordinary course of the Company's businesses
since the date of the Financial Statements and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. No event or
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circumstance has occurred or exists with respect to the Company or its
10.5 - 10
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires as of the date hereof, public
disclosure or announcement prior to the date hereof by the Company.
Section 4.13 No Integrated Offering. Neither the Company, nor any of
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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, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as set forth in
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the Financial Statements described in Section 4.5, there are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which might have a Material Adverse
Effect. Except as set forth on Schedule 4.14, no judgment, order, writ,
injunction, decree or award has been issued by or, so far as is known by the
Company, requested by any court, arbitrator or governmental agency which might
result in a Material Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company and any
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Person representing the Company, in connection with the transactions
contemplated by this Agreement, have not made, at any time, any oral
communication in connection with same, which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16 Non-Public Information. Neither the Company nor any of
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its officers of agents has disclosed any material non-public information about
the Company to the Investor or the Placement Agent.
Section 4.17 No Default or Violation. The Company is not (i) in default
------------------------
under or in violation of and no event has occurred which has not been waived
which, with notice or lapse of time or both, would result in a default by the
Company, nor has the Company received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound, (ii) in violation of any order of any court,
arbitration or governmental body, or (iii) in violation of any statute, rule or
regulation of any governmental authority, except as could not have or result in
a Material Adverse Effect.
Section 4.18 Financial Statements. The financial statements of the
----------------------
Company included in the reports filed by the Company under the Exchange Act
comply in all material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
10.5 - 11
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with
--------------------
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.
Section 5.2 Selling Restrictions. The Investor has the right to sell
----------------------
shares of the Company's Common Stock equal in number to the number of the Shares
to be purchased pursuant to this Agreement during the Commitment Period.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause a Registration
--------------------
Statement to be filed with respect to all Put Shares and Warrant Shares within
sixty (60) days of the Subscription Date and shall use its best efforts to cause
such Registration Statement to be declared effective within one hundred twenty
(120) days of the Subscription Date and remain effective for a period of two (2)
years. The Company shall provide the Investor, or its counsel, a copy of the
Registration Statement at least two (2) days prior to filing with the SEC.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
-----------------------------
Company has reserved and the Company shall continue to reserve and keep
available at all times shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue the Put Shares.
Section 6.3 Quoting or Listing of Common Stock. The Company shall
------------------------------------
maintain the quoting or listing of the Common Stock on a Principal Market, and
as soon as practicable (but in any event prior to the commencement of the
Commitment Period) to list the Put Shares on the Principal Market, if the
Principal Market is the Nasdaq, AMEX or NYSE. The Company further shall, if the
Company applies to have the Common Stock traded on any other Principal Market,
include in such application the Put Shares, and shall take such other action as
is necessary or desirable in the opinion of the Investor to cause the Common
Stock to be listed on such other Principal Market as promptly as possible. The
Company shall take all action necessary to continue the quoting, listing and
trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market.
10.5 - 12
Section 6.4 Exchange Act Registration. The Company shall cause its
----------------------------
Common Stock to become and continue to be registered under Section 12(g) or
12(b) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act. The Company will
take all action to obtain a listing and continue the listing and trading of its
Common Stock on the Principal Market and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Principal Market.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
--------
sold by the Investor pursuant to Section 9.1 shall be free of restrictive
legends, except as set forth in Article IX.
Section 6.6 Corporate Existence. The Company will take all steps
---------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. In the event that the SEC
---------------------------
Documents furnished or submitted to the SEC by the Company are not available or
accessible by the Investor(s) on XXXXX, the Company will deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all such SEC Documents.
Section 6.8. Blackout Period. The Company will immediately notify the
----------------
Investor upon the occurrence of any of the following events in respect of a
registration statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the registration statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate; and the Company will promptly make available to
10.5 - 13
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Purchase Notice during the
continuation of any of the foregoing events or if the Company has knowledge that
any of the foregoing events will occur within twenty (20) days of such
knowledge.
Section 6.9. Expectations Regarding Put Purchase Notices. Within ten
---------------------------------------------
(10) days after the commencement of each calendar quarter occurring subsequent
to the commencement of the Commitment Period, the Company undertakes to notify
the Investor as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance of
Put Purchase Notices. Such notification shall constitute only the Company's good
faith estimate and shall in no way obligate the Company to raise such amount, or
any amount, or otherwise limit its ability to deliver Put Purchase Notices. The
failure by the Company to comply with this provision can be cured by the
Company's notifying the Investor at any time as to its reasonable expectations
with respect to the current calendar quarter.
Section 6.10. Capital Raising Limitations.
----------------------------
(i) Capital Raising Limitations. For so long as
----------------------------
a Put Closing has occurred in the Investment Agreements as the Company has
designated in its Put Purchase Notice (Investor consented to each Investment
Amount in excess of $50,000 and less than $100,000 and a Put Closing has
occurred at each time designated in the Put Purchase Notice) during the period
from the date of this Agreement until its expiration, the Company shall not
issue or sell, or agree to issue or sell Equity Securities (as defined below),
for cash in private capital raising transactions without obtaining the prior
written approval of the Investor (the limitations referred to in this subsection
6.10(i) are collectively referred to as the "Capital Raising Limitations"). For
purposes hereof, the following shall be collectively referred to herein as, the
"Equity Securities": (i) Common Stock or any other equity securities, (ii) any
debt or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares of Common
Stock or other equity securities, or (iii) any securities of the Company
pursuant to an equity line structure or format similar in nature to this
transaction.
(ii) Exceptions to Capital Raising Limitations.
---------------------------------------------
Notwithstanding the above, the Capital Raising Limitations shall not apply to
any transaction involving issuances of securities in connection with a merger,
consolidation, acquisition or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company or exercise of options by employees,
consultants or directors, or a primary underwritten offering of the Company's
Common Stock.
Section 6.11. No Reclassification or Recapitalization. The Company
-------------------------------------------
shall not, without the consent of the Investor, during the term of this
Agreement, effect a recapitalization, reclassification or other similar
10.5 - 14
transaction of such character that the shares of Common Stock shall be changed
into or become exchangeable for a smaller number of shares (a "Reverse Stock
Split"), provided that the Company may effect such Reverse Stock Split without
the consent of Investor in connection with achieving listing requirements for
any Principal Market.
Section 6.12. Disclosure of Material Information. In the event that any
-----------------------------------
or all of the information set forth on Schedule 8.2(a) hereto becomes material,
the Company shall make full and complete public disclosure in accordance with
all applicable law.
Section 6.13. Issuance of Put Shares. The sale and issuance of the Put
-----------------------
Shares shall be made in accordance with the provisions and requirements of
applicable federal and state law.
ARTICLE VII
CONDITIONS TO DELIVERY OF PUT
PURCHASE NOTICES AND CONDITIONS TO PUT CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to
----------------------------------------------------------
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
----------------------------
and sell the Put Shares to the Investor incident to each Put Closing is subject
to the satisfaction, at or before each such Put Closing, of each of the
conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties.
----------------------------------------------------------
The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of
each such Put Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have
------------------------------
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Put Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
-----------------------------------------------------------
a Put Purchase Notice and the Obligation of the Investor to purchase Put Shares.
--------------------------------------------------------------------------------
The right of the Company to deliver a Put Purchase Notice and the obligation of
the Investor hereunder to acquire and pay for the Put Shares incident to a Put
Closing is subject to the satisfaction, (i) on the Put Date, (ii) for each day
during the Valuation Period, and (iii) on the applicable Put Closing Date (each
a "Condition Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company
----------------------------------------------
shall have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities that shall have been declared effective by
10.5 - 15
the SEC prior to the first Put Date, but in no event later than one hundred
twenty (120) days after the Subscription Date.
(b) Effective Registration Statement. The Registration
-------------------------------------
Statement shall have become effective on or prior to the Put Date and shall
remain effective on each Condition Satisfaction Date and (i) neither the Company
nor the Investor shall have received notice that the SEC has issued or intends
to issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so, and (ii) no other suspension of the use or withdrawal of the effectiveness
of the Registration Statement or related prospectus shall exist.
(c) Accuracy of the Company's Representations and Warranties.
----------------------------------------------------------
The representations and warranties of the Company shall be true and correct in
all material respects as of each Condition Satisfaction Date as though made at
each such time (except for representations and warranties specifically made as
of a particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(d) Performance by the Company. The Company shall have
------------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to each Condition Satisfaction Date,
including but not limited to the requirements for the Company and its transfer
agent set forth in Sections 9.1 and 9.2 to deliver Common Stock without legends
pursuant to the terms set forth in Sections 9.1 and 9.2, and Exhibit B hereto
and each of the representations and warranties of the Company, as set forth in
Article IV, shall be true and correct and there shall be no omissions of any
material fact which, if disclosed, would render any such representation or
warranty untrue.
(e) No Injunction. No statute, rule, regulation, executive
--------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly or materially adversely affects any of
the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or materially adversely
affecting any of the transactions contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's
----------------
most recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock.
----------------------------------------------------------
The trading of the Common Stock (including without limitation the Put Shares)
10.5 - 16
shall not have been suspended by the SEC, the Principal Market or the NASD and
the Common Stock (including without limitation the Put Shares) shall have been
approved for listing or quotation and shall have actually been listed or quoted
on, and shall not have been delisted from the Principal Market, nor shall the
Company have received any letter or notice of any suspension or delisting or
warning of such suspension or delisting. The issuance of shares of Common Stock
with respect to the applicable Put Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(h) Legal Opinions. The Company's counsel shall deliver to the
---------------
Investor prior to the first Put Date an opinion in the form of Exhibit C hereto.
(i) Due Diligence. No dispute between the Company and the
---------------
Investor shall exist pursuant to Section 8.2(c) as to the adequacy of the
disclosure contained in the Registration Statement.
(j) Ten Percent Limitation. The number of Put Shares to be
-------------------------
purchased on each Put Closing Date and the number of Warrant Shares issuable
upon any exercise of such Warrant by the Investor shall not exceed the number of
such shares that, when aggregated with all other shares of Common Stock then
owned by the Investor beneficially or deemed beneficially owned by the Investor,
would result in the Investor owning more than 9.99% of all of such Common Stock
as would be outstanding on such Put Closing Date or such date of exercise of the
Warrant, as determined in accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder. In such event, the Investment Amount
designated in any Put Purchase Notice shall be reduced by the minimum amount
necessary as to not result in the Investor owning more than 9.99% of the Common
Stock of the Company. For purposes of this Section 7.2(j), in the event that the
amount of Common Stock outstanding as determined in accordance with Section 16
of the Exchange Act and the regulations promulgated thereunder is greater on a
Put Closing Date than on the date upon which the Put Purchase Notice associated
with such Put Closing Date is given, the amount of Common Stock outstanding on
such Put Closing Date shall govern for purposes of determining whether the
Investor, when aggregating all purchases of Common Stock made pursuant to this
Agreement and, if any, Shares, would own more than 9.99% of the Common Stock
following such Put Closing Date.
(k) Cross Default. The Company shall not be in default of a
---------------
term, covenant, warranty or undertaking of any other agreement to which the
Company and Investor are parties, nor shall there have occurred an event of
default under any such other agreement, in each case which default would have a
material adverse effect on the financial condition of the Company or the
Company's ability to comply with its obligations to the Investor.
(l) No Knowledge. The Company shall have no knowledge of any
--------------
event more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is more likely
than not to occur within the Valuation Period during which the Put Purchase
Notice is deemed delivered).
10.5 - 17
(m) Put Cushion. The Put Cushion shall have elapsed since
-----------
the immediately preceding Put Date.
(n) Shareholder Vote. The issuance of shares of Common Stock
------------------
with respect to the applicable Put Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(o) Escrow Agreement. The parties hereto shall have entered
------------------
into a mutually acceptable escrow agreement for the Purchase Prices due
hereunder, providing for reasonable interest on any funds deposited into the
escrow account established under the escrow agreement.
(p) Compliance Certificate. The Company shall deliver a
------------------------
Compliance Certificate in the form attached hereto as Exhibit D on each Put
Closing Date.
(q) Other. On each Condition Satisfaction Date, the Investor
------
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2. including, without limitation, a certificate in
substantially the form and substance of Exhibit D hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Put Closing shall have been satisfied as at the date of each
such certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 Due Diligence Review. The Company shall make available for
---------------------
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
10.5 - 18
Section 8.2 Non-Disclosure of Non-Public Information.
-----------------------------------------
(a) Except as set forth on Schedule 8.2(a) hereof,
the Company represents and warrants that the Company and its officers,
directors, employees and agents have not disclosed any non-public information to
the Investor or advisors to or representatives of the Investor. The Company
covenants and agrees that it shall refrain from disclosing, and shall cause its
officers, directors, employees and agents to refrain from disclosing, unless
prior to disclosure of such information the Company identifies such information
as being non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) The Company acknowledges and understands that the
Investor is entering into this Agreement at the request of the Company and in
good faith reliance on (i) the Company's representation set forth in Section
4.16 that neither it nor its agents have disclosed to the Investor any material
non-public information; and (ii) the Company's covenant set forth in Section
6.10 that if all or any portion of the information set forth on Schedule 8.2(a)
becomes material, the Company shall timely make full and complete public
disclosure of all or such portion of such information that shall have become
material in accordance with all applicable law.
(c) Nothing herein shall require the Company to
disclose non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts, provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
10.5 - 19
ARTICLE IX
LEGENDS
Section 9.1 Legends. Unless otherwise provided below, each certificate
--------
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH OTHER SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS
THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE
COMPANY SET FORTH IN A PRIVATE EQUITY LINE OF
CREDIT AGREEMENT BETWEEN UNITED VENTURES GROUP,
INC. AND BOAT BASIN INVESTORS LLC DATED AUGUST
__, 2000. A COPY OF THE PORTION OF THE
AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS
MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE
OFFICES.
Notwithstanding the foregoing, upon the execution and delivery hereof,
the Company is issuing to the transfer agent for its Common Stock (and to any
substitute or replacement transfer agent for its Common Stock upon the Company's
appointment of any such substitute or replacement transfer agent) instructions
in substantially the form of Exhibit B hereto. Such instructions shall be
irrevocable by the Company from and after the date hereof or from and after the
issuance thereof to any such substitute or replacement transfer agent, as the
case may be, except as otherwise expressly provided herein. It is the intent and
purpose of such instructions, as provided therein, to require the transfer agent
for the Common Stock from time to time upon transfer of Registrable Securities
by the Investor to issue certificates evidencing such Registrable Securities
free of the Legend during the following periods and under the following
circumstances and without consultation by the transfer agent with the Company or
its counsel and without the need for any further advice or instruction or
documentation to the transfer agent by or from the Company or its counsel or the
Investor:
(a) at any time after the Effective Date, upon surrender of
one or more certificates evidencing Common Stock that bear the Legend,
to the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered; provided
that (i) the Registration Statement shall then be effective; (ii) the
10.5 - 20
Investor confirms to the transfer agent that it has sold, pledged or
otherwise transferred or agreed to sell, pledge or otherwise transfer
such Common Stock in a bona fide transaction to a third party that is
not an affiliate of the Company; and (iii) the Investor confirms to the
transfer agent that the Investor has complied with the prospectus
delivery requirement; and
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates
free of the Legend to replace those surrendered and containing
representations that (i) the Investor is permitted to dispose of such
Registrable Securities without limitation as to amount or manner of
sale pursuant to Rule 144(k) under the Securities Act or (ii) the
Investor has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Registrable Securities in a manner
other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities. Any of the notices referred to above in this Section 9.1
may be sent by facsimile to the Company's transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
------------------------------------------------
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article IX shall
-----------------------
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW/VENUE
Section 10.1 Choice of Law/Venue. This Agreement and the Warrants shall
--------------------
be governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of laws. Any controversy or claim
arising out of or related to this Agreement and the Warrants or the breach
thereof, shall be settled by binding arbitration in New York City, New York in
accordance with the rules of the Judicial Arbitration & Mediation Services'
Eastern Regional Office located in New York City, New York ("JAMS"). A
proceeding shall be commenced upon written demand by Company or the Investor to
the other. The arbitrator(s) shall enter a judgment by default against any party
which fails or refuses to appear in any properly noticed arbitration proceeding.
