ECOM XXXX.XXX, INC.
INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL
AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE SUCH AUTHORITIES
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF
THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED
DISCLOSURE DOCUMENTS AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS INVESTMENT AGREEMENT (this "Agreement" or "Investment Agreement")
is made as of the 13th day of May, 1999, by and between eCom xXxx.xxx,
Inc., a corporation duly organized and existing under the laws of the State
of Florida (the "Company"), and Xxxxxx Private Equity, LLC ("Investor").
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investor, and
the Investor shall purchase from the Company, from time to time as provided
herein, shares of the Company's Common Stock as part of an offering of
Common Stock by the Company to Investor, for a maximum aggregate offering
amount of Thirty Million Dollars ($30,000,000) (the "Maximum Offering
Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if
accepted by the Company, the offer and sale of the Common Stock are being
made in reliance upon the provisions of Section 4(2) promulgated under the
Act, Regulation D promulgated under the Act and/or upon such other
exemption from the registration requirements of the Act as may be available
with respect to any or all of the purchases of Common Stock to be made
hereunder.
1
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"20% Approval" shall have the meaning set forth in Section 5.26.
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section
2.3.1(a), the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.5.
"Aggregate Issued Shares" equals the aggregate number of shares of
Common Stock issued to Investor pursuant to the terms of this Agreement or
the Registration Rights Agreement as of a given date, including Put Shares
and Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in
Section 2.6.3(b).
"Agreement" shall mean this Investment Agreement.
"Automatic Termination" shall have the meaning set forth in Section
2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is
open for trading.
"Calendar Month" shall mean the period of time beginning on the
numeric day in question in a calendar month and for Calendar Months
thereafter, beginning on the earlier of (i) the same numeric day of the
next calendar month or (ii) the last day of the next calendar month. Each
Calendar Month shall end on the day immediately preceding the beginning of
the next succeeding Calendar Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.11.
"Capital Raising Limitations" shall have the meaning set forth in
Section 6.6.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
2
"Closing" shall mean one of (i) the Investment Commitment Closing and
(ii) each closing of a purchase and sale of Common Stock pursuant to
Section 2.
"Closing Bid Price"means, for any security as of any date, the last
closing bid price for such security on the O.T.C. Bulletin Board, or, if
the O.T.C. Bulletin Board is not the principal securities exchange or
trading market for such security, the last closing bid price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by such principal securities
exchange or trading market, or if the foregoing do not apply, the last
closing bid price of such security in the over-the-counter market on the
electronic bulletin board for such security, or, if no closing bid price is
reported for such security, the average of the bid prices of any market
makers for such security as reported in the "pink sheets"by the National
Quotation 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 Investor in this Offering. If
the Company and the Investor in this Offering are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
by an investment banking firm mutually acceptable to the Company and the
Investor in this offering and any fees and costs associated therewith shall
be paid by the Company.
"Commitment Evaluation Period" shall have the meaning set forth in
Section 2.7.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Commitment Warrants" shall have the meaning set forth in Section 2.7.
"Commitment Warrant Exercise Price" shall have the meaning set forth
in Section 2.7.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean eCom xXxx.xxx, Inc., a corporation duly organized
and existing under the laws of the State of Florida.
"Company Designated Maximum Put Dollar Amount" shall have the meaning
set forth in Section 2.3.1(a).
"Company Designated Minimum Put Share Price" shall have the meaning
set forth in Section 2.3.1(a).
"Company Termination" shall have the meaning set forth in Section
2.3.14.
"Conditions to Investor's Obligations" shall have the meaning as set
forth in Section 2.2.4.
"Delisting Event" shall mean any time during the term of this
Investment Agreement, that the Company's Common Stock is not quoted or
listed on, and actively trading on, the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, the American Stock Exchange,
or the New York Stock Exchange or is suspended or delisted with respect to
the trading of the shares of Common Stock on such market or exchange.
3
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section
2.6
"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Evaluation Day" shall have the meaning set forth in Section 2.3.7(b).
"Equity Securities" shall have the meaning set forth in Section 6.6.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Day" shall have the meaning set forth in Section 2.3.7(b).
"Extended Put Period" shall mean the period of time between the
Advanced Put Notice Date until the Purchase Period End Date.
"Gross Discount Amount," for each Purchase of Put Shares, shall equal
10% of the Put Dollar Amount paid to the Company by the Investor for the
Put Shares in that Purchase.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section
9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section
2.3.1 (b).
"Ineffective Period" shall mean any period of time that the
Registration Statement or any Supplemental Registration Statement (each as
defined in the Registration Rights Agreement) becomes ineffective or
unavailable for use for the sale or resale, as applicable, of any or all of
the Registrable Securities (as defined in the Registration Rights
Agreement) for any reason (or in the event the prospectus under either of
the above is not current and deliverable) during any time period required
under the Registration Rights Agreement.
"Intended Put Share Amount" shall have the meaning set forth in
Section 2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in
Section 2.2.3.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as
Exhibit B, or such other form as agreed upon by the parties, as to the
Investment Commitment Closing.
4
"Investment Date" shall mean the date of the Investment Commitment
Closing.
"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.18, as
set forth in Exhibit N.
"Late Payment Amount" shall have the meaning set forth in Section
2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction"shall mean and shall be deemed to have occurred at
such time upon any of the following events:
(i) a consolidation, merger or other business combination or
event or transaction following which the holders of Common Stock of the
Company immediately preceding such consolidation, merger, combination or
event either (i) no longer hold a majority of the shares of Common Stock of
the Company or (ii) no longer have the ability to elect the board of
directors of the Company (a "Change of Control"); provided, however, that
if the other entity involved in such consolidation, merger, combination or
event is a publicly traded company with "Substantially Similar Trading
Characteristics"(as defined below) as the Company and the holders of Common
Stock are to receive solely Common Stock or no consideration (if the
Company is the surviving entity) or solely common stock of such other
entity (if such other entity is the surviving entity), such transaction
shall not be deemed to be a Major Transaction (provided the surviving
entity, if other than the Company, shall have agreed to assume all
obligations of the Company under this Agreement and the Registration Rights
Agreement). For purposes hereof, an entity shall have Substantially
Similar Trading Characteristics as the Company if the average daily dollar
trading volume of the common stock of such entity is equal to or in excess
of $200,000 for the 90th through the 31st day prior to the public
announcement of such transaction;
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to the holders of
outstanding shares of Common Stock, such that following such purchase,
tender or exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the lowest intra-day trade price for the
Common Stock on the Principal Market for the six (6) Business Days
immediately preceding the date of the applicable Purchase Notice (the "6
Day Low Trade Price"), provided that, if such 6 Day Low Trade Price is
represented by a trade of less than 10,000 shares and is less than 90% of
the next higher trade price on that same Business Day, then one (but no
more than one per Market Price calculation) such trade shall be discarded
and shall not be considered in the calculation of the Market Price.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (i) the Company
Designated Maximum Put Dollar Amount, if any, specified by the Company in a
Put Notice, and (ii) $10 million.
5
"Maximum Offering Amount" shall mean Thirty Million Dollars
($30,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11.
"NASD" shall have the meaning set forth in Section 6.10.
"NYSE" shall have the meaning set forth in Section 6.10.
"Numeric Day" shall mean the numerical day of the month of the
Investment Date or the last day of the calendar month in question,
whichever is less.