The proceeding shall be conducted by one (1) arbitrator, unless the amount
alleged to be in dispute exceeds two hundred fifty thousand dollars ($250,000),
in which case three (3) arbitrators shall preside. The arbitrator(s) will be
chosen by the parties from a list provided by JAMS, and if they are unable to
agree within ten (10) days, JAMS shall select the arbitrator(s). The arbitrators
must be experts in securities law and financial transactions. The arbitrators
10.5 - 21
shall assess costs and expenses of the arbitration, including all attorneys' and
experts' fees, as the arbitrators believe is appropriate in light of the merits
of parties' respective positions in the issues in dispute. The award of the
arbitrator(s) shall be final and binding upon the parties and may be enforced in
any court having jurisdiction. Nothing in this section 10.1 shall preclude the
parties from seeking extraordinary relief in the event that a claim of
irreparable harm arises, provided however, that such application shall be made
in the United States District Court for the Southern District of New York, or in
the Supreme Court of the State of New York, New York County. In the event that
any provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
-----------
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, and be binding upon, any
transferee of any of the Common Stock purchased or acquired by the Investor
hereunder with respect to the Common Stock held by such person unless such
Common Stock is free from restrictions on further transfer of such Common Stock,
and (b) the Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any other person or entity (including any affiliate of
the Investor) effective upon written notice to the Company. The Company shall
have the right to require any assignee to execute a counterpart of this
Agreement.
Section 11.2 Termination. This Agreement shall terminate forty-eight
------------
(48) months after the commencement of the Commitment Period; provided, however,
that the provisions of Articles VI, VIII, IX, X, XI, and XII shall survive the
termination of this Agreement.
Section 11.3 Entire Agreement, Amendment. This Agreement constitutes
-----------------------------
the full and entire understanding and agreement between the parties with regard
to the subjects hereof, and no party shall be liable or bound to any other party
in any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement. Except as expressly provided in this
Agreement, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by both
parties hereto.
ARTICLE XII
NOTICES; INDEMNIFICATION
Section 12.1 Notices. All notices, demands, requests, consents,
--------
approvals, and other communications required or permitted hereunder shall be in
10.5 - 22
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to Staruni Corporation:
Staruni Corporation
0000 Xxxxxxxx Xxxxxxxxx
XxxXxxxxxx, Xxxxxxxxxx 00000
Telecopier:
Attention: Xxxxx Xxxxxx
If to the Investor:
To the address and telecopier number set forth on Schedule A
hereto.
With a copy to:
Xxxxxx Xxxxxxxx Xxxxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx H, Burnbaum, Esq.
Telecopier: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 12.2 Indemnification.
----------------
(a) The Company agrees to indemnify and hold harmless the
Investor, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act or is controlled by the Investor (the "Control Person") from and
against any Damages, joint or several, and any action in respect thereof to
which the Investor, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Control Person becomes subject to,
resulting from, arising out of or relating to any misrepresentation, breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of Company contained in this Agreement in any event as such Damages are
incurred.
10.5 - 23
(b) The Investor agrees to indemnify and hold harmless the
Company, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Control Persons from and against any Damages,
joint or several, and any action in respect thereof to which the Company, its
partners, Affiliates, officers, directors, employees, and duly authorized
agents, and any such Control Person becomes subject to, resulting from, arising
out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Investor contained in this Agreement.
Section 12.3 Method of Asserting Indemnification Claims. All claims for
-------------------------------------------
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 12.2 (an
"Indemnified Party") might seek indemnity under Section 12.2 is asserted against
or sought to be collected from such Indemnified Party by a person other than the
Company, the Investor or any affiliate of the Company or (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of Section 12.2 against any person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
the Indemnified Party under Section 12.2 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
12.3(a), then the Indemnifying Party will have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
which affects the Indemnified Party, other than the payment of monetary damages
10.5 - 24
or that provides for the payment of monetary damages as to which the Indemnified
Party will not be indemnified in full pursuant to Section 12.2). The
Indemnifying Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this clause 1, file any motion, answer or other pleadings
or take any other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided further, that if
requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause 1, and except as provided in the
preceding sentence, the Indemnified Party will bear its own costs and expenses
with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under Section 12.2 with respect to such Third Party Claim.
(c) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 12.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause 2, if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause 3 below, the Indemnifying
Party will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause 2 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause 2, and
the Indemnifying Party will bear its own costs and expenses with respect to such
participation.
10.5 - 25
(d) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section 12.2 or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party with respect to such Third Party Claim, the Loss in the amount
specified in the Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 12.2 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability or the amount of its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by arbitration in accordance with paragraph (c) of this Section
12.3.
(e) In the event any Indemnified Party should have a claim
under Section 12.2 against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under Section 12.2 specifying the nature of and basis for
such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 12.2 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
paragraph (c) of this Section 12.3.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Fees and Expenses. Each of the Company and the Investor
-------------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder except that the Company shall pay the fees of the Investor's attorneys
and the Escrow Agreement in connection with this transaction and the preparation
of documents which shall be only and to the extent set forth in the Escrow
Agreement. Any such fees shall be netted from the proceeds of any Put Purchase
Price.
10.5 - 26
Section 13.2 Brokerage. Each of the parties hereto represents that it
----------
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission except for Capstone
Partners. The Company shall pay the fees of Capstone Partners pursuant to a
separately negotiated placement agreement
Section 13.3 Publicity. Except as required by applicable law, the
----------
Company shall not issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior consent of the
Purchaser.
Section 13.4 Counterparts. This Agreement may be executed in multiple
-------------
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 13.5 Entire Agreement. This Agreement with the Exhibits hereto
-----------------
set forth the entire agreement and understanding of the parties relating to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written
relating to the subject matter hereof. The terms and conditions of all Exhibits
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as if fully set forth herein.
Section 13.6 Survival; Severability. The representations, warranties,
------------------------
covenants and agreements of the parties hereto shall survive each Put Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.7 Title and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.8 Reporting Entity for the Common Stock. The reporting
----------------------------------------
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
[THIS SPACE INTENTIONALLY LEFT BLANK]
10.5 - 27
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
STARUNI CORPORATION
By:_____________________________
Xxxxx Xxxxxx
BOAT BASIN INVESTORS LLC
By:
10.5 - 28
EXHIBIT A
FORM OF
PUT PURCHASE NOTICE
Reference is made to the Private Equity Line of Credit
Agreement dated as of September __, 2000(the "Agreement") between Staruni
Corporation, a corporation (the "Company") and Boat Basin Investors LLC.
Capitalized terms used and not otherwise defined herein shall have the meanings
given such terms in the Agreement.
In accordance with and pursuant to Section 2.2 of the
Agreement, the Company hereby issues this Put Purchase Notice to exercise a Put
request for the Put Amount indicated below.
Investment Amount:
-----------------------------
Valuation Period start date:
-------------------
Valuation Period end date:
---------------------
Put Closing Date:
------------------------------
Floor Price: $
-------------------------------
Dated:
----------------------------
STARUNI CORPORATION
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Wire Instructions: __________________
Contact Name: __________________________
10.5 - 29
EXHIBIT B
INSTRUCTIONS TO TRANSFER AGENT
STARUNI CORPORATION
________________, 2000
[Name and address
of Transfer Agent]
Ladies & Gentlemen:
Reference is made to that certain Private Equity Line of Credit
Agreement (the "Agreement") by and among certain Investors (the "Investor") and
Staruni Corporation. Pursuant and subject to the terms and conditions set forth
in the Agreement the Investor has agreed to purchase from the Company and the
Company has agreed to sell to the Investor from time to time during the term of
the Agreement shares (the "Shares") of Common Stock of the Company, $0.001 par
value (the "Common Stock") and certain warrants (the "Warrants") which shall be
exercisable into shares of Common Stock. The shares of Common Stock issuable
upon exercise of the Warrants are referred to herein as "Warrant Shares." The
Shares and Warrant Shares are collectively referred to herein as "Underlying
Shares."
This letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent for the Company with respect to
its Common Stock at such time) to issue Underlying Shares from time to time upon
notice from the Company to issue such Underlying Shares. So long as you have
previously received (w) a notice of effectiveness of the Company's outside
counsel substantially in the form of Exhibit I attached hereto (which the
Company shall direct be delivered to you by such outside counsel upon the
effectiveness of the registration statement covering resales of Underlying
Shares) stating that a registration statement covering resales of Underlying
Shares has been declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and that Underlying Shares may be
issued (or reissued if they have been issued at a time when there was not such
an effective registration statement) or resold without any restrictive legend
(the "Notice of Effectiveness"), (x) a copy of such registration statement, (y)
an appropriate representation that the resale prospectus contained in the
registration statement has been delivered in compliance with applicable rules
and regulations and (z) with respect to the issuance of replacement Warrant
Shares, the certificates representing the originally issued Warrant Shares have
been returned to you as transfer agent, then certificates representing
Underlying Shares shall not bear any legend restricting transfer of Underlying
Shares thereby and should not be subject to any stop-transfer restriction;
provided, however, that if you have not previously received a copy of the Notice
of Effectiveness, such registration statement and such representation or you
have received a subsequent notice by the Company or its counsel of the
suspension or termination of the effectiveness of the registration statement or
the imposition of a Blackout Period as set forth in the Section 6.8 of the
Agreement, then certificates representing Underlying Shares shall bear the
following legend:
THESE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE
10.5 - 30
SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THAT ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR UNITED VENTURES GROUP,
INC. (THE "COMPANY") SHALL HAVE RECEIVED AN
OPINION OF ITS COUNSEL THAT REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
provided, however, that the Company may, from time to time, notify you to place
stop-transfer restrictions on the certificates for Underlying Shares in the
event, but only in the event, a registration statement covering Underlying
Shares is subject to amendment for events then current.
Please be advised that the Investor has relied upon this instruction
letter as an inducement to enter into the Agreement and, accordingly, the
Investor, is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at .
----------------------
Very truly yours,
STARUNI CORPORATION
By:_____________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By:________________________________
Name: ________________________
Title: _________________________
Tel.: ___________________________
10.5 - 31
Exhibit I
[FORM OF NOTICE OF EFFECTIVENESS]
[Addressee]
[Address]
TO WHOM IT MAY CONCERN:
We are counsel to Staruni Corporation, a corporation (the "Company"),
and we have represented the Company in connection with that certain Private
Equity Line of Credit Agreement (the "Agreement") between the Company and the
Investor named therein, pursuant to which the Company agreed to issue shares
(the "Shares") of its common stock (the "Common Stock") from time to time during
the term of the Agreement and warrants to purchase shares of the Common Stock
(the "Warrant Shares"). Pursuant to the Agreement, the Company agreed to
register the Common Stock and the Warrant Shares.
In connection with the foregoing, we have been advised that the
Registration Statement on Form ____ (File No. 333-______________) of the Company
(the "Registration Statement"), a copy of which is enclosed, was declared
effective at ____________M., eastern time, on ____________, 2000. Upon issuance
of the Underlying Shares referred to in the Company's instruction letter
attached, and provided that you have received a copy of the representation
pursuant to item (z) in the second paragraph of such instruction letter, you are
authorized to issue certificates for the Company's Common Stock without
restrictive legends. We have no knowledge as of the date hereof, after
telephonic inquiry of a member of the Securities and Exchange Commission's staff
that any stop order suspending the effectiveness of the Registration Statement
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the Securities and Exchange Commission and, accordingly, the
Underlying Shares are available for resale under the Securities Act of 1933, as
amended in the manner specified in, and pursuant to the terms of the
Registration Statement.
Very truly yours,
10.5 - 32
EXHIBIT C
OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of . The Company has
the requisite corporate power to own and operate its properties and assets, and
to carry on its business as presently conducted.
2. The Company has the requisite corporate power and authority
to enter into and perform its obligations under the Equity Line of Credit
Agreement and to issue and sell the Common Stock, the Warrants and the Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares"). The
execution, delivery and performance of the Equity Line of Credit Agreement by
the Company and the consummation by it of the transactions contemplated 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. The Equity Line of Credit Agreement has been duly
executed and delivered, and the Common Stock and the Warrants have been duly
executed, issued and delivered by the Company and the Equity Line of Credit
Agreement constitutes a legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its respective terms.
3. The Common Stock and the Warrants have been duly authorized
and the Common Stock, when delivered against payment in full as provided in the
Equity Line of Credit Agreement, will be validly issued, fully paid and
nonassessable. The Warrant Shares have been duly authorized and reserved for
issuance, and, when delivered upon exercise or against payment in full as
provided in the Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance
with the terms of the Equity Line of Credit Agreement and the consummation by
the Company of the transactions contemplated thereby (i) do not violate any
provision of the Company's certificate of incorporation or bylaws, (ii) to our
knowledge, 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 material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance 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 federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are 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.
5. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of the Equity
10.5 - 33
Line of Credit Agreement, or the offer, sale or issuance of the Common Stock and
the Warrants or the consummation of any other transaction contemplated by the
Equity Line of Credit Agreement (other than any filings which may be required to
be made by the Company with the Commission, or the OTC Bulletin Board or an
Alternate Market subsequent to the Closing, and, any registration statement
which may be filed pursuant to the Equity Line of Credit Agreement).
10.5 - 34
EXHIBIT D
COMPLIANCE CERTIFICATE
STARUNI CORPORATION
The undersigned, _______________, hereby certifies, with respect to
shares of common stock of Staruni Corporation (the "Company") issuable in
connection with the Put Purchase Notice, dated (the "Notice"), delivered
pursuant to Article II of the Private Equity Line of Credit Agreement, dated
September __, 2000, by and among the Company and certain Investors (the
"Agreement"), as follows:
1. The undersigned is the duly elected [Chairman and Chief Executive
Officer] of the Company.
2. The representations and warranties of the Company set forth in
Article IV of the Agreement are true and correct in all material respects as
though made on and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Put Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VI and Article VII of the
Agreement.
The undersigned has executed this Certificate this ____ day of ______,
2000.
STARUNI CORPORATION
By:_____________________________
Name:
Title:
10.5 - 35
EXHIBIT E
FORM OF WARRANT
10.5 - 36
EXHIBIT F
FORM OF WARRANT
10.5 - 37
EXHIBIT E
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED THE DATE
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE RIGHTS OF THE
HOLDER.
STARUNI CORP.