"Offering" shall mean the Company's offering of common stock and
warrants issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer
of the Company, to the effect that the representations and warranties of
the Company in this Agreement required to be true for the applicable
Closing are true and correct in all material respects and all of the
conditions and limitations set forth in this Agreement for the applicable
Closing are satisfied.
"Opinion of Counsel" shall mean, as applicable, the Investment
Commitment Opinion of Counsel, the Put Opinion of Counsel, the Registration
Opinion and the Purchase Warrant Opinion of Counsel.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, 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.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7(a).
"Purchase Notice" shall have the meaning set forth in Section
2.3.7(c), in the form attached as Exhibit P.
"Purchase Notice Date" shall have the meaning set forth in Section
2.3.7(c).
"Purchase Period" shall have the meaning set forth in Section
2.3.7(b).
"Purchase Period End Date" shall mean the last Business Day of any
Purchase Period.
"Purchase Warrant" shall have the meaning set forth in Section 2.4.2.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Purchase Warrant Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as
Exhibit O, or such other form as agreed upon by the parties, as to the
issuance of Purchase Warrants to the Investor.
6
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice Confirmation" shall have the meaning set
forth in Section 2.3.13(c), the form of which is attached hereto as Exhibit
S.
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.13(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.13(a), the form of which is attached hereto as Exhibit Q.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any
Put Notice for which the Company intends to exercise a Put under Section
2.3.1, unless the Put Date is postponed pursuant to the terms hereof, in
which case the "Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share
Amount by the Put Share Price with respect to such Put Shares, subject to
the limitations herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the
form of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's
independent counsel, in the form attached as Exhibit I, or such other form
as agreed upon by the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section
2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section
2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by
the Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a).
"Registration Opinion Deadline" shall have the meaning set forth in
Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration
rights agreement entered into by the Company and Investor on even date
7
herewith, in the form attached hereto as Exhibit A, or such other form as
agreed upon by the parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall mean Regulation D promulgated under the
Securities Act of 1933, as amended.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section
2.3.5.
"Risk Factors" shall have the meaning set forth in Section 3.2.4,
attached hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in Section
5, and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the
Common Stock of the Company, the Warrants and the Warrant Shares issuable
pursuant to this Investment Agreement.
"Semi-Annual Non-Usage Fee" shall have the meaning set forth in
Section 2.7.
"Share Authorization Increase Approval" shall have the meaning set
forth in Section 5.26.
"Six Month Anniversary" shall mean the date that is the same Numeric
Day of the sixth (6th) calendar month after the Investment Date, and the
date that is the same Numeric Day of each sixth (6th) calendar month
thereafter, provided that if such date is not a Business Day, the next
Business Day thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.12.
"Supplemental Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period
of time beginning on the date of this Agreement and ending on the
Termination Date.
"Termination Date" shall mean the earlier of (i) the date that is
three (3) years after the Effective Date, or (ii) the date that is thirty
(30) Business Days after the later of (a) the Put Closing Date on which the
sum of the aggregate Put Share Price for all Put Shares equal the Maximum
Offering Amount, (b) the date that the Company has delivered a Termination
Notice to the Investor, (c) the date of an Automatic Termination, and (d)
the date that all of the Warrants have been exercised.
"Termination Fee" shall have the meaning set forth in Section 2.7.
8
"Termination Notice" shall have the meaning as set forth in Section
2.3.14.
"Third Party Report" shall have the meaning set forth in Section
3.2.4.
"Transaction Documents" shall have the meaning set forth in Section 9.
"Transfer Agent Instructions" shall mean the Company's instructions to
its transfer agent, substantially in the form attached as Exhibit T, or
such other form as agreed upon by the parties.
"Trigger Price" shall have the meaning set forth in Section 2.3.7(b).
"Truncated Purchase Period" shall have the meaning set forth in
Section 2.3.7(b).
"Truncated Put Share Amount" shall have the meaning set forth in
Section 2.3.13(b).
"Unlegended Share Certificates" shall mean a certificate or
certificates, or electronically delivered shares, as appropriate (in
denominations as instructed by Investor) representing the shares of Common
Stock to which the Investor is then entitled to receive, registered in the
name of Investor or its nominee (as instructed by Investor), not containing
a restrictive legend and not subject to any stop transfer order, including
but not limited to the Put Shares for the applicable Put and Warrant
Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in
Section 3.2.4, attached hereto as Exhibit L.
"Warrant Shares" shall mean the Common Stock issuable upon exercise of
the Warrants.
"Warrants" shall mean the Commitment Warrants and the Purchase
Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the satisfaction
of the conditions to closing set forth in Sections 2.2 and 2.3 below,
Investor hereby agrees to purchase such amounts of Common Stock and
accompanying Warrants as the Company may, in its sole and absolute
discretion, from time to time elect to issue and sell to Investor according
to one or more Puts pursuant to Section 2.3 below.
2.2 Investment Commitment.
2.2.1 [Intentionally Left Blank].
2.2.2 [Intentionally Left Blank].
2.2.3 Investment Commitment Closing. The closing of this
Agreement (the "Investment Commitment Closing") shall be deemed to occur
when this Agreement and the Registration Rights Agreement have been
executed by both Investor and the Company, the Transfer Agent Instructions
9
have been executed by both the Company and the Transfer Agent, and the
other Conditions to Investor's Obligations set forth in Section 2.2.4 below
have been met.
2.2.4 Conditions to Investor's Obligations. As a
prerequisite to the Investment Commitment Closing and the Investor's
obligations hereunder, all of the following (the "Conditions to Investor's
Obligations") shall have been satisfied prior to or concurrently with the
Company's execution and delivery of this Agreement:
(a) the following documents shall have been
delivered to the Investor: (i) the Registration Rights Agreement, (executed
by the Company and Investor), (ii) the Investment Commitment Opinion of
Counsel (signed by the Company's counsel), (iii) the Transfer Agent
Instructions (executed by the Company and the Transfer Agent), and (iv) a
Secretary's Certificate as to (A) the resolutions of the Company's board of
directors authorizing this transaction, (B) the Company's Certificate of
Incorporation, and (C) the Company's Bylaws;
(b) this Investment Agreement, accepted by the
Company, shall have been received by the Investor;
(c) [Intentionally Left Blank];
(d) the Company's Common Stock shall be quoted for
trading and actually trading on the O.T.C. Bulletin Board, the Nasdaq Small
Cap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange;
(e) other than continuing losses described in the
Risk Factors set forth in the Disclosure Documents (provided for in Section
3.2.4), as of the Closing there have been no material adverse changes in
the Company's business prospects or financial condition since the date of
the last balance sheet included in the Disclosure Documents, including but
not limited to incurring material liabilities; and
(f) the representations and warranties of the
Company in this Agreement shall be true and correct in all material
respects and the conditions to Investor's obligations set forth in this
Section 2.2.4 shall have been satisfied as of such Closing; and the Company
shall deliver an Officer's Certificate, signed by an officer of the
Company, to such effect to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the
Individual Put Limit, the Maximum Offering Amount and the Cap Amount (if
applicable), and the other conditions and limitations set forth in this
Agreement, at any time beginning on the date on which the Registration
Statement is declared effective by the SEC (the "Effective Date"), the
Company may, in its sole and absolute discretion, elect to exercise one or
more Puts according to the following procedure, provided that each
subsequent Put Date after the first Put Date shall be no sooner than twenty
(20) Business Days following the preceding Put Date:
(a) Delivery of Advance Put Notice. At least ten
(10) Business Days but not more than twenty (20) Business Days prior to any
intended Put Date (unless otherwise agreed in writing by the Investor), the
Company shall deliver advance written notice (the "Advance Put Notice," the
10
form of which is attached hereto as Exhibit E, the date of such Advance Put
Notice being the "Advance Put Notice Date") to Investor stating the Put
Date for which the Company shall, subject to the limitations and
restrictions contained herein, exercise a Put and stating the number of
shares of Common Stock (subject to the Individual Put Limit and the Maximum
Put Dollar Amount) which the Company intends to sell to the Investor during
the Purchase Period (the "Intended Put Share Amount").
The Company may, at its option, also designate in an Advance Put
Notice (i) a maximum dollar amount of Common Stock, not to exceed
$10,000,000, which it shall sell to Investor during the Put (the "Company
Designated Maximum Put Dollar Amount") and/or (ii) a minimum purchase price
per Put Share at which the Investor may purchase Shares pursuant to such
Put Notice during the related Purchase Period (a "Company Designated
Minimum Put Share Price"). The Company Designated Minimum Put Share Price,
if applicable, shall be no greater than 80% of the Closing Bid Price of the
Company's common stock on the Advance Put Notice Date.
Notwithstanding the above, if at the time of delivery of an Advance
Put Notice, more than two (2) Calendar Months have passed since the
previous Put Date, such Advance Put Notice shall provide at least twenty
(20) Business Days notice of the intended Put Date, unless waived in
writing by the Investor. In order to effect delivery of the Advance Put
Notice, the Company shall (i) send the Advance Put Notice by facsimile on
such date so that such notice is received by the Investor by 6:00 p.m., New
York, NY time, and (ii) surrender such notice on such date to a courier for
overnight delivery to the Investor (or two (2) day delivery in the case of
an Investor residing outside of the U.S.). Upon receipt by the Investor of
a facsimile copy of the Advance Put Notice, the Investor shall, within two
(2) Business Days, send, via facsimile, a confirmation of receipt (the
"Advance Put Notice Confirmation," the form of which is attached hereto as
Exhibit F) of the Advance Put Notice to the Company specifying that the
Advance Put Notice has been received and affirming the intended Put Date
and the Intended Put Share Amount.
(b) Put Share Amount. The "Put Share Amount" is the
number of shares of Common Stock that the Investor shall be obligated to
purchase in a given Put, and shall equal the lesser of (i) the Intended Put
Share Amount, and (ii) the Individual Put Limit. The "Individual Put
Limit" shall equal the lesser of (i) 15% of the sum of the aggregate daily
reported trading volumes in the outstanding Common Stock on the Company's
Principal Market, excluding any block trades of 20,000 or more shares of
Common Stock, for all Evaluation Days (as defined below) in the Purchase
Period, (ii) the number of Put Shares which, when multiplied by their
respective Put Share Prices, equals the Maximum Put Dollar Amount, and
(iii) 9.9% of the total amount of the Company's Common Stock that would be
outstanding upon completion of the Put.
(c) Put Share Price. The purchase price for the Put
Shares (the "Put Share Price") shall equal the lesser of (i) the Market
Price for such Put, minus $.25, or (ii) 92% of the Market Price for such
Put, but shall in no event be less than the Company Designated Minimum Put
Share Price for such Put, if applicable.
(d) Delivery of Put Notice. After delivery of an
Advance Put Notice, on the Put Date specified in the Advance Put Notice,
the Company shall deliver written notice (the "Put Notice," the form of
which is attached hereto as Exhibit G) to Investor stating (i) the Put
Date, (ii) the Intended Put Share Amount as specified in the Advance Put
11
Notice (such exercise a "Put"), (iii) the Company Designated Maximum Put
Dollar Amount (if applicable), and (iv) the Company Designated Minimum Put
Share Price (if applicable). In order to effect delivery of the Put
Notice, the Company shall (i) send the Put Notice by facsimile on the Put
Date so that such notice is received by the Investor by 6:00 p.m., New
York, NY time, and (ii) surrender such notice on the Put Date to a courier
for overnight delivery to the Investor (or two (2) day delivery in the case
of an Investor residing outside of the U.S.). Upon receipt by the Investor
of a facsimile copy of the Put Notice, the Investor shall, within two (2)
Business Days, send, via facsimile, a confirmation of receipt (the "Put
Notice Confirmation," the form of which is attached hereto as Exhibit H) of
the Put Notice to Company specifying that the Put Notice has been received
and affirming the Put Date and the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On or before
the Put Date for such Put, the Company shall deliver the Required Put
Documents (as defined in Section 2.3.5 below) to the Investor (or to an
agent of Investor, if Investor so directs). Unless otherwise specified by
the Investor, the Put Shares of Common Stock shall be transmitted
electronically pursuant to such electronic delivery system as the Investor
shall request; otherwise delivery shall be by physical certificates. If
the Company has not delivered all of the Required Put Documents to the
Investor on or before the Put Date, the Put shall be automatically
cancelled, unless the Investor agrees to delay the Put Date by up to three
(3) Business Days, in which case the Purchase Period begins on the Business
Day following such new Put Date. If the Company has not delivered all of
the Required Put Documents to the Investor on or before the Put Date (or
new Put Date, if applicable), and the Investor has not agreed in writing to
delay the Put Date, the Put is automatically canceled (an "Impermissible
Put Cancellation") and, unless the Put was otherwise canceled in accordance
with the terms of Section 2.3.13, the Company shall pay the Investor $5,000
for its reasonable due diligence expenses incurred in preparation for the
canceled Put and the Company may deliver an Advance Put Notice for the
subsequent Put no sooner than ten (10) Business Days after the date that
such Put was canceled, unless otherwise agreed by the Investor.
2.3.2 Termination of Right to Put. The Company's right to
require the Investor to purchase any subsequent Put Shares shall terminate
permanently (each, an "Automatic Termination"), unless waived in writing by
the Investor, upon the occurrence of any of the following:
(a) the Company shall not exercise a Put or any Put
thereafter if, at any time, either the Company or any director or executive
officer of the Company has engaged in a transaction or conduct related to
the Company that gives rise to (i) a Securities and Exchange Commission
enforcement action, or (ii) a civil judgment or criminal conviction for
fraud or misrepresentation, or for any other offense that, if prosecuted
criminally, would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or any Put
thereafter, on any date after a cumulative time period or series of time
periods, including both Ineffective Periods and Delisting Events, that
lasts for an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put
thereafter if at any time the Company has filed for and/or is subject to
any bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors instituted by or against the Company or any subsidiary of
12
the Company; provided that in the event that an involuntary bankruptcy
petition is filed against the Company, the Company shall have sixty (60)
days to obtain dismissal of such petition before such Put prohibition shall
initiate;
(d) the Company shall not exercise a Put after the
sooner of (i) the date that is three (3) years after the Effective Date, or
(ii) the Put Closing Date on which the aggregate of the Put Dollar Amounts
for all Puts equal the Maximum Offering Amount; and
(e) the Company shall not exercise a Put after the
Company has breached any covenant in Section 2.7, Section 6, or Section 9
hereof.
2.3.3 Put Limitations. The Company's right to exercise a
Put shall be limited as follows, unless waived in writing by the Investor:
(a) [Intentionally Left Blank].