COMMON STOCK PURCHASE WARRANT
No. Warrant to Purchase Shares
STARUNI CORP., a California corporation (the "Company"), hereby
certifies that, for value received, _________________________________ or
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time during the period commencing September
, 2000 and ending September , 2004 (the "Exercise Period"), at the Purchase
Price(as hereinafter defined), eight hundred thousand (800,000) shares of the
fully paid and nonassessable shares of Common Stock of the Company. The number
and character of such shares of Common Stock and the Purchase Price are subject
to adjustment as provided herein.
This Warrant (this "Warrant"; such term to include any warrants issued
in substitution therefor) is one of a series of warrants issued in connection
with that certain Private Equity Line of Credit dated of even date herewith
among the initial Holder hereof, the Company and certain other parties thereto.
Capitalized terms used herein not otherwise defined shall have the
meanings ascribed thereto in the Agreement. As used herein the following terms,
unless the context otherwise requires, have the following respective meanings:
(a) The term "Agreement" refers to that certain Private Equity
Line of Credit Agreement dated the date herewith among the initial
Holder hereof, the Company and certain other parties hereto.
(b) The term "Company" shall include Staruni Corp. and any
corporation that shall succeed or assume the obligations of such
corporation hereunder.
(c) The term "Common Stock" includes (a) the Company's common
stock, no par per share, (b) any other capital stock of any class or
classes (however designated) of the Company, authorized on or after
10.6 - 1
such date, the Holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and
the Holders of which shall ordinarily, in the absence of contingencies,
be entitled to vote for the election of a majority of directors of the
Company (even though the right so to vote has been suspended by the
happening of such a contingency) and (c) any other securities into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(d) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) that the Holder of this Warrant at any
time shall be entitled to receive, or shall have received, on the
exercise of this Warrant, in lieu of or in addition to Common Stock, or
that at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 3 or otherwise.
(e) The term "Purchase Price" means 120% of the Market Price;
and the term "Market Price" shall have the meaning set forth in the
Agreement and shall be calculated based upon the Market Price for the
Put Shares which are issued to the Holder simultaneously with the
issuance of these Warrants.
(f) The term "Registration Statement" means that Registration
Statement defined in a certain Registration Rights Agreement
("Registration Rights Agreement") between the Company and the Holder of
even date.
1. Exercise of Warrant.
1.1. Method of Exercise.
(a) This Warrant may be exercised in whole or in part (but not
as to a fractional share of Common Stock), at any time and from time to
time during the Exercise Period by the Holder hereof by delivery of a
notice of exercise (a "Notice of Exercise") in the form attached hereto
as Exhibit A via facsimile to the Company specifying the Purchase Price
---------
(the "Exercise Price"). This Warrant is a "cashless" Warrant, and upon
exercise of the Warrant the Holder shall not be required to make cash
payment to the Company for the shares of Common Stock issuable upon
such exercise. Rather, upon exercise, the Holder shall be entitled to
receive, one or more certificates, issued in the Holder's name or in
such name or names as the Holder may direct, subject to the limitations
on transfer contained herein, for the number of shares of Common Stock
so purchased, less the number of shares equivalent in value to the
Purchase Price of the Warrants determined by applying the Market Price.
The number of shares of Common Stock constituting the Purchase Price
shall be set forth in the Notice of Exercise along with the net number
of shares to be delivered to the Holder. The shares of Common Stock so
purchased shall be deemed to be issued as of the close of business on
the date on which the Company shall have received from the Holder
payment of the Exercise Price (the "Exercise Date").
10.6 - 2
(b) Notwithstanding anything to the contrary set forth herein,
upon exercise of all or a portion of this Warrant in accordance with
the terms hereof, the Holder shall not be required to physically
surrender this Warrant to the Company. Rather, records showing the
amount so exercised and the date of exercise shall be maintained on a
ledger in the form of Annex B attached hereto (a copy of which shall be
-------
delivered to the Company or transfer agent with each Notice of
Exercise). It is specifically contemplated that the Company hereof
shall act as the calculation agent for all exercises of this Warrant.
In the event of any dispute or discrepancies, such records maintained
by the Company shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following an exercise of a portion of this Warrant, the
number of shares of Common Stock represented by this Warrant will be
the amount indicated on Annex B attached hereto (which may be less than
-------
the amount stated on the face hereof).
1.2. Regulation D Restrictions. The Holder hereof represents
and warrants to the Company that it has acquired this Warrant and
anticipates acquiring the shares of Common Stock issuable upon exercise
of the Warrant solely for its own account for investment purposes and
not with a view to or for resale of such securities unless such resale
has been registered with the Commission or an applicable exemption is
available therefor. At the time this Warrant is exercised, the Company
may require the Holder to state in the Notice of Exercise such
representations concerning the Holder as are necessary or appropriate
to assure compliance by the Holder with the Securities Act.
2. Delivery of Stock Certificates on Exercise. As soon as
practicable after the exercise of this Warrant, the Company at its expense
(including the payment by it of any applicable issue, stamp or transfer taxes)
will cause to be issued in the name of and delivered to the Holder thereof, or,
to the extent permissible hereunder, to such other person as such Holder may
direct, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then applicable Purchase Price, together with any other stock
or other securities and property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment of Purchase Price In Certain Events. The Purchase
Price to be paid by the Holder upon exercise of this Warrant, and the
consideration to be received upon exercise of this Warrant, shall be adjusted in
case at any time or from time to time for Capital Reorganizations as provided in
the Agreement as if such provisions were specifically set forth herein.
4. No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
10.6 - 3
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant, and (c) will not
transfer all or substantially all of its properties and assets to any other
person (corporate or otherwise), or consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant.
5. Notices of Record Date. In the event of
(a) any taking by the Company of a record of the
Holders of any class or securities for the purpose of
determining the Holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company, then and in each such event the
Company will mail or cause to be mailed to the Holder of this Warrant a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any, as of which the Holders of record of Common Stock (or Other Securities)
shall be entitled to exchange their shares of Common Stock (or Other Securities)
for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 20
days prior to the date specified in such notice on which any action is to be
taken.
6. Reservation of Stock Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
7. Exchange of Warrant. On surrender for exchange of this
Warrant, properly endorsed and in compliance with the restrictions on transfer
10.6 - 4
set forth in the legend on the face of this Warrant, to the Company, the Company
at its expense will issue and deliver to or on the order of the Holder thereof a
new Warrant of like tenor, in the name of such Holder or as such Holder (on
payment by such Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face of the Warrant so surrendered.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Remedies. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
10. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each Holder or owner hereof by the taking hereof consents
and agrees: (a) title to this Warrant may be transferred by endorsement and
delivery in the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery.
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to all
rights represented hereby;
(c) until this Warrant is transferred on the books of
the Company, the Company may treat the registered Holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may
not be sold, transferred or assigned except pursuant to an
effective registration statement under the Securities Act or
pursuant to an applicable exemption therefrom.
11. Registration Rights. The Company is obligated to register the
shares of Common Stock issuable upon exercise of this Warrant in accordance with
the terms of the Registration Rights Agreement.
10.6 - 5
12. Notices. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
[Signature Page Follows]
10.6 - 6
DATED as of September _____, 2000.
STARUNI CORP.
By:
Name:
Title:
[Corporate Seal]
Attest:
By:
Secretary
10.6 - 7
EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
------------------------------------
(To be executed only upon exercise of the Warrant in whole or in part)
To: STARUNI CORP.
The undersigned registered Holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
____________(1) shares of Common Stock (as defined in such Warrant) and herewith
makes payment therefor in the amount and manner set forth below, as of the date
written below. The undersigned requests that the certificates for such shares of
Common Stock be issued in the name of, and delivered to,
_________________________ whose address is _______________________.
The Exercise Price for the shares of Common Stock issued on account of
this exercise of Warrant shall be in the amount of $________.
The number of shares to be issued hereunder less shares equivalent to
the Exercise Price, as determined in this Warrant, is______________________ .
Dated: ____________________
(Name must conform to name of Holder as
specified on the face of the Warrant)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address of Holder:
---------------------
---------------------
---------------------
Date of exercise:
---------------------
C:\Edgarizing\New\staruniwarrantf\starnuiwarrantexE.wpd
-----------------------
(1) Insert the number of shares of Common Stock as to which the
accompanying Warrant is being exercised. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the accompanying Warrant, to the holder surrendering the
same.
10.6 - 8
EXHIBIT F
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED THE DATE
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE RIGHTS OF THE
HOLDER.
STARUNI CORP.
COMMON STOCK PURCHASE WARRANT
No. Warrant to Purchase 1,000,000 Shares
STARUNI CORP., a California corporation (the "Company"), hereby
certifies that, for value received, _________________________________ or
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time during the period commencing (i)
September , 2000 and ending September , 2003, at the Purchase Price(as
hereinafter defined), eight hundred thousand (800,000) shares of the fully paid
and nonassessable shares of Common Stock of the Company and (ii) the earlier of
(x) February 16, 2001 or (y) the date the Registration Statement (as hereinafter
defined) becomes effective two hundred thousand (200,000) shares of the fully
paid and nonassessable shares of Common Stock of the Company. The time periods
for the exercise of Warrants set forth in (i) and (ii) above shall be the
"Exercise Period".The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
This Warrant (this "Warrant"; such term to include any warrants issued
in substitution therefor) is one of a series of warrants issued in
connection with that certain Private Equity Line of Credit dated of even date
herewith among the initial Holder hereof, the Company and certain other parties
thereto.
Capitalized terms used herein not otherwise defined shall have the
meanings ascribed thereto in the Agreement. As used herein the following terms,
unless the context otherwise requires, have the following respective meanings:
(a) The term "Agreement" refers to that certain Private Equity
Line of Credit Agreement dated the date herewith among the initial
Holder hereof, the Company and certain other parties hereto.
(b) The term "Company" shall include Staruni Corp. and any
corporation that shall succeed or assume the obligations of such
corporation hereunder.
10.6? - 1
(c) The term "Common Stock" includes (a) the Company's common
stock, no par per share, (b) any other capital stock of any class or
classes (however designated) of the Company, authorized on or after
such date, the Holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and
the Holders of which shall ordinarily, in the absence of contingencies,
be entitled to vote for the election of a majority of directors of the
Company (even though the right so to vote has been suspended by the
happening of such a contingency) and (c) any other securities into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(d) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) that the Holder of this Warrant at any
time shall be entitled to receive, or shall have received, on the
exercise of this Warrant, in lieu of or in addition to Common Stock, or
that at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 3 or otherwise.
(e) The term "Purchase Price" means 75% of the Market Price;
and the term "Market Price" shall mean the lowest closing bid price of
a share of Common Stock as reported on the Principal Market as reported
by the National Association of Securities Dealers Electronic Bulletin
Board ("OTC Bulletin Board") for the 30 days immediately preceding the
date of receipt by the Company of Notice of Exercise (as hereinafter
defined). If on any date that a Notice of Exercise is given the Common
Stock is not listed or traded on the OTC Bulletin Board, the Market
Price shall be determined by reference to the Nasdaq Stock Market or
the principal securities exchange or trading market where such security
is listed or traded as reported by Bloomberg, L.P., or the average of
the bid prices of any market makers for such security as reported in
the "pink sheets" by the National Quotations Bureau, Inc. If the
closing bid price cannot be calculated for such security on such date
on any of the foregoing bases, the closing bid price of such security
on such date shall be the fair market value as mutually determined by
the Company and the Holder of this Warrant.
(f) The term "Registration Statement" means that Registration
Statement defined in a certain Registration Rights Agreement
("Registration Rights Agreement") between the Company and the Holder of
even date.
1. Exercise of Warrant.
1.1.Method of Exercise.
(a) This Warrant may be exercised in whole or in part (but not
as to a fractional share of Common Stock), at any time and from time to
time during the Exercise Period by the Holder hereof by delivery of a
notice of exercise (a "Notice of Exercise") in the form attached hereto
as Exhibit A via facsimile to the Company specifying the Purchase Price
10.6? - 2
(the "Exercise Price"). This Warrant is a "cashless" Warrant, and upon
exercise of the Warrant the Holder shall not be required to make cash
payment to the Company for the shares of Common Stock issuable upon
such exercise. Rather, upon exercise, the Holder shall be entitled to
receive, one or more certificates, issued in the Holder's name or in
such name or names as the Holder may direct, subject to the limitations
on transfer contained herein, for the number of shares of Common Stock
so purchased, less the number of shares equivalent in value to the
Purchase Price of the Warrants determined by applying the Market Price.
The number of shares of Common Stock constituting the Purchase Price
shall be set forth in the Notice of Exercise along with the net number
of shares to be delivered to the Holder. The shares of Common Stock so
purchased shall be deemed to be issued as of the close of business on
the date on which the Company shall have received from the Holder
payment of the Exercise Price (the "Exercise Date").
(b) Notwithstanding anything to the contrary set forth herein,
upon exercise of all or a portion of this Warrant in accordance with
the terms hereof, the Holder shall not be required to physically
surrender this Warrant to the Company. Rather, records showing the
amount so exercised and the date of exercise shall be maintained on a
ledger in the form of Annex B attached hereto (a copy of which shall be
delivered to the Company or transfer agent with each Notice of
Exercise). It is specifically contemplated that the Company hereof
shall act as the calculation agent for all exercises of this Warrant.
In the event of any dispute or discrepancies, such records maintained
by the Company shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following an exercise of a portion of this Warrant, the
number of shares of Common Stock represented by this Warrant will be
the amount indicated on Annex B attached hereto (which may be less than
the amount stated on the face hereof).
1.2. Regulation D Restrictions. The Holder hereof represents
and warrants to the Company that it has acquired this Warrant and
anticipates acquiring the shares of Common Stock issuable upon exercise
of the Warrant solely for its own account for investment purposes and
not with a view to or for resale of such securities unless such resale
has been registered with the Commission or an applicable exemption is
available therefor. At the time this Warrant is exercised, the Company
may require the Holder to state in the Notice of Exercise such
representations concerning the Holder as are necessary or appropriate
to assure compliance by the Holder with the Securities Act. 2. Delivery
of Stock Certificates on Exercise. As soon as practicable after the
exercise of this Warrant, the Company at its expense (including the
payment by it of any applicable issue, stamp or transfer taxes) will
cause to be issued in the name of and delivered to the Holder thereof,
or, to the extent permissible hereunder, to such other person as such
Holder may direct, a certificate or certificates for the number of
fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the
10.6? - 3
then applicable Purchase Price, together with any other stock or other
securities and property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment of Purchase Price In Certain Events. The Purchase
Price to be paid by the Holder upon exercise of this Warrant, and the
consideration to be received upon exercise of this Warrant, shall be adjusted in
case at any time or from time to time for Capital Reorganizations as provided in
the Agreement as if such provisions were specifically set forth herein.
4. No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant, and (c) will not
transfer all or substantially all of its properties and assets to any other
person (corporate or otherwise), or consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant.
5. Notices of Record Date. In the event of
(a) any taking by the Company of a record of the
Holders of any class or securities for the purpose of
determining the Holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company, then and in each
such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on
which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, and (ii)
the date on which any such reorganization, reclassification,
10.6? - 4
recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and
the time, if any, as of which the Holders of record of Common
Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for
securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up.
Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any action is to be taken.
6. Reservation of Stock Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
7. Exchange of Warrant. On surrender for exchange of this
Warrant, properly endorsed and in compliance with the restrictions on transfer
set forth in the legend on the face of this Warrant, to the Company, the Company
at its expense will issue and deliver to or on the order of the Holder thereof a
new Warrant of like tenor, in the name of such Holder or as such Holder (on
payment by such Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face of the Warrant so surrendered.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Remedies. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
10. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each Holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may be transferred by
endorsement and delivery in the same manner as in the case of
a negotiable instrument transferable by endorsement and
delivery.
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
10.6? - 5
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to all
rights represented hereby;
(c) until this Warrant is transferred on the books of
the Company, the Company may treat the registered Holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may
not be sold, transferred or assigned except pursuant to an
effective registration statement under the Securities Act or
pursuant to an applicable exemption therefrom.
11. Registration Rights. The Company is obligated to register the
shares of Common Stock issuable upon exercise of this Warrant in accordance with
the terms of the Registration Rights Agreement.
12. Notices. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
[Signature Page Follows]
10.6? - 6
DATED as of September _____, 2000.
STARUNI CORP.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
[Corporate Seal]
Attest:
By:
----------------------------
Secretary
10.6? - 7
EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
------------------------------------
(To be executed only upon exercise of the Warrant in whole or in part)
To: STARUNI CORP.
The undersigned registered Holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
____________(1) shares of Common Stock (as defined in such Warrant) and herewith
makes payment therefor in the amount and manner set forth below, as of the date
written below. The undersigned requests that the certificates for such shares of
Common Stock be issued in the name of, and delivered to,
_________________________ whose address is ____________________________________.
The Exercise Price for the shares of Common Stock issued on account of
this exercise of Warrant shall be in the amount of $________.
The number of shares to be issued hereunder less shares equivalent to
the Exercise Price, as determined in this Warrant, is______________________ .
Dated: ____________________ -------------------------------------
(Name must conform to name of Holder as
specified on the face of the Warrant)
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
Address of Holder:
--------------------
--------------------
--------------------
Date of exercise:
C:\Edgarizing\New\staruniwarrantf\Staruni warrantexF.wpd
-------------------------
(1) Insert the number of shares of Common Stock as to which the
accompanying Warrant is being exercised. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the accompanying Warrant, to the holder surrendering the
same.
10.6? - 8
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED THE DATE
HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH LIMIT THE EXERCISE RIGHTS OF THE
HOLDER.
STARUNI CORP.
COMMON STOCK PURCHASE WARRANT
No. B-001 Warrant to Purchase 1,000,000 Shares
STARUNI CORP., a California corporation (the "Company"), hereby
certifies that, for value received, Boat Basin Investors LLC or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time during the period commencing (i) September 28,
2000 and ending September 28, 2003, at the Purchase Price (as hereinafter
defined), eight hundred thousand (800,000) shares of the fully paid and
nonassessable shares of Common Stock of the Company and (ii) on the earlier of
(x) February 16, 2001 or (y) the date the Registration Statement (as hereinafter
defined) becomes effective two hundred thousand (200,000) shares of the fully
paid and nonassessable shares of Common Stock of the Company. The time periods
for the exercise of Warrants set forth in (i) and (ii) above shall be the
"Exercise Period".The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein.
This Warrant (this "Warrant"; such term to include any warrants issued
in substitution therefor) is one of a series of warrants issued in connection
with that certain Private Equity Line of Credit dated of even date herewith
among the initial Holder hereof, the Company and certain other parties thereto.
Capitalized terms used herein not otherwise defined shall have the
meanings ascribed thereto in the Agreement. As used herein the following terms,
unless the context otherwise requires, have the following respective meanings:
(a) The term "Agreement" refers to that certain Private
Equity Line of Credit Agreement dated the date herewith among the
initial Holder hereof, the Company and certain other parties hereto.
(b) The term "Company" shall include Staruni Corp. and
any corporation that shall succeed or assume the obligations of such
corporation hereunder.
10.7 - 1
(c) The term "Common Stock" includes (a) the Company's
common stock, no par per share, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or
after such date, the Holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and
the Holders of which shall ordinarily, in the absence of contingencies,
be entitled to vote for the election of a majority of directors of the
Company (even though the right so to vote has been suspended by the
happening of such a contingency) and (c) any other securities into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(d) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the Company or any
other person (corporate or otherwise) that the Holder of this Warrant
at any time shall be entitled to receive, or shall have received, on
the exercise of this Warrant, in lieu of or in addition to Common
Stock, or that at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 3 or otherwise.
(e) The term "Purchase Price" means 75% of the Market
Price; and the term "Market Price" shall mean the lowest closing bid
price of a share of Common Stock as reported on the Principal Market as
reported by the National Association of Securities Dealers Electronic
Bulletin Board ("OTC Bulletin Board") for the 30 days immediately
preceding the date of receipt by the Company of Notice of Exercise (as
hereinafter defined). If on any date that a Notice of Exercise is given
the Common Stock is not listed or traded on the OTC Bulletin Board, the
Market Price shall be determined by reference to the Nasdaq Stock
Market or the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg, L.P., or
the average of the bid prices of any market makers for such security as
reported in the "pink sheets" by the National Quotations Bureau, Inc.
If the closing bid price cannot be calculated for such security on such
date on any of the foregoing bases, the closing bid price of such
security on such date shall be the fair market value as mutually
determined by the Company and the Holder of this Warrant.
(f) The term "Registration Statement" means that
Registration Statement defined in a certain Registration Rights
Agreement ("Registration Rights Agreement") between the Company and the
Holder of even date.
1. Exercise of Warrant.
1.1. Method of Exercise.
(a) This Warrant may be exercised in whole or in part
(but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period by the Holder hereof by
10.7 - 2
delivery of a notice of exercise (a "Notice of Exercise") in the form
attached hereto as Exhibit A via facsimile to the Company specifying
the Purchase Price (the "Exercise Price"). This Warrant is a "cashless"
Warrant, and upon exercise of the Warrant the Holder shall not be
required to make cash payment to the Company for the shares of Common
Stock issuable upon such exercise. Rather, upon exercise, the Holder
shall be entitled to receive, one or more certificates, issued in the
Holder's name or in such name or names as the Holder may direct,
subject to the limitations on transfer contained herein, for the number
of shares of Common Stock so purchased, less the number of shares
equivalent in value to the Purchase Price of the Warrants determined by
applying the Market Price. The number of shares of Common Stock
constituting the Purchase Price shall be set forth in the Notice of
Exercise along with the net number of shares to be delivered to the
Holder. The shares of Common Stock so purchased shall be deemed to be
issued as of the close of business on the date on which the Company
shall have received from the Holder payment of the Exercise Price (the
"Exercise Date").
(b) Notwithstanding anything to the contrary set forth
herein, upon exercise of all or a portion of this Warrant in accordance
with the terms hereof, the Holder shall not be required to physically
surrender this Warrant to the Company. Rather, records showing the
amount so exercised and the date of exercise shall be maintained on a
ledger in the form of Annex B attached hereto (a copy of which shall be
delivered to the Company or transfer agent with each Notice of
Exercise). It is specifically contemplated that the Company hereof
shall act as the calculation agent for all exercises of this Warrant.
In the event of any dispute or discrepancies, such records maintained
by the Company shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following an exercise of a portion of this Warrant, the
number of shares of Common Stock represented by this Warrant will be
the amount indicated on Annex B attached hereto (which may be less than
the amount stated on the face hereof).
1.2. Regulation D Restrictions. The Holder hereof
represents and warrants to the Company that it has acquired this
Warrant and anticipates acquiring the shares of Common Stock issuable
upon exercise of the Warrant solely for its own account for investment
purposes and not with a view to or for resale of such securities unless
such resale has been registered with the Commission or an applicable
exemption is available therefor. At the time this Warrant is exercised,
the Company may require the Holder to state in the Notice of Exercise
such representations concerning the Holder as are necessary or
appropriate to assure compliance by the Holder with the Securities Act.
2. Delivery of Stock Certificates on Exercise. As soon as
practicable after the exercise of this Warrant, the Company at its expense
(including the payment by it of any applicable issue, stamp or transfer taxes)
will cause to be issued in the name of and delivered to the Holder thereof, or,
to the extent permissible hereunder, to such other person as such Holder may
direct, a certificate or certificates for the number of fully paid and
10.7 - 3
nonassessable shares of Common Stock (or Other Securities) to which such Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then applicable Purchase Price, together with any other stock
or other securities and property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment of Purchase Price In Certain Events. The Purchase
Price to be paid by the Holder upon exercise of this Warrant, and the
consideration to be received upon exercise of this Warrant, shall be adjusted in
case at any time or from time to time for Capital Reorganizations as provided in
the Agreement as if such provisions were specifically set forth herein.
4. No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant, and (c) will not
transfer all or substantially all of its properties and assets to any other
person (corporate or otherwise), or consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant.
5. Notices of Record Date. In the event of
(a) any taking by the Company of a record of the
Holders of any class or securities for the purpose of
determining the Holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company, then and in each
such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on
which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and
10.7 - 4
character of such dividend, distribution or right, and (ii)
the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and
the time, if any, as of which the Holders of record of Common
Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for
securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up.
Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any action is to be taken.
6. Reservation of Stock Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
7. Exchange of Warrant. On surrender for exchange of this
Warrant, properly endorsed and in compliance with the restrictions on transfer
set forth in the legend on the face of this Warrant, to the Company, the Company
at its expense will issue and deliver to or on the order of the Holder thereof a
new Warrant of like tenor, in the name of such Holder or as such Holder (on
payment by such Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face of the Warrant so surrendered.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Remedies. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
10. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each Holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may be transferred by
endorsement and delivery in the same manner as in the case of
a negotiable instrument transferable by endorsement and
delivery.
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
10.7 - 5
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to all
rights represented hereby;
(c) until this Warrant is transferred on the books of
the Company, the Company may treat the registered Holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may
not be sold, transferred or assigned except pursuant to an
effective registration statement under the Securities Act or
pursuant to an applicable exemption therefrom.
11. Registration Rights. The Company is obligated to register the
shares of Common Stock issuable upon exercise of this Warrant in accordance with
the terms of the Registration Rights Agreement.
12. Notices. All notices and other communications from the Company
to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the internal laws of the State of New York. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
[Signature Page Follows]
10.7 - 6
DATED as of September 28, 2000.
STARUNI CORP.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
[Corporate Seal]
Attest:
By:
-----------------------
Secretary
10.7 - 7
EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
------------------------------------
(To be executed only upon exercise of the Warrant in whole or in part)
To: STARUNI CORP.
The undersigned registered Holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
____________(1) shares of Common Stock (as defined in such Warrant) and herewith
makes payment therefor in the amount and manner set forth below, as of the date
written below. The undersigned requests that the certificates for such shares of
Common Stock be issued in the name of, and delivered to,
_________________________ whose address is ____________________________________.
The Exercise Price for the shares of Common Stock issued on account of
this exercise of Warrant shall be in the amount of $________.
The number of shares to be issued hereunder less shares equivalent to
the Exercise Price, as determined in this Warrant, is_______________ .
Dated: ____________________
(Name must conform to name of Holder as
specified on the face of the Warrant)
By:
-----------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Address of Holder:
-------------------------
-------------------------
-------------------------
Date of exercise:
C:\Edgarizing\New\staruniwarrantf\staruniwarrantf.final.wpd
-------------------
(1) Insert the number of shares of Common Stock as to which the
accompanying Warrant is being exercised. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the accompanying Warrant, to the holder surrendering the
same.
10.7 - 8
ESCROW AGREEMENT
----------------
ESCROW AGREEMENT (the "Escrow Agreement") made as of the 28th day of
-----------------
September, 2000, by and among Staruni Corporation, a California corporation,
with offices at 0000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (the
"Company"), Boat Basin Investors LLC, a limited liability company organized
-------
under the laws of Nevis (the "Investor"), and Xxxxxx Xxxxxxxx Xxxxxxx LLP with
--------
offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as escrow agent (the
"Escrow Agent").
------------
W I T N E S S E T H:
--------------------
WHEREAS, the Company desires to raise capital in order to finance the
growth of its business operations and for other general corporate purposes;
WHEREAS, the Investor will from time to time as requested by the
Company, purchase shares of the Company's common stock, no par value per share
(the "Common Stock"), from the Company and will be issued Put Warrants in
conjunction with the purchase of such shares of Common Stock as set forth in
that certain Private Equity Line of Credit Agreement (the "Purchase Agreement")
dated the date hereof between the Investor and the Company, which shares will be
issued pursuant to the terms and conditions contained in the Purchase Agreement
and herein; and
WHEREAS, pursuant to the Purchase Agreement, the Company and the
Investor have requested that the Escrow Agent receive from the Company, hold in
escrow and ultimately deliver, as applicable, the Put Warrants, and have further
requested that upon each Put, the Escrow Agent receive, hold, and ultimately
deliver, the relevant number of Put Shares.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowl-edged, the parties to this Escrow
Agreement hereby agree as follows:
1. Defined Terms. Capitalized terms used and not
--------------
otherwise defined herein shall have the meanings respectively assigned to
them in the Purchase Agreement.
2. (a) Escrow of Put Warrants. On or prior to each
----------------------
Put Closing Date, the Company shall issue and deliver or cause to be delivered
to the Escrow Agent such number of Put Warrants as required by the Purchase
Agreement The Escrow Agent shall hold the Put Warrants and shall deliver them or
redeliver them to the Investor or to the Company, as applicable, only in
accordance with the terms and conditions of this Escrow Agreement.
(b) Escrow of Put Shares. Each time the Company
--------------------
issues a Put Purchase Notice to the Investor pursuant to Section 2.2 of the
Purchase Agreement, the Company shall issue and deliver or cause to be delivered
10.8 - 1
to the Escrow Agent a copy of such Put Purchase Notice and that number of shares
of Common Stock (the "Put Shares" and together with the Warrant Shares, the
-----------
"Shares") that would cause the number of shares of Common Stock in the Escrow
------
Account as defined in Section 3 hereto) to be equal to the maximum number of
shares of Common Stock the Investor may purchase pursuant to such Put Purchase
Notice. The Escrow Agent shall hold the Put Shares and shall deliver or
redeliver them to the Investor or the Company, as applicable, only in accordance
with the terms and conditions of this Escrow Agreement.
3. Holding of Shares. The Escrow Agent shall hold the
-----------------
Shares in a segregated escrow account (the "Escrow Account") in a securities
--------------
brokerage firm where it normally holds such Shares or shall hold the Shares in
certificated form, in the discretion of the Escrow Agent, and shall hold the
Put Warrants in escrow.
4. Release of Shares.
-----------------
(a) Upon the receipt of (i) a notice from the Investor
(the "Investor's Notice") on or prior to the Put Closing Date stipulating the
------------------
number of shares of Common Stock it is purchasing on such date pursuant to a Put
Purchase Notice and Section 2.2 of the Purchase Agreement, and (ii) evidence of
payment to the Company of the full purchase price for such shares of Common
Stock being purchased, the Escrow Agent shall release from the Escrow Account
and transfer to the Investor that number of shares of Common Stock stipulated in
the Investor's Notice (the "Draw Down Transfer") and the Put Warrants. The Draw
------------------
Down Transfer shall be made to the Investor through DTC. This Escrow Agreement
shall serve as irrevocable authorization and direction to make Draw Down
Transfer(s) to the Investor pursuant to this Section 4(b).