(b) notwithstanding the amount of any Put, the
Investor shall not be obligated to purchase any additional Put Shares once
the aggregate Put Dollar Amount paid by Investor equals the Maximum
Offering Amount;
(c) the Investor shall not be obligated to acquire
and pay for the Put Shares with respect to any Put for which the Company
has announced a subdivision or combination, including a reverse split, of
its Common Stock or has subdivided or combined its Common Stock during the
Extended Put Period;
(d) the Investor shall not be obligated to acquire
and pay for the Put Shares with respect to any Put for which the Company
has paid a dividend of its Common Stock or has made any other distribution
of its Common Stock during the Extended Put Period;
(e) the Investor shall not be obligated to acquire
and pay for the Put Shares with respect to any Put for which the Company
has made, during the Extended Put Period, a distribution of all or any
portion of its assets or evidences of indebtedness to the holders of its
Common Stock;
(f) the Investor shall not be obligated to acquire
and pay for the Put Shares with respect to any Put for which a Major
Transaction has occurred during the Extended Put Period;
2.3.4 Conditions Precedent to the Right of the Company to
Deliver an Advance Put Notice or a Put Notice and the Obligation of the
Investor to Purchase Put Shares. The right of the Company to deliver an
Advance Put Notice or a Put Notice and the obligation of the Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is
subject to the satisfaction, on (i) the date of delivery of such Advance
Put Notice or Put Notice and (ii) the applicable Put Closing Date, of each
of the following conditions, unless waived in writing by the Investor:
(a) the Company's Common Stock shall be quoted for
and actively trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap
Market, the Nasdaq National Market or the New York Stock Exchange and the
Put Shares shall be so quoted, and to the Company's knowledge there is no
13
notice of any suspension or delisting with respect to the trading of the
shares of Common Stock on such market or exchange;
(b) the Company shall have satisfied any and all
obligations pursuant to the Registration Rights Agreement, including, but
not limited to, the filing of the Registration Statement with the SEC with
respect to the resale of all Registrable Securities and the requirement
that the Registration Statement shall have been declared effective by the
SEC for the resale of all Registrable Securities and the Company shall have
satisfied and shall be in compliance with any and all obligations pursuant
to this Agreement and the Warrants;
(c) [Intentionally Left Blank].
(d) the representations and warranties of the Company
are true and correct in all material respects as if made on such date and
the conditions to Investor's obligations set forth in this Section 2.3.4
are satisfied as of such Closing, and the Company shall deliver a
certificate, signed by an officer of the Company, to such effect to the
Investor;
(e) the Company shall have reserved for issuance a
sufficient number of Common Shares for the purpose of enabling the Company
to satisfy any obligation to issue Common Shares pursuant to any Put and to
effect exercise of the Warrants;
(f) the Registration Statement is not subject to an
Ineffective Period as defined in the Registration Rights Agreement, the
prospectus included therein is current and deliverable, and to the
Company's knowledge there is no notice of any investigation or inquiry
concerning any stop order with respect to the Registration Statement; and
(g) if the Aggregate Issued Shares after the Closing
of the Put would exceed the Cap Amount, the Company shall have obtained the
Stockholder 20% Approval as specified in Section 6.12.
2.3.5 Documents Required to be Delivered on the Put Date as
Conditions to Closing of any Put. The Closing of any Put and Investor's
obligations hereunder shall additionally be conditioned upon the delivery
to the Investor of each of the following (the "Required Put Documents") on
or before the applicable Put Date, unless waived or extended in writing by
the Investor:
(a) a number of Unlegended Share Certificates (or
electronically delivered shares, as appropriate) equal to the Intended Put
Share Amount, in denominations of not more than 50,000 shares per
certificate;
(b) the following documents: Put Opinion of Counsel,
Officer's Certificate, Put Notice, any required Registration Opinion, and
any report or disclosure required under Section 2.3.6 or Section 2.6;
(c) current Risk Factors; and
(d) all documents, instruments and other writings
required to be delivered on or before the Put Date pursuant to any
provision of this Agreement in order to implement and effect the
transactions contemplated herein.
14
2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be delivered to
the Investor, (i) whenever required by Section 2.3.6(b) or by Section
2.6.3, and (ii) on the date that is three (3) Business Days prior to each
Put Date (the "Registration Opinion Deadline"), an opinion of the Company's
independent counsel, in substantially the form of Exhibit R (the
"Registration Opinion"), addressed to the Investor stating, inter alia,
that no facts ("Material Facts") have come to such counsel's attention that
have caused it to believe that the Registration Statement is subject to an
Ineffective Period or to believe that the Registration Statement, any
Supplemental Registration Statement (as each may be amended, if
applicable), and any related prospectuses, contains an untrue statement of
material fact or omits a material fact required to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading. If a Registration Opinion cannot be delivered by the
Company's independent counsel to the Investor on the Registration Opinion
Deadline due to the existence of Material Facts or an Ineffective Period,
the Company shall promptly notify the Investor and as promptly as possible
amend each of the Registration Statement and any Supplemental Registration
Statement, as applicable, and any related prospectus or cause such
Ineffective Period to terminate, as the case may be, and deliver such
Registration Opinion and updated prospectus as soon as possible thereafter.
If at any time after a Put Notice shall have been delivered to Investor but
before the related Purchase Period End Date, the Company acquires knowledge
of such Material Facts or any Ineffective Period occurs, the Company shall
promptly notify the Investor and shall deliver a Put Cancellation Notice to
the Investor pursuant to Section 2.3.13 by facsimile and overnight courier
by the end of that Business Day.
(b) (i) the Company shall engage its independent
auditors to perform the procedures in accordance with the provisions of
Statement on Auditing Standards No. 71, as amended, as agreed to by the
parties hereto, and reports thereon (the "Bring Down Cold Comfort Letters")
as shall have been reasonably requested by the Investor with respect to
certain financial information contained in the Registration Statement and
shall have delivered to the Investor such a report addressed to the
Investor, on the date that is three (3) Business Days prior to each Put
Date.
(ii) in the event that the Investor shall have
requested delivery of an "Agreed Upon Procedures Report" pursuant to
Section 2.6.3, the Company shall engage its independent auditors to perform
certain agreed upon procedures and report thereon as shall have been
reasonably requested by the Investor with respect to certain financial
information of the Company and the Company shall deliver to the Investor a
copy of such report addressed to the Investor. In the event that the
report required by this Section 2.3.6(b) cannot be delivered by the
Company's independent auditors, the Company shall, if necessary, promptly
revise the Registration Statement and the Company shall not deliver a Put
Notice until such report is delivered.
2.3.7 Mechanics of Purchase of Put Shares.
(a) Investor's Obligation and Right to Purchase
Shares. Subject to the conditions set forth in this Agreement, following
the Investor's receipt of a validly delivered Put Notice, the Investor
shall be required to purchase (each a "Purchase") from the Company during
15
the related Purchase Period a number of Put Shares equal to the Put Share
Amount, in the manner described below.
(b) Purchase Period. For purposes hereof, the
"Purchase Period" shall mean, unless otherwise shortened under the terms of
this Agreement, the period beginning on the Business Day immediately
following the Put Date and ending on and including the date which is 20
Business Days after such Put Date; provided that, if a Put Cancellation
Notice has been delivered to the Investor after the Put Date, the Purchase
Period for such Put shall end at 6:00 p.m., New York City time, on the Put
Cancellation Date (a "Truncated Purchase Period").
For purposes of this Agreement:
"Trigger Price"for any Purchase Period shall mean the greater of
(i) the Company Designated Minimum Put Share Price, plus $.25, or (ii) the
Company Designated Minimum Put Share Price divided by .92.
An "Evaluation Day" shall mean each Business Day during a
Purchase Period where the lowest intra-day trading price of the Common
Stock is greater than or equal to the Trigger Price.
An "Excluded Day" shall mean each Business Day where the lowest
intra-day trading price of the Common Stock is less than the Trigger Price.
(c) Delivery of Purchase Notices. To effect a
purchase of Put Shares, the Investor shall deliver one or more written
notices to the Company (each a "Purchase Notice") at any time and from time
to time during the Purchase Period. Each Purchase Notice shall set forth
(i) the number of Put Shares being purchased pursuant to such Purchase
Notice, (ii) the Put Share Price per share, and (iii) the aggregate Put
Dollar Amount for the Put Shares being purchased by the Investor pursuant
to such Purchase Notice, as of the date of delivery of such Purchase
Notice. The "Purchase Notice Date"with respect to a Purchase Notice shall
be the date on which the Investor delivers a copy of such Purchase Notice
to the Company by facsimile transmission prior to 11:59 p.m. Eastern Time
on such date.
If prior to the last day of a Purchase Period the Investor shall not
have delivered Purchase Notices covering the purchase of an aggregate
number of Put Shares equal to at least the Put Share Amount with respect to
such Purchase Period, then the Investor shall be deemed to have delivered a
Purchase Notice on the last day of such Purchase Period covering the
purchase of a number of Put Shares equal to the difference of (x) the Put
Share Amount with respect to such Purchase Period minus (y) the aggregate
number of Put Shares covered by Purchase Notices already delivered by the
Investor to the Company during such Purchase Period.
2.3.8 Mechanics of Put Closing. Each of the Company and the
Investor shall deliver all documents, instruments and writings required to
be delivered by either of them pursuant to this Agreement at or prior to
each Closing. Subject to such delivery and the satisfaction of the
conditions set forth in Sections 2.3.4 and 2.3.5, the closing of the
purchase by the Investor of Shares shall occur by 5:00 PM, New York City
Time, on the date which is five (5) Business Days following the applicable
Purchase Notice Date (or such other time or later date as is mutually
agreed to by the Company and the Investor) (the "Payment Due Date") at the
offices of Investor. On or before each Payment Due Date, the Investor
shall deliver to the Company, in the manner specified in Section 8 below,
16
the Put Dollar Amount to be paid for such Put Shares, determined as
aforesaid. The closing (each a "Put Closing") for each Put shall occur on
the date that both (i) the Company has delivered to the Investor all
Required Put Documents, and (ii) the Investor has delivered to the Company
such Put Dollar Amount and any Late Payment Amount, if applicable (each a
"Put Closing Date").
If the Investor does not deliver to the Company the Put Dollar Amount
for such Put Closing on or before the Payment Due Date, then the Investor
shall pay to the Company, in addition to the Put Dollar Amount, an amount
(the "Late Payment Amount") at a rate of X% per month, accruing daily,
multiplied by such Put Dollar Amount, where "X" equals one percent (1%) for
the first month following the date in question, and increases by an
additional one percent (1%) for each month that passes after the date in
question, up to a maximum of five percent (5%) per month; provided,
however, that in no event shall the amount of interest that shall become
due and payable hereunder exceed the maximum amount permissible under
applicable law.
2.3.9 [Intentionally Left Blank].
2.3.10 Limitation on Short Sales. The Investor and its
Affiliates shall not engage in short sales of the Company's Common Stock;
provided, however, that the Investor may enter into any short sale or other
hedging or similar arrangement it deems appropriate with respect to Put
Shares after it receives a Put Notice with respect to such Put Shares so
long as such sales or arrangements do not involve more than the number of
such Put Shares specified in the Put Notice.
2.3.11 Cap Amount. If the Company becomes listed on the
Nasdaq Small Cap Market or the Nasdaq National Market, then, unless the
Company has obtained Stockholder 20% Approval as set forth in Section 6.12
or unless otherwise permitted by Nasdaq, in no event shall the Aggregate
Issued Shares exceed the maximum number of shares of Common Stock (the "Cap
Amount") that the Company can, without stockholder approval, so issue
pursuant to Nasdaq Rule 4460(i)(1)(d)(ii) (or any other applicable Nasdaq
Rules or any successor rule) (the "Nasdaq 20% Rule").
2.3.12 [Intentionally Left Blank]
2.3.13 Put Cancellation.
(a) Mechanics of Put Cancellation. If at any time
during a Purchase Period the Company discovers the existence of Material
Facts or any Ineffective Period or Delisting Event occurs, the Company
shall cancel the Put (a "Put Cancellation"), by delivering written notice
to the Investor (the "Put Cancellation Notice"), attached as Exhibit Q, by
facsimile and overnight courier. The "Put Cancellation Date" shall be the
date that the Put Cancellation Notice is first received by the Investor, if
such notice is received by the Investor by 6:00 p.m., New York, NY time,
and shall be the following date, if such notice is received by the Investor
after 6:00 p.m., New York, NY time.
(b) Effect of Put Cancellation. Anytime a Put
Cancellation Notice is delivered to Investor after the Put Date, the Put,
at the Investor's option, shall remain effective with respect to the number
of Put Shares (the "Truncated Put Share Amount"), if any, that were
included in Purchase Notices delivered by the Investor on or before 11:59
PM, New York City time, on the Put Cancellation Date.
17
(c) Put Cancellation Notice Confirmation. Upon
receipt by the Investor of a facsimile copy of the Put Cancellation Notice,
the Investor shall promptly send, via facsimile, a confirmation of receipt
(the "Put Cancellation Notice Confirmation," a form of which is attached as
Exhibit S) of the Put Cancellation Notice to the Company specifying that
the Put Cancellation Notice has been received and affirming the Put
Cancellation Date.
2.3.14 Investment Agreement Cancellation. The Company may
terminate (a "Company Termination") its right to initiate future Puts by
providing written notice ("Termination Notice") to the Investor, by
facsimile and overnight courier, at any time other than during an Extended
Put Period, provided that such termination shall have no effect on the
parties' other rights and obligations under this Agreement, the
Registration Rights Agreement or the Warrants. Notwithstanding the above,
any cancellation occurring during an Extended Put Period is governed by
Section 2.3.13.
2.3.15 Return of Excess Common Shares. In the event that
the number of Shares purchased by the Investor pursuant to its obligations
hereunder is less than the Intended Put Share Amount, the Investor shall
promptly return to the Company any shares of Common Stock in the Investor's
possession that are not being purchased by the Investor.
2.4 Warrants.
2.4.1 [Intentionally Omitted].