(b) Except as provided in Sections 4(a) and 4(b), the
Escrow Agent shall release the Shares upon receipt, at any time, of joint
written instructions from the Company and the Investor directing the manner in
which the return or other distribution of the Shares is to be made.
(c) This Escrow Agreement shall terminate upon the
expiration of the Commitment Period and upon such expiration the Escrow Agent
shall return all Shares in the Escrow Account to the Company.
5. Further Assurances. The Company and the Investor
-------------------
agree to do such further acts and to execute and deliver such statements,
assignments, agreements, instruments and other documents as the Escrow Agent,
from time to time, may reasonably request in connection with the administration,
maintenance, enforcement or adjudication of this Escrow Agreement in order (a)
to give the Escrow Agent confirmation and assurance of the Escrow Agent's
rights, powers, privileges, remedies and interests under this Escrow Agreement
and applicable law, (b) to better enable the Escrow Agent to exercise any such
right, power, privilege, rem-edy or interest, or (c) to otherwise effectuate the
purpose and the terms and provisions of this Escrow Agreement, each in such form
and substance as may be reasonably acceptable to the Escrow Agent.
10.8 - 2
6. Conflicting Demands. If conflicting or adverse claims
-------------------
or demands are made or notices served upon the Escrow Agent with respect to the
escrow provided for herein, the Company and the Investor agree that the Escrow
Agent shall refuse to comply with any such claim or demand and withhold and stop
all further performance of this escrow so long as such disagreement shall
continue. In so doing, the Escrow Agent shall not be or become liable for
damages, losses, costs, expenses or interest to any or any other person for its
failure to comply with such conflicting or adverse demands. The Escrow Agent
shall be entitled to continue to so refrain and refuse to so act until such
conflicting claims or demands shall have been finally determined by a court or
arbitrator of competent jurisdiction or shall have been settled by agreement of
the parties to such controversy, in which case the Escrow Agent shall be
notified thereof in a notice signed by such parties. The Escrow Agent may also
elect to commence an interpleader or other action for declaratory judgment for
the purpose of having the respective rights of the claimants adjudicated, and
may deposit with the court all Shares held hereunder pursuant to this Escrow
Agreement; and if it so commences and deposits, the Escrow Agent shall be
relieved and discharged from any further duties and obligations under this
Escrow Agreement.
7. Disputes. Each of the parties hereto hereby covenants
--------
and agrees that the Federal or state courts located in the County of New York,
State of New York shall have jurisdiction over any dispute with the Escrow Agent
or relating to this Escrow Agreement.
8. Reliance on Documents and Experts. The Escrow Agent
----------------------------------
shall be entitled to rely upon any notice, consent, certificate, affidavit,
statement, paper, document, writing or communication (which to the extent
permitted hereunder may be by telegram, cable, telex, telecopier, or telephone)
reasonably believed by it to be genuine and to have been signed, sent or made by
the proper person or persons, and upon opinions and advice of legal counsel
(including itself or counsel for any party hereto), independent public
accountants and other experts selected by the Escrow Agent and mutually
acceptable to each of the Company and the Investor. If the Shares are evidenced
by stock certificates, the Escrow Agent shall not be responsible to review the
stock certificates representing the Shares other than to confirm that it has
been signed.
9. Status of the Escrow Agent, Etc. The Escrow Agent is
--------------------------------
acting under this Escrow Agreement as a stakeholder only. No term or provision
of this Escrow Agreement is intended to create, nor shall any such term or
provision be deemed to have created, any joint venture, partnership or
attorney-client relationship between or among the Escrow Agent and the Company
or the Investor. This Escrow Agreement shall not be deemed to prohibit or in any
way restrict the Escrow Agent's representation of the Investor, who may be
advised by the Escrow Agent on any and all matters pertaining to this Escrow
Agreement. To the extent the Investor has been represented by the Escrow Agent,
the Investor hereby waives any conflict of interest and irrevocably authorizes
and directs the Escrow Agent to carry out the terms and provisions of this
Escrow Agreement fairly as to all parties, without regard to any such
representation and irrespective of the impact upon such Investor. The Escrow
10.8 - 3
Agent's only duties are those expressly set forth in this Escrow Agreement, and
each of the Company and the Investor authorizes the Escrow Agent to perform
those duties in accordance with its usual practices in holding property of its
own or those of other escrows. The Escrow Agent may exercise or other-wise
enforce any of its rights, powers, privileges, remedies and interests under this
Escrow Agreement and applicable law or perform any of its duties under this
Escrow Agreement by or through its partners, employees, attorneys, agents or
designees.
10. Exculpation. The Escrow Agent and its designees, and
-----------
their respective partners, employees, attorneys and agents, shall not incur any
liability whatsoever for the disposition of the Shares or the taking of any
other action in accordance with the terms and provisions of this Escrow
Agreement, for any mistake or error in judgment, for compliance with any
applicable law or any attachment, order or other directive of any court or other
authority (irrespective of any conflicting term or provision of this Escrow
Agreement), or for any act or omission of any other person selected with
reasonable care and engaged by the Escrow Agent in connection with this Escrow
Agreement (other than for such Escrow Agent's or such person's own acts or
omissions breaching a duty owed to the claimant under this Escrow Agreement and
amounting to gross negligence or willful misconduct as finally determined
pursuant to applicable law by a governmental author-ity having jurisdiction);
and each of the Company and the Investor hereby waives any and all claims and
actions whatsoever against the Escrow Agent and its designees, and their
respective partners, employees, attorneys and agents, arising out of or related
directly or indirectly to any and all of the foregoing acts, omissions and
circumstances. Furthermore, the Escrow Agent and its designees, and their
respective partners, employees, attorneys and agents, shall not incur any
liability (other than for a person's own acts or omissions breaching a duty owed
to the claimant under this Escrow Agreement and amounting to gross negligence or
willful misconduct as finally determined pursuant to applicable law by a
governmental authority having jurisdiction) for other acts and omissions arising
out of or related directly or indirectly to this Escrow Agreement or the Shares;
and each of the Company and the Investor hereby expressly waives any and all
claims and actions (other than the Escrow Agent's or such person's own acts or
omissions breaching a duty owed to the claimant and amounting to gross
negligence or willful misconduct as finally determined pursuant to applicable
law by a governmental authority having jurisdiction) against the Escrow Agent
and its designees, and their respective partners, employees, attorneys and
agents, arising out of or related directly or indirectly to any and all of the
foregoing acts, omissions and circumstances.
11. Indemnification. The Escrow Agent and its designees,
---------------
and their respective partners, employees, attorneys and agents, shall be
indemnified, reimbursed, held harmless and, at the request of the Escrow Agent,
defended, by the Company from and against any and all claims, liabilities,
losses and expenses (including, without limitation, the reasonable
disbursements, expenses and fees of their respective attorneys) that may be
imposed upon, incurred by, or asserted against any of them, arising out of or
related directly or indirectly to this Escrow Agreement or the Shares, except
such as are occasioned by the indemnified person's own acts and omissions
10.8 - 4
breaching a duty owed to the claimant under this Escrow Agreement and amounting
to willful misconduct or gross negligence as finally determined pursuant to
applicable law by a governmental authority having jurisdiction.
12. Notices. Any notice, request, demand or other
-------
communication permitted or required to be given hereunder shall be in writing,
shall be sent by one of the following means to the addressee at the address set
forth below (or at such other address as shall be designated hereunder by notice
to the other parties and persons receiving copies, effective upon actual
receipt) and shall be deemed conclusively to have been given: (a) on the first
business day following the day timely deposited with Federal Express (or other
equivalent national overnight courier) or United States Express Mail, with the
cost of delivery prepaid; (b) on the fifth business day following the day duly
sent by certified or registered United States mail, postage prepaid and return
receipt requested; or (c) when otherwise actually delivered to the addressee.
If to the Company:
Staruni Corporation
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile No.: (310)
If to the Investor:
At the address of such Investor set forth on Schedule A to this Escrow Agreement
If to the Escrow Agent:
Xxxxxx Xxxxxxxx Xxxxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopier: (000) 000-0000
13. Section and Other Headings. The section and other
----------------------------
headings contained in this Escrow Agreement are for convenience only, shall not
be deemed a part of this Escrow Agreement and shall not affect the meaning or
interpretation of this Escrow Agreement.
14. Governing Law. This Escrow Agreement shall be
--------------
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any controversy or claim
arising out of or related to this Agreement and the Warrants or the breach
thereof, shall be settled by binding arbitration in New York City, New York in
accordance with the rules of the Judicial Arbitration & Mediation Services'
Eastern Regional Office located in New York City, New York ("JAMS"). A
proceeding shall be commenced upon written demand by Company or the Investor to
the other. The arbitrator(s) shall enter a judgment by default against any party
which fails or refuses to appear in any properly noticed arbitration proceeding.
The proceeding shall be conducted by one (1) arbitrator, unless the amount
10.8 - 5
alleged to be in dispute exceeds two hundred fifty thousand dollars ($250,000),
in which case three (3) arbitrators shall preside. The arbitrator(s) will be
chosen by the parties from a list provided by JAMS, and if they are unable to
agree within ten (10) days, JAMS shall select the arbitrator(s). The arbitrators
must be experts in securities law and financial transactions. The arbitrators
shall assess costs and expenses of the arbitration, including all attorneys' and
experts' fees, as the arbitrators believe is appropriate in light of the merits
of parties' respective positions in the issues in dispute. The award of the
arbitrator(s) shall be final and binding upon the parties and may be enforced in
any court having jurisdiction. Nothing in this section 14 shall preclude the
parties from seeking extraordinary relief in the event that a claim of
irreparable harm arises, provided however, that such application shall be made
in the United States District Court for the Southern District of New York, or in
the Supreme Court of the State of New York, New York County. In the event that
any provision of this Escrow Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
15. Counterparts. This Escrow Agreement may be executed
------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original but all such counterparts shall together
constitute one and the same agreement.
16. Resignation of Escrow Agent. The Escrow Agent may, at
---------------------------
any time, at its option, elect to resign its duties as Escrow Agent under this
Escrow Agreement by providing notice thereof to each of the Company and the
Investor. In such event, the Escrow Agent shall transfer the Shares to a
successor independent escrow agent to be appointed by (a) the Company and the
Investor within thirty (30) days following the receipt of notice of resignation
from the Escrow Agent, or (b) the Escrow Agent if the Company and the Investor
shall have not agreed on a successor escrow agent within the aforesaid 30-day
period, upon which appointment and delivery of the Shares, the Escrow Agent
shall be released of and from all lia-bility under this Escrow Agreement.
17. Successors and Assigns; Assignment. Whenever in this
----------------------------------
Escrow Agreement reference is made to any party, such reference shall be deemed
to include the successors, assigns and legal representatives of such party, and,
without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of each of the
Company and the Investor in this Escrow Agreement shall inure to the benefit of
any successor escrow agent hereunder; provided, however, that nothing herein
shall be deemed to authorize or permit the Company or the Investor to assign any
of its rights or obligations hereunder to any other person (whether or not an
affiliate of the Company or the Investor) without the written consent of each of
the other parties nor to authorize or permit the Escrow Agent to assign any of
its duties or obligations hereunder except as provided in Section 17 hereof.
10.8 - 6
18. No Third Party Rights. The representations,
---------------------------
warranties and other terms and provisions of this Escrow Agreement are for the
exclusive benefit of the parties hereto, and no other per-son, including the
creditors of the Company or the Investor, shall have any right or claim against
any party by reason of any of those terms and provisions or be entitled to
enforce any of those terms and provisions against any party.
19. No Waiver by Action, Etc. Any waiver or consent
---------------------------
respecting any representation, warranty, covenant or other term or provision of
this Escrow Agreement shall be effective only in the specific instance and for
the specific purpose for which given and shall not be deemed, regardless of
frequency given, to be a further or continuing waiver or consent. The failure or
delay of a party at any time or times to require performance of, or to exercise
its rights with respect to, any representation, war-ranty, covenant or other
term or provision of this Escrow Agreement in no manner (except as otherwise
expressly provided herein) shall affect its right at a later time to enforce any
such term or provision. No notice to or demand on either the Company or the
Investor in any case shall entitle such party to any other or further notice or
demand in the same, similar or other circumstances. All rights, powers,
privileges, remedies and interests of the parties under this Escrow Agreement
are cumulative and not alternatives, and they are in addition to and shall not
limit (except as otherwise expressly provided herein) any other right, power,
privilege, remedy or interest of the parties under this Escrow Agreement or
applicable law.
20. Modification, Amendment, Etc. Each and every
--------------------------------
modification and amendment of this Escrow Agreement shall be in writing and
signed by all of the parties hereto, and each and every waiver of, or consent to
any departure from, any covenant, representation, warranty or other provision of
this Escrow Agreement shall be in writing and signed by the party granting such
waiver or consent.
21. Entire Agreement. This Escrow Agreement contains the
----------------
entire agreement of the parties with respect to the matters contained herein and
supersedes all prior representations, agreements and understandings, oral or
otherwise, among the parties with respect to the matters contained herein.
22. Fees. The Escrow Agent shall receive as its fee 2% of
----
each gross Investment Amount as set forth in each Put Purchase Notice which
shall be deducted by the Investor from the Put Proceeds paid to the Company by
the Investor and paid directly to the Escrow Agent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10.8 - 7
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the date first written above.
STARUNI CORPORATION
By:_________________________________
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
XXXXXX XXXXXXXX XXXXXXX LLP
By:_________________________________
Name: Xxxxxx X. Xxxxxxxx, Esq.
Title: Partner
BOAT BASIN INVESTORS LLC
By:
---------------------------------
Name:
Title:
10.8 - 8
PLACEMENT AGENT AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the ___ day of October, 2000,
by and between Staruni Corporation, a corporation organized under the laws of
the state of California("Company"), and Capstone Partners, L.C., a Utah limited
liability company, with its principal office location at 0000 Xxxxx Xxxx, Xxxxx
000, Xxxxxxx, Xxxxxxx 00000 (the "Agent").
RECITALS:
WHEREAS, the Company proposes to issue and sell shares of its Common
Stock, which are accompanied by a warrant or warrants to purchase a number of
shares of Common Stock of the Company (together the "Securities") resulting in
gross proceeds to the Company of a maximum of Two Million Dollars ($2,000,000),
excluding Warrants, in an offering (the "Offering") not involving a public
offering under the Securities Act of 1933, as amended (the "Act"), pursuant to
an exemption from the registration requirements of the Act under Regulation D
promulgated under the Act ("Regulation D"), as described below; and
WHEREAS, the Agent has offered to assist the Company in placing the
Securities on a "best efforts" basis with respect to sales of Securities
thereafter up to the Maximum Proceeds (as defined below), and the Company
desires to secure the services of the Agent on the terms and conditions
hereinafter set forth.