2.4.2 Purchase Warrants. Within five (5) Business Days of
the end of each Purchase Period, the Company shall issue and deliver to the
Investor a warrant ("Purchase Warrant"), in the form attached hereto as
Exhibit D, or such other form as agreed upon by the parties, to purchase a
number of shares of Common Stock equal to 8% of the number of Put Shares
issued to Investor in that Put. Each Purchase Warrant shall be
exerciseable at a price (the "Purchase Warrant Exercise Price") which shall
initially equal 110% of the Market Price on the Purchase Period End Date,
and shall have semi-annual reset provisions. Each Purchase Warrant shall
be immediately exercisable at the Purchase Warrant Exercise Price, and
shall have a term beginning on the date of issuance and ending on the date
that is five (5) years thereafter. The Warrant Shares shall be registered
for resale pursuant to the Registration Rights Agreement. Concurrently
with the issuance and delivery of the Purchase Warrant to the Investor, the
Company shall deliver to the Investor a Purchase Warrant Opinion of Counsel
(signed by the Company's independent counsel).
2.5 [Intentionally Left Blank].
2.6 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"),
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 Common Stock
on behalf of the Investor pursuant to the Registration Statement, any
Supplemental Registration Statement, or amendments or supplements 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
18
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.
2.6.1 Treatment of Nonpublic Information. The Company
shall not disclose nonpublic information to the Investor or to its advisors
or representatives unless prior to disclosure of such information the
Company identifies such information as being nonpublic information and
provides the Investor and such advisors and representatives with the
opportunity to accept or refuse to accept such nonpublic information for
review. The Company may, as a condition to disclosing any nonpublic
information hereunder, require the Investor and its advisors and
representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from
trading in Common Stock during such period of time as they are in
possession of nonpublic information) in form reasonably satisfactory to the
Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate nonpublic 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 nonpublic information
(whether or not requested of the Company specifically or generally during
the course of due diligence by and 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 2.6 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 nonpublic information in the course of conducting due
diligence in accordance with the terms of this Agreement; provided,
however, that in no event shall the Investor's advisors or representatives
disclose to the Investor the nature of the specific event or circumstances
constituting any nonpublic information discovered by such advisors or
representatives in the course of their due diligence without the written
consent of the Investor prior to disclosure of such information.
2.6.2 Disclosure of Misstatements and Omissions. The
Investor's advisors or representatives shall make complete disclosure to
the Investor's counsel of all events or circumstances constituting
nonpublic information discovered by such advisors or representatives in the
course of their due diligence upon which such advisors or representatives
form the opinion 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
19
therein, in the light of the circumstances in which they were made, not
misleading. Upon receipt of such disclosure, the Investor's counsel shall
consult with the Company's independent counsel in order to address the
concern raised as to the existence of a material misstatement or omission
and to discuss appropriate disclosure with respect thereto; provided,
however, that such consultation shall not constitute the advice of the
Company's independent counsel to the Investor as to the accuracy of the
Registration Statement and related Prospectus.
2.6.3 Procedure if Material Facts are Reasonably Believed
to be Untrue or are Omitted. In the event after such consultation the
Investor or the Investor's counsel reasonably believes that the
Registration Statement contains an untrue statement or 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,
(a) the Company shall file with the SEC an amendment
to the Registration Statement responsive to such alleged untrue statement
or omission and provide the Investor, as promptly as practicable, with
copies of the Registration Statement and related Prospectus, as so amended,
or
(b) if the Company disputes the existence of any such
material misstatement or omission, (i) the Company's independent counsel
shall provide the Investor's counsel with a Registration Opinion and (ii)
in the event the dispute relates to the adequacy of financial disclosure
and the Investor shall reasonably request, the Company's independent
auditors shall provide to the Company a letter ("Agreed Upon Procedures
Report") outlining the performance of such "agreed upon procedures"as shall
be reasonably requested by the Investor and the Company shall provide the
Investor with a copy of such letter.
2.7 Commitment Payments. In partial consideration hereof,
following the execution of the Letter of Agreement dated on or about April
19, 1999 between the Company and the Investor, the Company issued and
delivered to Subscriber or its designated assignees, warrants (the
"Commitment Warrants") in the form attached hereto as Exhibit U, or such
other form as agreed upon by the parties, to purchase 490,000 shares of
Common Stock. The Commitment Warrants shall be exerciseable at a price (the
"Commitment Warrant Exercise Price") which shall initially equal the
average Closing Bid Price for the five (5) trading days immediately
preceding April 19, 1999 ("Initial Exercise Price"), and shall have semi-
annual reset provisions. Each Commitment Warrant shall be immediately
exercisable at the Commitment Warrant Exercise Price, and shall have a term
beginning on the date of issuance and ending on date that is five (5) years
thereafter. The Warrant Shares shall be registered for resale pursuant to
the Registration Rights Agreement. Concurrently with the issuance and
delivery of the Commitment Warrant to the Subscriber, the Company shall
deliver to the Subscriber a Commitment Warrant Opinion of Counsel (signed
by the Company's independent counsel).
On the last Business Day of each six (6) Calendar Month period
following the Effective Date (each such period a "Commitment Evaluation
Period"), if the Company has not Put at least $1,000,000 in aggregate Put
Dollar Amount during that Commitment Evaluation Period, the Company, in
consideration of Investor's commitment costs, including, but not limited
to, due diligence expenses, shall pay to the Investor an amount (the "Semi-
Annual Non-Usage Fee ") equal to the difference of (i) $100,000, minus (ii)
20
10% of the aggregate Put Dollar Amount of the Put Shares put to Investor
during that Commitment Evaluation Period. In the event that the Company
delivers a Termination Notice to the Investor or Automatic Termination
occurs, the Company shall pay to the Investor (the "Termination Fee") the
greater of (i) the Semi-Annual Non-Usage Fee for the applicable Commitment
Evaluation Period, or (ii) the difference of (x) $200,000, minus (y) 10% of
the aggregate Put Dollar Amount of the Put Shares put to Investor during
all Puts to date, and the Company shall not be required to pay the Semi-
Annual Non-Usage Fee thereafter.
Each Semi Annual Non-Usage Fee or Termination Fee is payable within
five (5) business days of the date it accrued, in cash or in registered,
unlegended, freely tradable Common Stock of the Company. Where such
payment is made in shares of Common Stock, each share of Common Stock shall
be valued at the lesser of (i) the average Closing Bid Price for the five
(5) Business Days preceding the date that such Semi-Annual Non-Usage Fee is
due, or (ii) the average Closing Bid Price for the five (5) Business Days
preceding the date that such shares are delivered to Investor. The Company
shall not be required to deliver any payments to Investor under this
subsection until Investor has paid all Put Dollar Amounts that are then
due.
3. Representations, Warranties and Covenants of Investor. Investor
hereby represents and warrants to and agrees with the Company as follows:
3.1 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has
checked the applicable box set forth in Section 12 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Investor or Investor's
professional advisor has been granted the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the terms and conditions of this
Offering, the Company and its business and prospects, and to obtain any
additional information which Investor or Investor's professional advisor
deems necessary to verify the accuracy and completeness of the information
received.
3.2.2 Reliance on Own Advisors. Investor has relied
completely on the advice of, or has consulted with, Investor's own personal
tax, investment, legal or other advisors and has not relied on the Company
or any of its affiliates, officers, directors, attorneys, accountants or
any affiliates of any thereof and each other person, if any, who controls
any of the foregoing, within the meaning of Section 15 of the Act for any
tax or legal advice (other than reliance on information in the Disclosure
Documents as defined in Section 3.2.4 below and on the Opinion of Counsel).
The foregoing, however, does not limit or modify Investor's right to rely
upon covenants, representations and warranties of the Company in this
Agreement.