TERMS:
NOW, THEREFORE, in consideration of the premises and the mutual
promises, conditions and covenants herein contained, the parties hereto do
hereby agree as follows:
1. ENGAGEMENT OF AGENT. The Company on the basis of the representations and
warranties contained herein, but subject to the terms and conditions herein set
forth, hereby appoints the Agent as its exclusive placement agent for this
Offering, to sell, on a "best efforts basis," a minimum dollar amount of
Securities resulting in gross proceeds to the Company of a maximum dollar amount
of Securities, excluding Warrants, resulting in gross proceeds to the Company of
Two Million Dollars ($2,000,000) (the "Maximum Proceeds"). The Agent, on the
basis of the representations and warranties herein contained, but subject to the
terms and conditions herein set forth, accepts such appointment and agrees to
use its best efforts to find purchasers for the Securities. This appointment
shall be irrevocable for the period commencing on the date of the executed
Letter of Agreement, being August 22, 2000, and ending on the earlier of (i) the
date that the Company receives the Investment Amount as defined in Section 1.16
of the Private Equity Line of Credit Agreement (the "Equity Line Agreement")
hereinafter to be entered into by the Company and the investor named in the
Equity Line Agreement (the "Investor"), (ii) on February 1, 2000, if the Initial
Put Closing Date has not occurred by such date, which period may be extended by
the consent of the Company and the Agent (the "Offering Period"), or (iii) June
30, 2001.
Capstone Partners, L.C. 10.9 - 1
Copywrite 2000
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce the Agent to enter into this Agreement, the Company
hereby represents and warrants to and agrees with the Agent as follows:
2.1 Offering Documents. The Company (with the assistance of the Agent
and Investor) has prepared the Equity Line Agreement, with certain exhibits
thereto, which documents have been or will be delivered to one or more proposed
Investors. In addition, all proposed Investors will have received or will
receive prior to closing, copies of the Company's Annual Report on Form 10-KS
for the year ended September 30, 19991999, and the Company's quarterly reports
on Form 10-QSB for the quarters ended December 31, 1999, March 31, and June 30,
2000 ("SEC Documents"). The SEC Documents were prepared in conformity with the
requirements (to the extent applicable) of the Securities Exchange Act of 1934,
as amended, (the "'34 Act") and the rules and regulations ("Rules and
Regulations") of the Commission promulgated thereunder. As used in this
Agreement, the term "Offering Documents" refer to and mean the SEC Documents,
the Equity Line Agreement and all amendments, exhibits and supplements thereto,
together with any other documents which are provided to the Agent by, or
approved for Agent's use by, the Company for the purpose of this Offering.
2.2 Provision of Offering Documents. The Company shall deliver to the
Agent, without charge, as many copies of the Offering Documents as the Agent may
reasonably require for the purposes contemplated by this Agreement. The Company
authorizes the Agent, in connection with the Offering of the Securities, to use
the Offering Documents as from time to time amended or supplemented in
connection with the offering and sale of the Securities and in accordance with
the applicable provisions of the Act and Regulation D.
2.3 Accuracy of Offering Documents. The Offering Documents, at the time
of delivery to Investors for the Securities, conformed in all material respects
with the requirements, to the extent applicable, of the '34 Act and the
applicable Rules and Regulations and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. On the Closing Date (as hereinafter
defined), the Offering Documents will contain all statements that are required
to be stated therein in accordance with the Act and the Rules and Regulations
for the purposes of the proposed Offering, and all statements of material fact
contained in the Offering Documents will be true and correct, and the Offering
Documents will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.4 Duty to Amend. If during such period of time as in the reasonable
opinion of the Agent, or its counsel, an Offering Document relating to this
financing is required to be delivered under the Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur as a
result of which the Offering Documents as then amended or supplemented would
include an untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
Capstone Partners, L.C. 10.9 - 2
Copywrite 2000
under which they were made, not misleading, or if it is necessary at any time
after the date hereof to amend or supplement the Offering Documents to comply
with the Act or the applicable Rules and Regulations, the Company shall
forthwith notify the Agent thereof and shall prepare such further amendment or
supplement to the Offering Documents as may be required and shall furnish and
deliver to the Agent and to others, whose names and addresses are designated by
the Agent, all at the cost of the Company, a reasonable number of copies of the
amendment or supplement (or of the amended or supplemented Offering Documents)
which, as so amended or supplemented, will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
Offering Documents, not misleading in the light of the circumstances when
delivered to a purchaser or prospective purchaser, and which will comply in all
respects with the requirements (to the extent applicable) of the '34 Act and the
applicable Rules Regulations.
2.5 Corporation Condition. The Company's condition is as described in
its Offering Documents, except for continuing losses and changes in the ordinary
course of business and normal year-end adjustments that are not in the aggregate
materially adverse to the Company. The Offering Documents, taken as a whole,
present fairly the business and financial position of the Company as of the
Closing Date.
2.6 No Material Adverse Change. Except as may be reflected in or
contemplated by the Offering Documents, subsequent to the dates as of which
information is given in the Offering Documents, and prior to the Closing Date,
taken as a whole, there has not been any material adverse change in the
condition, financial or otherwise, or in the results of operations of the
Company or in its business.
2.7 No Defaults. Except as disclosed in the Offering Documents or in
writing to the Agent, the Company is not in default in any material respect in
the performance of any obligation, agreement or condition contained in any
material debenture, note or other evidence of indebtedness or any material
indenture or loan agreement of the Company. The execution and delivery of this
Agreement, and the consummation of the transactions herein contemplated, and
compliance with the terms of this Agreement will not conflict with or result in
a breach of any of the terms, conditions or provisions of, or constitute a
default under, the Certificate of Incorporation or Bylaws of the Company (in any
respect that is material to the Company), any material note, indenture,
mortgage, deed of trust, or other agreement or instrument to which the Company
is a party or by which the Company or any property of the Company is bound, or
to the Company's knowledge, any existing law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign, having jurisdiction
over the Company or any property of the Company. The consent, approval,
authorization or order of any court or governmental instrumentality, agency or
body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act or under the Blue Sky
or securities laws of any state or jurisdiction.
2.8 Incorporation and Standing. The Company is, and at the Closing Date
will be, duly formed and validly existing in good standing as a corporation
under the laws of the State of California and with full power and authority
(corporate and other) to own its properties and conduct its business, present
Capstone Partners, L.C. 10.9 - 3
Copywrite 2000
and proposed, as described in the Offering Documents; the Company, has full
power and authority to enter into and to perform this Agreement, and the Company
is duly qualified and in good standing as a foreign entity in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
Company or its properties.
2.9 Legality of Outstanding Securities. Prior to the Closing Date, the
outstanding securities of the Company have been duly and validly authorized and
issued, and are fully paid and non-assessable, and conform in all material
respects to the statements with regard thereto contained in the Offering
Documents.
2.10 Legality of Securities. The Securities when sold and delivered in
accordance with the Offering Documents, and the Agent Securities (as defined in
Section 3.4 below) when issued and delivered, will constitute legal, valid and
binding obligations of the Company, enforceable in accordance with the terms
thereof, and the Securities and Agent Securities shall be duly and validly
issued and outstanding, fully paid and non-assessable. The Common Stock into
which any Securities are exercisable and the Common Stock into which any of
Agent's Securities are exercisable, when issued upon exercise of any Securities
or upon exercise of any of Agent's Securities, as applicable, shall be duly and
validly issued and outstanding, fully paid and non-assessable.
2.11 Litigation. Except as set forth in the Offering Documents, there is
now, and at the Closing Date there will be, no action, suit or proceeding before
any court or governmental agency, authority or body pending or, to the knowledge
of the Company, threatened, which might result in judgments against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise) or business of
the Company or which would materially adversely affect the properties or assets
of the Company.
2.12 Finders. The Company does not know of any outstanding claims for
services in the nature of a finder's fee or origination fees with respect to the
sale of the Securities hereunder for which the Agent may be responsible, and the
Company will indemnify the Agent from any liability for such fees (including the
payment of attorney's fees incurred by Agent due to any claim by any such finder
or originator) by any party who, in the reasonable opinion of Agent's counsel,
has a legitimate claim for such compensation from the Company and for which
person the Agent is not legally responsible. In the event of such claim, Agent
shall properly notify Company thereof and the Company may, at its option and at
its sole cost and expense, take over the defense of such a claim with counsel of
its choice, reasonably satisfactory to Agent. Agent shall not settle any such
claims or litigation arising hereunder without the prior written consent of the
Company, which shall not be unreasonably withheld.
2.13 Tax Returns. The Company has filed all federal and state and local
tax returns which are required to be filed, and has paid all material taxes
shown on such returns and on all assessments received by it to the extent such
taxes have become due (except for taxes the amount of which the Company is
contesting in good faith). All taxes with respect to which the Company is
obligated have been paid, or adequate accruals have been set up to cover any
such unpaid taxes.
Capstone Partners, L.C. 10.9 - 4
Copywrite 2000
2.14 Authority. The execution and delivery by the Company of this
Agreement have been duly authorized by all necessary action, and this Agreement
is the valid, binding and legally enforceable obligation of the Company except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws, by principles governing
enforcement of equitable remedies and, with respect to indemnification against
liabilities under the Act, matters of public policy.
2.15 Actions by the Company. The Company will not take any action that
will impair the effectiveness of the transactions contemplated by this
Agreement.
3. ISSUE, SALE AND DELIVERY OF THE SECURITIES.
3.1 Deliveries of Securities. Certificates in such form that, subject to
applicable transfer restrictions as described in the Equity Line Agreement,
(issued in such denominations and in such names as the Agent may direct the
Company to issue) for the Securities, and the Agent Securities (described in
Section 3.4 below), shall be delivered by the Company to the Escrow Agent, with
copies made available to the Agent for checking at least one (1) full business
day prior to the Closing Date, it being understood that the directions from the
Agent to the Company shall be given at least two (2) full business days prior to
the Closing Date. The certificates for the Securities and the Agent Securities
shall be delivered at the Initial Put Closing Date and at each subsequent Put
Closing (as defined in the Equity Line Agreement).
3.2 Escrow of Funds. Pursuant to a separate form of escrow agreement to
be entered into by and between the Company, the Investor and the escrow agent,
as defined in the Equity Line Agreement ("Escrow Agreement" and "Escrow Agent"
respectively), the Investor shall place all funds for purchase of Securities in
an escrow account set up on behalf of the Company. Pursuant to the Escrow
Agreement, the Investor shall place all funds for purchase of Securities with
respect to any Put into such escrow account set up on behalf of the Company, and
the Company shall place all certificates for the Securities subject to any Put
into such escrow account for the benefit of the Investor. With respect to any
Put Closing, at such time as the Investor has delivered to the Escrow Agent any
necessary Closing documents, the Investor has been approved by the Company and
all other Closing conditions have been met, Escrow Agent shall release the
subscription funds and signed documents to the Company and release the
certificates representing the Securities to the Investor.
3.3 Closing Date. The Initial Put Closing Date shall take place at the
offices of Escrow Agent on the Initial Put Closing Date as specified in the
Equity Line Agreement. Any subsequent Put Closings shall take place at the
offices of the Escrow Agent on each Put Closing Date as specified in the Equity
Line Agreement. The Initial Put Closing Date and any subsequent Put Closing
Dates shall be referred to herein as the "Closing Date."
3.4 Agent's Compensation. The Company shall pay the Agent the amounts
pursuant to Section 3.4.1 and 3.4.2 herein, which shall be the full amount
payable to the Agent for its services, as fees and expenses, in connection with
this Offering.
Capstone Partners, L.C. 10.9 - 5
Copywrite 2000
3.4.1 Cash Placement Fee. Based upon the total aggregate amount
of the Equity Line Agreement funds received by the Company and which is placed
in this Offering, the Agent shall be paid:
(a) a cash placement fee ("Cash Placement Fee") equal to
seven percent (7%) of the purchase price of any and all Securities placed up to
the aggregate purchase price of two million dollars ($2,000,000) of Securities
placed, which shall equal a total of one-hundred and forty thousand dollars
($140,000) for the two million dollars ($2,000,000) of Securities placed;
(b) a non-accountable expense allowance equal to one
percent (1%) of the purchase price of any and all Securities placed up to the
aggregate purchase price of the two million dollars ($2,000,0000) of Securities
placed, which covers legal and due diligence expenses of the placement (the
"Non-Accountable Expense Allowance," together with the Cash Placement Fee; and
(c) an amount of securities (the "Agent Securities") equal
to (i) three percent (3%) of all Common Stock issued to the Investor (the "Agent
Common Stock") and (ii) three percent (3%) of all warrants issued to the
Investor (the "Agent Warrants"), subject to adjustment as specified in Section
3.5 below. The Agent Warrants and the Agent Common Stock to be received by the
Agent shall be issued to Agent on the same terms and conditions as those issued
to the Investor pursuant to the Equity Line Agreement, including the provisions
contained in Section 6.1 of the Equity Line Agreement with respect to certain
registration rights covering the put shares and warrants shares to be received
by the Investor.
3.5 Payment of Fees. The Escrow Agent shall be instructed to pay all
Cash Fees and to deliver all Agent Securities pursuant to Section 3.4 of this
Agreement, directly to the Agent from the proceeds of the Initial Put Closing
Date and all subsequent Put Closings, simultaneous with the transfer of proceeds
to the Company.
3.6 Press Release. The Agent shall have the right to review and comment
upon any press release issued by the Company in connection with the Offering.
4. OFFERING OF THE SECURITIES ON BEHALF OF THE COMPANY.
4.1 In offering the Securities for sale, the Agent shall offer them
solely as an agent for the Company, and such offer shall be made upon the terms
and subject to the conditions set forth in the Offering Documents. The Agent
shall commence making such offer as an agent for the Company as soon as possible
following delivery of the final Company approved Offering Documents to Agent (or
notification by Company or its Counsel the latest version of any Offering
Documents on Agent's computer system is acceptable for faxing to the Investor).
4.2 The Agent will only make offers to sell the Securities to, or
solicit offers to subscribe for any Securities from, persons or entities that
Agent reasonably believes are "accredited investors" as defined Regulation D.
5. RIGHT OF FIRST REFUSAL.
The Company hereby grants Agent rights of first refusal as follows:
Capstone Partners, L.C. 10.9 - 6
Copywrite 2000
5.1 The Agent has the night of first refusal to act as placement agent
for any future private financings of the Company under which the Company issues
or sells, or agrees to issue or sell, for cash (a) any debt or equity securities
which are convertible into, exercisable or exchangeable for, or carry the right
to receive additional shares of Common Stock either (i) at any conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security, or (ii) with a fixed
conversion, exercise or exchange price that is subject to being reset at some
future date at any time after the initial issuance of such debt or equity
security or upon the occurrence of specified contingent events directly or
indirectly related to the business of the Company or the market for the Common
Stock, or (b) any securities of the Company pursuant to an equity line structure
or format similar in nature to this Offering or otherwise, excluding joint
ventures, mergers, acquisitions, or similar transactions; provided, however,
that the Agent has the right of first refusal to act as placement agent for any
future private financings between the Company and the Investor pursuant to the
Equity Line Agreement, whether equity securities, convertible debt securities,
or securities or instruments convertible into or exchangeable for debt or equity
securities of the Company, excluding joint ventures, mergers, acquisitions, or
similar transactions. The duration of the Agent's right of first refusal under
this Section 5.1 shall be for a period of two (2) years following the Initial
Put Closing Date.