3.2.3 Capability to Evaluate. Investor has such knowledge
and experience in financial and business matters so as to enable such
Investor to utilize the information made available to it in connection with
the Offering in order to evaluate the merits and risks of the prospective
investment, which are substantial, including without limitation those set
forth in the Disclosure Documents (as defined in Section 3.2.4 below).
21
3.2.4 Disclosure Documents. Investor, in making Investor's
investment decision to subscribe for the Investment Agreement hereunder,
represents that (a) Investor has received and had an opportunity to review
(i) the Company's quarterly report on Form 10-QSB for the quarter ended
February 28, 1999, (ii) the Company's report on Form 8-K filed on January
25, 1999 (iii) the Risk Factors, attached as Exhibit J, (the "Risk
Factors") (iv) the Capitalization Schedule, attached as Exhibit K, (the
"Capitalization Schedule") and (v) the Use of Proceeds Schedule, attached
as Exhibit L, (the "Use of Proceeds Schedule"); (b) Investor has read,
reviewed, and relied solely on the documents described in (a) above, the
Company's representations and warranties and other information in this
Agreement, including the exhibits, documents prepared by the Company which
have been specifically provided to Investor in connection with this
Offering (the documents described in this Section 3.2.4 (a) and (b) are
collectively referred to as the "Disclosure Documents"), and an independent
investigation made by Investor and Investor's representatives, if any; (c)
Investor has, prior to the date of this Agreement, been given an
opportunity to review material contracts and documents of the Company which
have been filed as exhibits to the Company's filings under the Act and the
Exchange Act and has had an opportunity to ask questions of and receive
answers from the Company's officers and directors; and (d) is not relying
on any oral representation of the Company or any other person, nor any
written representation or assurance from the Company other than those
contained in the Disclosure Documents or incorporated herein or therein.
The foregoing, however, does not limit or modify Investor's right to rely
upon covenants, representations and warranties of the Company in Sections 5
and 6 of this Agreement. Investor acknowledges and agrees that the Company
has no responsibility for, does not ratify, and is under no responsibility
whatsoever to comment upon or correct any reports, analyses or other
comments made about the Company by any third parties, including, but not
limited to, analysts' research reports or comments (collectively, "Third
Party Reports"), and Investor has not relied upon any Third Party Reports
in making the decision to invest.
3.2.5 Investment Experience; Fend for Self. Investor has
substantial experience in investing in securities and it has made
investments in securities other than those of the Company. Investor
acknowledges that Investor is able to fend for Investor's self in the
transaction contemplated by this Agreement, that Investor has the ability
to bear the economic risk of Investor's investment pursuant to this
Agreement and that Investor is an "Accredited Investor" by virtue of the
fact that Investor meets the investor qualification standards set forth in
Section 3.1 above. Investor has not been organized for the purpose of
investing in securities of the Company, although such investment is
consistent with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 [Intentionally Left Blank].
3.3.2 No General Solicitation. The Investment Agreement
was not offered to Investor through, and Investor is not aware of, any form
of general solicitation or general advertising, including, without
limitation, (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, and (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising.
22
3.3.3 Restricted Securities. Investor understands that the
Investment Agreement is, the Common Stock and Warrants issued at each Put
Closing will be, and the Warrant Shares will be, characterized as
"restricted securities"under the federal securities laws inasmuch as they
are being acquired from the Company in a transaction exempt from the
registration requirements of the federal securities laws and that under
such laws and applicable regulations such securities may not be transferred
or resold without registration under the Act or pursuant to an exemption
therefrom. In this connection, Investor represents that Investor is
familiar with Rule 144 under the Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.3.4 Disposition. Without in any way limiting the
representations set forth above, Investor agrees that until the Securities
are sold pursuant to an effective Registration Statement or an exemption
from registration, they will remain in the name of Investor and will not be
transferred to or assigned to any broker, dealer or depositary. Investor
further agrees not to sell, transfer, assign, or pledge the Securities
(except for any bona fide pledge arrangement to the extent that such pledge
does not require registration under the Act or unless an exemption from
such registration is available and provided further that if such pledge is
realized upon, any transfer to the pledgee shall comply with the
requirements set forth herein), or to otherwise dispose of all or any
portion of the Securities unless and until:
(a) There is then in effect a registration statement
under the Act and any applicable state securities laws covering such
proposed disposition and such disposition is made in accordance with such
registration statement and in compliance with applicable prospectus
delivery requirements; or
(b) (i) Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition to the
extent relevant for determination of the availability of an exemption from
registration, and (ii) if reasonably requested by the Company, Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Securities under the Act or state securities laws. It
is agreed that the Company will not require the Investor to provide
opinions of counsel for transactions made pursuant to Rule 144 provided
that Investor and Investor's broker, if necessary, provide the Company with
the necessary representations for counsel to the Company to issue an
opinion with respect to such transaction.
The Investor is entering into this Agreement for its own account
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.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Investment
Agreement, if executing this Agreement in a representative or fiduciary
capacity, has full power and authority to execute and deliver this
23
Agreement and each other document included herein for which a signature is
required in such capacity and on behalf of the subscribing individual,
partnership, trust, estate, corporation or other entity for whom or which
Investor is executing this Agreement. Investor has reached the age of
majority (if an individual) according to the laws of the state in which he
or she resides.
3.4.2 Due Authorization. If Investor is a corporation,
Investor is duly and validly organized, validly existing and in good tax
and corporate standing as a corporation under the laws of the jurisdiction
of its incorporation with full power and authority to purchase the
Securities to be purchased by Investor and to execute and deliver this
Agreement.
3.4.3 Partnerships. If Investor is a partnership, the
representations, warranties, agreements and understandings set forth above
are true with respect to all partners of Investor (and if any such partner
is itself a partnership, all persons holding an interest in such
partnership, directly or indirectly, including through one or more
partnerships), and the person executing this Agreement has made due inquiry
to determine the truthfulness of the representations and warranties made
hereby.
3.4.4 Representatives. If Investor is purchasing in a
representative or fiduciary capacity, the representations and warranties
shall be deemed to have been made on behalf of the person or persons for
whom Investor is so purchasing.
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an investment
in the Company involves substantial risks, including the potential loss of
Investor's entire investment herein. Investor recognizes that the
Disclosure Documents, this Agreement and the exhibits hereto do not purport
to contain all the information, which would be contained in a registration
statement under the Act;
4.2 No Government Approval. No federal or state agency has
passed upon the Securities, recommended or endorsed the Offering, or made
any finding or determination as to the fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of the date
of this Agreement, the Securities and any component thereof have not been
registered under the Act or any applicable state securities laws by reason
of exemptions from the registration requirements of the Act and such laws,
and may not be sold, pledged (except for any limited pledge in connection
with a margin account of Investor to the extent that such pledge does not
require registration under the Act or unless an exemption from such
registration is available and provided further that if such pledge is
realized upon, any transfer to the pledgee shall comply with the
requirements set forth herein), assigned or otherwise disposed of in the
absence of an effective registration of the Securities and any component
thereof under the Act or unless an exemption from such registration is
available;
4.4 Restrictions on Transfer. Investor may not attempt to sell,
transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities or any component thereof in the absence of either an effective
24
registration statement or an exemption from the registration requirements
of the Act and applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance
that any registration statement will become effective at the scheduled
time, or ever, or remain effective when required, and Investor
acknowledges that it may be required to bear the economic risk of
Investor's investment for an indefinite period of time;
4.6 Exempt Transaction. Investor understands that the
Securities are being offered and sold in reliance on specific exemptions
from the registration requirements of federal and state law and that the
representations, warranties, agreements, acknowledgments and understandings
set forth herein are being relied upon by the Company in determining the
applicability of such exemptions and the suitability of Investor to acquire
such Securities.