5.2 In the event that the Company wishes to undertake a transaction
described in this Section 5, the Company must send Agent a written notice
generally describing the proposed transaction (whether the transaction is
initiated by the Company or is offered to the Company by a third party), in
sufficient specificity to allow the Agent to understand the proposed transaction
clearly. This notice, which may be delivered by facsimile or email transmission,
must be delivered to Agent at least twenty (20) days prior to the proposed
closing of the transaction. The Agent shall have fifteen (15) days from receipt
of that notice to determine whether or not it wishes to exercise its right of
first refusal with respect to that transaction. The Agent shall notify the
Company in writing of its decision to exercise or waive its right of first
refusal with respect to the transaction described in the notice. If the Agent
waives its right of first refusal with respect to a particular transaction, the
Company may proceed with that transaction; provided, however, that if prior to
any Closing in the proposed transaction the terms of the transaction are changed
in any material way from the terms set forth in the notice to the Agent, the
Agent's right of first refusal shall commence again. Agent's waiver of its
rights of its rights of first refusal with respect to any specific transaction
shall not act as a waiver of its rights with respect to future transactions
within the applicable time period.
5.3 In the event that Company breaches Section 5.1 of this Agreement,
Agent shall be entitled to receive compensation based upon the aggregate
purchase price of securities placed in such transaction in an amount calculated
pursuant to Section 3.4 hereof, excluding, however, all amounts designated as
Non-Accountable Expense Allowances.
Capstone Partners, L.C. 10.9 - 7
Copywrite 2000
6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Agent that:
6.1 After the date hereof, the Company will not at any time, prepare and
distribute any amendment or supplement to the Offering Documents, of which
amendment or supplement the Agent shall not previously have been advised and the
Agent and its counsel furnished with a copy within a reasonable time period
prior to the proposed adoption thereof, or to which the Agent shall have
reasonably objected in writing on the ground that it is not in compliance with
the Act or the Rules and Regulations (if applicable).
6.2 The Company will pay, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming effective
or is terminated, all costs and expenses incident to the performance of its
obligations under this Agreement, including all expenses incident to the
authorization of the Securities and their issue and delivery to the Agent, any
original issue taxes in connection therewith, all transfer taxes, if any,
incident to the initial sale of the Securities, the fees and expenses of the
Company's counsel (except as provided below) and accountants, the cost of
reproduction and furnishing to the Agent copies of the Offering documents as
herein provided; provided, however, that the Company shall not be responsible
for the direct payment of fees and costs incurred by Agent, including attorney's
fees of or any costs incurred by the Agent's counsel.
6.3 As a condition precedent to the Initial Put Closing Date, the
Company will deliver to the Agent a true and correct copy of all documents
requested by Agent included in Agent's due diligence request, including but not
limited to the Certificate of Incorporation of the Company, and all amendments
and certificates of designation of preferences of preferred stock, certified by
the Secretary of State of the State of California.
6.4 Prior to the Closing Date, the Company will cooperate with the Agent
in such investigation as it may make or cause to be made of all of the
properties, business and operations of the Company in connection with the
Offering of the Securities. The Company will make available to it in connection
therewith such information in its possession as the Agent may reasonably request
and will make available to the Agent such persons as the Agent shall deem
reasonably necessary and appropriate in order to verify or substantiate any such
information so supplied.
6.5 The Company shall be responsible for making any and all filings
required by the Blue Sky authorities of the State of California and filings
required by the laws of the jurisdictions in which the Investor who is accepted
for purchase of Securities are located, if any.
7. NON-CIRCUMVENTION & CONFIDENTIALITY OF PROPRIETARY AGENT INFORMATION.
7.1 Non-Circumvention. The investor(s) who participate in the Offering
and the other investor(s) who are listed on the schedule attached hereto as
Exhibit B shall be considered, for purposes of this Agreement, the property of
Agent. The Company on behalf of itself, its parent or its subsidiaries
(collectively hereinafter referred to as "Company") agree not to circumvent,
Capstone Partners, L.C. 10.9 - 8
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directly or indirectly, Agent's relationship with these investor(s), their
parents or any of the investor(s') subsidiaries or affiliates (collectively
hereinafter referred to as "Investor") and Company will not directly or
indirectly contact or negotiate with the Investor regarding an investment in the
Company, or any other company, and will not enter into any agreement or
transaction with Investor, or disclose the names of Investor, except as such
disclosure may be required by any law, rule, regulation, regulatory body, court
or administrative agency, for a period of time beginning on the date hereof and
ending on the date that is two (2) years after the Initial Put Closing Date
without the prior written approval of Agent; provided, however, that
notwithstanding the above, nothing contained in this Agreement shall prevent
Company from directly or indirectly, selling securities to the Investor through
a public offering or from, directly or indirectly, contacting or negotiating
with the Investor in satisfaction of Company's obligations under the Equity Line
Agreements entered into in connection herewith. In the event that the Company,
with the Agent's advance written permission accepts an investment (a "Subsequent
Investment") from an Investor or Investors (other than in a public offering) in
a placement being arranged without an agent or through an agent other than the
Agent during the period beginning on the date hereof and terminating on the
second (2nd) anniversary of the Initial Put Closing Date as described in the
Equity Line Agreement, the Company agrees to pay to the Agent a fee equal to six
percent(6%) of all amounts invested by such Investor(s). In the event that the
Company accepts a Subsequent Investment without the Agent's advance written
permission, the Company agrees to pay to the Agent a fee equal to eight percent
(8%) of all amounts invested by such Investor(s).
7.2 Specific Performance and Attorney's Fees. The Company acknowledges
and agrees that, if it breaches its obligations under Sections 7.1, damages at
law will be an insufficient remedy to Agent and that Agent would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
Agent shall be entitled, upon application to a court of competent jurisdiction,
to obtain injunctive relief against the breaching party to enforce the
provisions of such sections, which injunctive relief shall be in addition to any
other rights or remedies available to Agent. The Company agrees to pay to Agent
(severally and not jointly) all costs and expenses incurred by Agent relating to
the enforcement of the terms of Sections 7.1 hereof due to its own actions,
whether by injunction, a suit for damages or both, including reasonable fees and
disbursements of counsel (both at trial and in appellate proceedings).
8. INDEMNIFICATION.
8.1 The Company agrees to indemnify and hold harmless the Agent, each
person who controls the Agent within the meaning of Section 15 of the Act and
the Agent's employees, accountants, attorneys and agents (the "Agent's
Indemnitees") against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or the
'34 Act or any other statute or at common law and for any reasonable legal or
other expenses (including the costs of any investigation and preparation)
incurred by them in connection with any litigation, whether or not resulting in
any liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon (i) the Company's breach of its
obligations under the Equity Line Agreement to deliver shares of Common Stock to
a Investor upon submission by Investor of the required documentation, or (ii)
any untrue statement of material fact contained in the Offering Documents or any
amendment or supplement thereto or any application or other document filed in
Capstone Partners, L.C. 10.9 - 9
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any state or jurisdiction in order to qualify the Securities under the Blue Sky
or securities laws thereof, or the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, under
the circumstances under which they were made, not misleading, all as of the date
of the Offering Documents or of such amendment as the case may be, or (iii) any
breach of any representation, warranty or covenant made by the Company in this
Agreement, provided, however, that the indemnity agreement contained in this
Section 8.1 shall not apply to amounts paid in settlement of any such
litigation, if such settlements are made without the consent of the Company (but
no such settlement may be made without the Company's prior written consent,
which consent shall not be unreasonably withheld), nor shall it apply to the
Agent's Indemnitees in respect to any such losses, claims, damages or
liabilities arising out of or based upon any such untrue statement or alleged
untrue statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by the Agent specifically for use in connection with the preparation of
the Offering Documents or any such amendment or supplement thereto or any
application or other document filed in any state or jurisdiction in order to
qualify the Securities under the Blue Sky or securities law thereof. This
indemnify agreement is in addition to any other liability which the Company may
otherwise have to the Agent's Indemnitees. The Agent's Indemnitees agree, within
ten (10) days after the receipt by them of written notice of the commencement of
any action against them in respect to which indemnify may be sought from the
Company under this Section 8.1, to notify the Company in writing of the
commencement of such action; provided, however, that the failure of the Agent's
Indemnitees to notify the Company of any such action shall not relieve the
Company from any liability which it may have to the Agent's Indemnitees on
account of the indemnity agreement contained in this Section 8.1, except with
respect to any failure which irreparably prejudices the Company or causes an
event of adjudication materially adverse to the Company. The Company shall not
be relieved from any other liability which it may have to the Agent's
Indemnitees, and if the Agent's Indemnitees shall notify the Company of the
commencement thereof, the Company shall be entitled to participate in (and, to
the extent that the Company shall wish, to direct) the defense thereof at its
own expense, but such defense shall be conducted by counsel of recognized
standing and reasonably satisfactory to the Agent's Indemnitees, defendant or
defendants, in such litigation. The Company agrees to notify the Agent's
Indemnitees promptly of the commencement of any litigation or proceedings
against the Company or any of the Company's officers or directors of which the
Company may be advised in connection with the issue and sale of any of the
Securities and to furnish to the Agent's Indemnitees, at their request, copies
of all pleadings therein and to permit the Agent's Indemnitees to be observers
therein and apprise the Agent's Indemnitees of all developments therein, all at
the Company's expense.
8.2 With the exception provided below as to limitations of indemnity,
the Agent agrees, in the same manner and to the same extent as set forth in
Section 8.1 above, to indemnify and hold harmless the Company, and the Company's
and Company's directors, officers, employees, accountants, attorneys and agents
(the "Company's Indemnitees") with respect to (i) any statement in or omission
from the Offering Documents or any amendment or supplement thereto or any
Capstone Partners, L.C. 10.9 - 10
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application or other document filed by the Company in any state or jurisdiction
in order for the Company to qualify, the Securities under the Blue Sky or
securities laws thereof, or any information furnished pursuant to Section 2.4
hereof, if such statement or omission was made in reliance upon information
furnished in writing to the Company by the Agent in a document executed by Agent
on its behalf specifically for use in connection with the preparation thereof or
supplement thereto, or (ii) any untrue statement of a material fact made by the
Agent or its agents not based on statements in the Offering Documents or
authorized in writing by the Company, or with respect to any misleading
statement made by the Agent or its agents resulting from the omission of
material facts which misleading statement is not based upon the Offering
Documents, and any documents filed with public or governmental authorities or
agencies, and any public press releases or information furnished in writing by
the Company or, (iii) any breach of any representation, warranty or covenant
made by the Agent in this Agreement. The Agent shall not be liable for amounts
paid in settlement of any such litigation if such settlement was effected
without its consent. In case of the commencement of any action in respect of
which indemnity may be sought from the Agent, the Company's Indemnitees shall
have the same obligation to have notice as set forth in Section 8.1 above,
subject to the same loss of indemnity in the event such notice is not given, and
the Agent shall have the same night to participate in (and, to the extent that
it shall wish, to direct) the defense of such action at its own expense, but
such defense shall be conducted by counsel of recognized standing reasonably
satisfactory to the Company. The Agent agrees to notify the Company's
Indemnitees, at their request, and to provide copies of all pleadings therein
and to permit the Company's Indemnitees to be observers therein and appraise
them of all the developments therein, all at the Agent's expense. As to Damages,
Company recognizes that since it is receiving the net proceeds of the monies
generated by this placement, that indemnity, if any, to be paid by the Placement
Agent to the Company shall be strictly limited to the Placement Agent's Cash
Fee, inclusive of attorney fees and costs of arbitration and/or court
proceedings.
9. LIQUIDATION DAMAGES.
Company and Agent both acknowledge that it would be extremely
impractical and difficult to ascertain the actual damages to be suffered by
Company if Agent is found by an arbitrator or a court of competent jurisdiction
to have breached any of the representations, warranties and covenants contained
in Section 13 of this Agreement. Accordingly, should a breach of the
representations of Section 13 be proven and Agent found liable for said breach,
Company and Agent hereby agree that the damages shall be limited to an amount
equal to the Cash Placement Fee received by Agent pursuant to Section 3.4 of
this Agreement plus the return to the Company of the Agent Securities received
by Agent pursuant to Section 3.4 of this Agreement (or, to the extent that the
Agent Securities have already been sold by Agent, the value, as defined below,
of the Agent Securities), inclusive of all attorney's fees and cost of court.
For purposes hereof, the value of the Agent Common Stock shall be deemed to
equal the lesser of (i) the aggregate Share Price of any Agent Common Stock
issued to Agent or (ii) the market value of such Agent Common Stock on the date
that such shares were sold by Agent, and in either case, the Agent may return
such Agent Common Stock to the Company in lieu of any payment, as to the value
of such Agent Securities, for damages pursuant to this section. For purposes
Capstone Partners, L.C. 10.9 - 11
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hereof, the value of each Warrant issued to Agent which has been exercised by
Agent shall be the difference of (i) the market value of the Common Stock
received upon such exercise on the date that such shares were sold by Agent,
minus (ii) the Exercise Price of such Warrant. This provision is not to be
construed as a penalty, but as full liquidated damages under Georgia law.
10. EFFECTIVENESS OF AGREEMENT.
This Agreement shall become effective (i) at 9:00 A.M., Atlanta, Georgia
time, on the date hereof or (ii) upon release by the Agent of the Securities for
offering after the date hereof, whichever occurs first. The Agent agrees to
notify the Company immediately after the Agent shall have taken any action by
such release or otherwise wherein this Agreement shall have become effective.
11. CONDITIONS OF THE AGENT'S OBLIGATIONS.
The Agent's obligations to act as agent of the Company hereunder and to
find purchasers for the Securities shall be subject to the accuracy, as of the
Closing Date, of the representations and warranties on the part of the Company
herein contained, to the fulfillment of or compliance by the Company with all
covenants and conditions hereof, and to the following additional conditions:
11.1 Counsel to the Agent shall not have objected in writing or shall
not have failed to give his consent to the Offering Documents (which objection
or failure to give consent shall not have been done unreasonably).
11.2 The Agent shall not have disclosed to the Company that the Offering
Documents, or any amendment thereof or supplement thereto, contains an untrue
statement of fact, which, in the opinion of counsel to the Agent, is material,
or omits to state a fact which, in the opinion of such counsel, is material and
is required to be stated therein, or is necessary to make the statements
therein, under the circumstances in which they were made, not misleading.
11.3 Between the date hereof and the Closing Date, the Company shall not
have sustained any loss on account of fire, explosion, flood, accident, calamity
or any other cause of such character as would materially adversely affect its
business or property considered as an entire entity, whether or not such loss is
covered by insurance.
11.4 Except as set forth in the Offering Documents , during the time
period between the date hereof and the Initial Put Closing Date, there shall be
no litigation instituted or threatened against the Company, and there shall be
no proceeding instituted or threatened against the Company before or by any
federal or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely effect the business, franchises, license,
permits, operations or financial condition or income of the Company considered
as an entity.
11.5 Except as contemplated herein or as set forth in the Offering
Documents, during the period subsequent to the most recent financial statements
contained in the Offering Documents, if any, and prior to the Initial Put
Closing Date, the Company (i) shall have conducted its business in all material
respects in the usual and ordinary manner as the same is being conducted as of
Capstone Partners, L.C. 10.9 - 12
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the date hereof and (ii) except in the ordinary course of business, the Company
shall not have incurred any liabilities or obligations (direct or contingent) or
disposed of any assets, or entered into any material transaction or suffered or
experienced any substantially adverse change in its condition, financial or
otherwise. At the Closing Date, the equity account of the Company shall be
substantially the same as reflected in the most recent balance sheet contained
in the Offering Documents except for reductions for matters discussed in the
Equity Line Agreements and without considering the proceeds from the sale of the
Securities other than as may be set forth in the Offering Documents.
11.6 The authorization of the Securities by the Company and all
proceedings and other legal matters hereto and to this Agreement shall be
reasonably satisfactory in all material respects matters to the Agent or counsel
to the Agent, who shall have furnished the Agent on the Closing Date with such
favorable opinion with respect to the sufficiency of all corporate proceedings
and other legal matters relating to this Agreement as the Agent may reasonably
require, and the Company shall have furnished such counsel such documents as he
may have requested to enable him to pass upon the matters referred to in this
subparagraph.
11.7 The Company shall have furnished to the Investor, with a true and
correct copy to the Agent, the opinion, dated the Closing Date, addressed to the
Investor, from counsel to the Company, as required by the Equity Line Agreement
in substantially the form attached to the Equity Line Agreement as an exhibit.
11.8 The Company shall have furnished to the Agent a due diligence
certificate signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, dated as of the Closing Date, to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects at and as of the Closing
Date (other than representations and warranties which by their terms are
specifically limited to a date other than the Closing Date), and the Company has
complied with all the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date;
(ii) the Company has carefully examined the Offering Documents, and
any amendments and supplements thereto, and, to the best of its knowledge, all
statements contained in the Offering Documents, and any amendments and
supplements thereto, are true and correct, and neither the Offering Documents,
nor any amendment or supplement thereto, includes any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein under the circumstances in which they
were made not misleading, and since the date hereof, there has occurred no event
required to be set forth in an amended or supplemented Offering Documents, which
has not been set forth; except as set forth in the Offering Documents, since the
respective dates as of which the periods for which the information is given in
the Offering Documents and prior to the date of such certificate, (a) there has
not been any material adverse change, financial and otherwise, in the affairs of
condition of the Company, and (b) except as disclosed in the Offering Documents,
the Company has not incurred any material liabilities, direct or contingent or
entered into any material transactions, otherwise than in the ordinary course of
business; and
Capstone Partners, L.C. 10.9 - 13
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(iii) the Company has provided true and correct copies of all
documents in its possession or which it could obtain that were requested by
Agent pursuant to any due diligence inquiry.
12. TERMINATION.
12.1 This Agreement may be terminated by the Agent by notice to the
Company in the event that the Company shall have failed or been unable to comply
with any of the material terms, conditions or provisions of this Agreement on
the part of the Company to be performed, complied with fulfilled within the
respective times, if any, herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by the
Agent in writing. However, if any material breach by the Company can be cured
within ten (10) business days, Agent shall provide the Company such reasonable
period to cure.
12.2 This Agreement may be terminated by the Company by notice to the
Agent in the event that the Agent shall have materially failed or been
materially unable to comply with any of the terms, conditions or provisions of
this Agreement on the part of the Agent to be performed, complied with or
fulfilled within the respective times, if any, herein provided for, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Company in writing. However, if any material breach by
Agent can be cured within ten (10) business days, Company shall provide Agent
such ten (10) business days to cure.
12.3 This Agreement may be terminated by the Agent by notice to the
Company at any time, if, in the reasonable, good faith judgment of the Agent,
payment for and delivery of the Securities is rendered impracticable or
inadvisable because: (i) additional material governmental restrictions not in
force and effect on the date hereof shall have been imposed upon trading in
securities generally, (ii) a war or other national calamity shall have occurred,
or (iii) the condition of the market (either generally or with reference to the
sale of the Securities to be offered hereby) or the condition of any matter
affecting the Company or any other circumstance is such that it would be
undesirable, impracticable or inadvisable, in the judgment of the Agent, to
proceed with this Agreement or with the Offering.
12.4 Any termination of this Agreement pursuant to this Section 12 shall
be without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that the Company shall remain obligated to pay the costs and expenses
provided to be paid by it specified in Sections 3 ; and the Company and the
Agent shall be obligated to pay, respectively, all losses, claims, damages or
liabilities, joint or several, under Section 8.1 in the case of the Company and
Section 8.2 in the case of the Agent.
13. AGENT'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Agent represents and warrants to and agrees with the Company that:
Capstone Partners, L.C. 10.9 - 14
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13.1 The Placement Agent is a limited liability company duly organized
and existing under the laws of the state of Utah. The Placement Agent is a
licensed NASD broker-dealer, and a member of SIPC.
13.2 There is not now pending or threatened or to the Agent's knowledge,
contemplated against the Agent any action or proceeding of which the Agent has
been advised, either in any court of competent jurisdiction, before the
Commission or before any state securities commission or the NASD, concerning the
Agent's activities which would impair the ability of the Agent to conduct the
Offering as contemplated by this Agreement.
13.3 In the event any action or proceeding of the type referred to
Section 13.2 above shall in be instituted or threatened against the Agent at any
time prior to the Closing Date or, in the event there shall be filed by or
against the Agent in any court, pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for reorganization
or for the appointment of a receiver or trustee of its assets or if the Agent
makes an assignment for the benefit of creditors, the Company shall have the
right, on three (3) days' written notice to the Agent, to terminate this
Agreement without any liability to the Agent of any kind, except for the payment
of all expenses provided herein.
13.4 Agent understands and acknowledges that prior to issuance, the
Equity Line Agreement is not being registered under the Act, and that the
Offering and sale of the Equity Line Agreement is to be conducted pursuant to
Regulation D under the Securities Act of 1933, as amended, (the "Act").
Accordingly, in conducting its activities under this Agreement.
(a) Agent has not offered or placed and will not offer or place the
Equity Line Agreement or the Securities that may issue therefrom to any investor
which Agent does not have reasonable grounds to believe, or does not believe, is
an "Accredited Investor," within the meaning of Regulation D under the Act.
(b) Agent has not offered or placed and will not offer or place the
Equity Line Agreement by means of any form of general solicitation or general
advertising, including, but not limited to, the following:
(1) any advertisement article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio; and
(2) any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising.
(c) Agent will not solicit or accept the subscription of any person
unless immediately before accepting such subscription Agent has reasonable
grounds to believe and does believe that (i) such person is an Accredited
Investor and (ii) all representations made and information furnished by such
person in the Equity Line Agreement and related documents are true and correct
in all material respects.
(d) Agent will not solicit any purchasers of any securities unless
the Offering Documents are furnished to such prospective purchaser.
Capstone Partners, L.C. 10.9 - 15
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(e) Upon notice from the Company that the Offering Documents are
required to be amended or supplemented, Agent will immediately cease use of the
Offering Documents until Agent has received such amendment or supplement and
thereafter will make use of the Offering Documents only as so amended or
supplemented, and Agent will deliver a copy of such amendment or supplement to
each prospective investor to whom a copy of the Offering Documents had
previously been delivered (and who has not returned such copy).
(f) Agent will use its best efforts to conduct the offering of the
Securities in a manner that will allow the availability of the private offering
exemption from federal securities regulation provided by Regulation D
promulgated under the Securities Act of 1933, as amended.
(g) Agent will notify the Company in writing promptly when any
event shall have occurred during the Offering Period as a result of which any
representation or warranty of the Agent herein would not be true.
13.5 Neither the Agent nor any of its affiliates or controlling persons
will take any action that will impair the effectiveness of the transactions
contemplated by this Agreement.
13.6 All corporate actions by Agent required for the execution, delivery
and performance of this Agreement have been taken. The execution and delivery of
this Agreement by the Agent, the observance and performance thereof, and the
consummation of the transactions contemplated herein or in the Offering
Documents do not and will not constitute a material breach of, or a material
default under, any instrument or agreement by which the Agent is bound, and does
not and will not, to the best of the Agent's knowledge, contravene any existing
law, decree or order applicable to it. This Agreement constitutes a valid and
binding agreement of Agent, enforceable in accordance with its terms.
13.7 Agent understands that the Company is relying upon Agent's
representations and warranties in connection with the Offering and the sale of
the Equity Line Agreement and the underlying Securities contemplated by this
Agreement.
13.8 Agent's representations and warranties under this Section 13 shall
be true and correct as of the Closing, and shall survive the Closing
indefinitely.
14. COMPANY ACKNOWLEDGMENT.
14.1 Company understands and acknowledges that the Investor, in their
sole discretion, may elect to hold the Securities underlying the Equity Line
Agreement for various periods of time, as provided in the Offering Documents,
and the Company further acknowledges that Agent makes no representations or
warranties as to how long the Securities will be held by each Investor or the
Investors' trading history or investment strategies.
14.2 The number of shares of Common Stock, as defined in the Equity Line
Agreement, that the Company may be obligated to issue on the Initial Put Closing
Date, as defined in the Equity Line Agreement may increase substantially in
Capstone Partners, L.C. 10.9 - 16
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certain circumstances, including the circumstance in which the trading price of
the Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the Equity Line Agreement, this
Agreement and the Securities being sold thereunder and recognize that they have
a potential dilutive effect. The board of directors of the Company has concluded
in its good faith business judgment that such issuance is in the best interests
of the Company.
14.3 Company understands that there is no assurance as to how the market
and/or market makers will respond to the purchase and sale of the Securities
underlying the Equity Line Agreement.
14.4 Company acknowledges that Agent has not made (either directly or
through any agent or representative) any representations, warranties or
covenants contrary to sections 14.1 through 14.3 and that Agent has disclosed
the risks inherent in the structure of the Offering including, without
limitation, risks associated with the activities contemplated in Sections 14.1
through 14.3.
14.5 Company acknowledges that due to the increase in the possible
issuance of shares of the Company's Common Stock during the course of the Equity
Line Agreement, an issuance of more than twenty percent (20%) of the outstanding
Common Stock of Company could occur.
14.6 Company acknowledges that this Offering will not be deemed to be
integrated with any prior placement of securities by the Company under Rule 502
of the Securities Act of 1933 or other applicable law.
15. NOTICES. Except as otherwise expressly provided in this Agreement:
15.1 Whenever notice is required by the provisions of this Agreement to
be given to the Company, such notice shall be in writing, addressed to the
Company, at:
If to Company: Attn: Xxxxx X. Xxxxxx, CEO
Staruni Corporation
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
With a Copy to: Attn:
15.2 Whenever notice is required by the provisions of this Agreement to
be given to the Agent, such notice shall be given in writing, addressed to the
Agent, at:
If to the Agent: Attn: Xxxxxxx Xxxxxx, CEO
Capstone Partners, L.C.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
With a Copy to: Attn:
Capstone Partners, L.C. 10.9 - 17
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15.3 Any notice instructing the Escrow Agent to distribute monies or
Securities held in Escrow must be signed by authorized agents of both the
Company and the Agent in order to be valid.
16. MISCELLANEOUS.
16.1 Benefit. This Agreement is made solely for the benefit of the Agent
and the Company, their respective officers and directors and any controlling
person referred to in Section 15 of the Act and their respective successors and
assigns, and no other person may acquire or have any night under or by virtue of
this Agreement, including, without limitation, the holders of any Securities.
The term "successor" or the term "successors and assigns" as used in this
Agreement shall not include any purchasers, as such, of any of the Securities.
16.2 Survival. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company and the Agent, or the
officers, directors or controlling persons of the Company and the Agent as set
forth in or made pursuant to this Agreement and the indemnity agreements of the
Company and the Agent shall survive and remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company or the
Agent or any such officer, director or controlling person of the Company or of
the Agent; (ii) delivery of or payment for the Securities; or (iii) the Closing
Date, and any successor of the Company or the Agent or any controlling person,
officer or director thereof, as the case may be, shall be entitled to the
benefits hereof.
16.3 Governing Law, Jurisdiction and Arbitration. The validity,
interpretation and construction of this Agreement and of each party hereof will
be governed by the laws of the State of Georgia. Any controversy or claim
arising out of or related to this Agreement or the breach thereof, shall be
settled by binding arbitration in Atlanta, Georgia in accordance with the rules
of the Judicial Arbitration & Mediation Services' Eastern Regional Office
located in Atlanta, Georgia ("JAMS"). A proceeding shall be commenced upon
written demand by Company or the Agent to the other. The arbitrator(s) shall
enter a judgment by default against any party which fails or refuses to appear
in any properly noticed arbitration proceeding. The proceeding shall be
conducted by one (1) arbitrator, unless the amount alleged to be in dispute
exceeds two hundred fifty thousand dollars ($250,000), in which case three (3)
arbitrators shall preside. The arbitrator(s) will be chosen by the parties from
a list provided by JAMS, and if they are unable to agree within ten (10) days,
JAMS shall select the arbitrator(s). The arbitrators must be experts in
securities law and financial transactions. The arbitrators shall assess costs
and expenses of the arbitration, including all attorneys' and experts' fees, as
the arbitrators believe is appropriate in light of the merits of parties'
respective positions in the issues in dispute. The award of the arbitrator(s)
shall be final and binding upon the parties and may be enforced in any court
having jurisdiction.
16.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
Capstone Partners, L.C. 10.9 - 18
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16.5 Confidential Information. All confidential financial or business
information (except publicly available or freely usable material otherwise
obtained from another source) respecting either party will be used solely by the
other party in connection with the within transactions, be revealed only to
employees or contractors of such other party who are necessary to the conduct of
such transactions, and be otherwise held in strict confidence.
16.6 Public Announcements. Neither party hereto will issue any public
announcement concerning the within transactions without the review and comment
of the other party. The Agent shall have the right to review and comment upon
any press release issued by the Company in connection with the Offering.
16.7 Finders. Company represents that it is not obligated to pay any
compensation or other fees, costs or related expenditures in cash or securities
in excess of $20,000 to any underwriter, broker, agent, finder or other
representative other than Agent. Company agrees to indemnify the Agent with
respect to any other claim for a fee in connection with the Offering. Agent
agrees to indemnify the Company with respect to any claim for a finder's fee
that arises because of Agent's agreement to pay a fee to the person or entity
making such claim.
16.8 Recitals. The recitals to this Agreement are a material part
hereof, and each recital Is incorporated into this Agreement by reference and
made a part of this Agreement.
17. ESCROW AGENT FEES.
The Company hereby agrees to pay the Escrow Agent for the opening and
maintenance of the Escrow Account, incidental expenses and all services provided
by the Escrow Agent under the Escrow Agreement, of even date herewith, by and
between the Company, the Investor and the Escrow Agent. The Company agrees to
pay the Escrow Agent reasonable fees, including fees of counsel on behalf of the
Investor for the preparation of the Equity Line Agreement and related documents,
which fees shall equal two percent (2%) of the total amount of funding provided
to the Company by the Investor under the Equity Line Agreement (collectively,
"Escrow Fees"). The Company does hereby agree to indemnify and hold the Agent
harmless as to the payment of any such Escrow Fees, in accordance with the
provisions of Section 8.1 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly caused this Placement
Agent Agreement to be executed as of the day and year first above written.
"THE COMPANY"
STARUNI CORPORATION
By:
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Xxxxx X. Xxxxxx, CEO
"THE AGENT"
CAPSTONE PARTNERS, L.C.
By:
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Xxxxxxx Xxxxxx, CEO
Capstone Partners, L.C. 10.9 - 19
Copywrite 2000