4.7 Legends. The certificates representing the Put Shares shall
not bear a Restrictive Legend. The certificates representing the Warrant
Shares shall not bear a Restrictive Legend unless they are issued at a time
when the Registration Statement is not effective for resale. It is
understood that the certificates evidencing any Warrant Shares issued at a
time when the Registration Statement is not effective for resale, subject
to legend removal under the terms of Section 6.9 below, shall bear the
following legend (the "Legend"):
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, or applicable state
securities laws, nor the securities laws of any other jurisdiction. They
may not be sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom."
5. Representations and Warranties of the Company . The Company
hereby makes the following representations and warranties to Investor
(which shall be true at the signing of this Agreement, and as of any such
later date as contemplated hereunder) and agrees with Investor that, except
as set forth in the "Schedule of Exceptions" attached hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida, USA and has all requisite corporate
power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure
to so qualify would have a material adverse effect on the business or
properties of the Company and its subsidiaries taken as a whole. The
Company is not the subject of any pending, threatened or, to its knowledge,
contemplated investigation or administrative or legal proceeding (a
"Proceeding") by the Internal Revenue Service, the taxing authorities of
any state or local jurisdiction, or the Securities and Exchange Commission,
The National Association of Securities Dealers, Inc., The Nasdaq Stock
Market, Inc. or any state securities commission, or any other governmental
entity, which have not been disclosed in the Disclosure Documents. None of
the disclosed Proceedings, if any, will have a material adverse effect upon
the Company or the market for the Common Stock. The Company has the
following subsidiaries: U.S. Amateur Co., a Florida corporation and U.S.A.
Performance Products, Inc., a Florida corporation.
25
5.2 Corporate Condition. The Company's condition is, in all
material respects, as described in the Disclosure Documents (as further set
forth in any subsequently filed Disclosure Documents, if applicable),
except for changes in the ordinary course of business and normal year-end
adjustments that are not, in the aggregate, materially adverse to the
Company. Except for continuing losses, there have been no material adverse
changes to the Company's business, financial condition, or prospects since
the dates of such Disclosure Documents. The financial statements as
contained in the 10-KSB and 10-QSB have been prepared in accordance with
generally accepted accounting principles, consistently applied (except as
otherwise permitted by Regulation S-X of the Exchange Act), subject, in the
case of unaudited interim financial statements, to customary year end
adjustments and the absence of certain footnotes, and fairly present the
financial condition of the Company as of the dates of the balance sheets
included therein and the consolidated results of its operations and cash
flows for the periods then ended,. Without limiting the foregoing, there
are no material liabilities, contingent or actual, that are not disclosed
in the Disclosure Documents (other than liabilities incurred by the Company
in the ordinary course of its business, consistent with its past practice,
after the period covered by the Disclosure Documents). The Company has
paid all material taxes that are due, except for taxes that it reasonably
disputes. There is no material claim, litigation, or administrative
proceeding pending or, to the best of the Company's knowledge, threatened
against the Company, except as disclosed in the Disclosure Documents. This
Agreement and the Disclosure Documents do not contain any untrue statement
of a material fact and do not omit to state any material fact required to
be stated therein or herein necessary to make the statements contained
therein or herein not misleading in the light of the circumstances under
which they were made. No event or circumstance exists relating to the
Company which, under applicable law, requires public disclosure but which
has not been so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part of the
Company by its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of
all obligations of the Company hereunder and the authorization, issuance
and delivery of the Common Stock being sold hereunder and the issuance
(and/or the reservation for issuance) of the Warrants and the Warrant
Shares have been taken, and this Agreement and the Registration Rights
Agreement constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, except insofar as the
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors' rights generally
or by principles governing the availability of equitable remedies. The
Company has obtained all consents and approvals required for it to execute,
deliver and perform each agreement referenced in the previous sentence.
5.4 Valid Issuance of Common Stock. The Common Stock and the
Warrants, when issued, sold and delivered in accordance with the terms
hereof, for the consideration expressed herein, will be validly issued,
fully paid and nonassessable and, based in part upon the representations of
Investor in this Agreement, will be issued in compliance with all
applicable U.S. federal and state securities laws. The Warrant Shares,
when issued in accordance with the terms of the Warrants, shall be duly and
validly issued and outstanding, fully paid and nonassessable, and based in
part on the representations and warranties of Investor, will be issued in
compliance with all applicable U.S. federal and state securities laws. The
Put Shares, the Warrants and the Warrant Shares will be issued free of any
preemptive rights.
26
5.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation
or Bylaws, each as amended and in effect on and as of the date of the
Agreement, or of any material provision of any material instrument or
material contract to which it is a party or by which it is bound or of any
provision of any federal or state judgment, writ, decree, order, statute,
rule or governmental regulation applicable to the Company, which would have
a material adverse effect on the Company's business or prospects, or on the
performance of its obligations under this Agreement or the Registration
Rights Agreement. The execution, delivery and performance of this
Agreement and the other agreements entered into in conjunction with the
Offering and the consummation of the transactions contemplated hereby and
thereby will not (a) result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument or contract or an
event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company, which would have a material adverse effect on
the Company's business or prospects, or on the performance of its
obligations under this Agreement, the Registration Rights Agreement, (b)
violate the Company's Certificate of Incorporation or By-Laws or (c)
violate any statute, rule or governmental regulation applicable to the
Company which violation would have a material adverse effect on the
Company's business or prospects.
5.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required by
the Exchange Act since the date the Company first became subject to such
reporting obligations. The Company undertakes to furnish Investor with
copies of such reports as may be reasonably requested by Investor prior to
consummation of this Offering and thereafter, to make such reports
available, for the full term of this Agreement, including any extensions
thereof, and for as long as Investor holds the Securities. The Common
Stock is duly quoted on the O.T.C. Bulletin Board. The Company is not in
violation of the listing requirements of the O.T.C. Bulletin Board and
reasonably anticipates that the Common Stock will continue to be quoted by
the O.T.C. Bulletin Board for the foreseeable future. The Company has
filed all reports required under the Exchange Act. The Company has not
furnished to the Investor any material nonpublic information concerning the
Company.
5.7 Capitalization. The capitalization of the Company as of May
13, 1999, is, and the capitalization as of the Closing, subject to exercise
of any outstanding warrants and/or exercise of any outstanding stock
options, after taking into account the offering of the Securities
contemplated by this Agreement and all other share issuances occurring
prior to this Offering, will be, as set forth in the Capitalization
Schedule as set forth in Exhibit K. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by
the issuance of the Securities. Except as disclosed in the Capitalization
Schedule, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, calls or commitments of
any character whatsoever relating to, or securities or rights convertible
into or exercisable or exchangeable for, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or
any of its subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its subsidiaries, and (ii) there
are no agreements or arrangements under which the Company or any of its
27
subsidiaries is obligated to register the sale of any of its or their
securities under the Act (except the Registration Rights Agreement).
5.8 Intellectual Property. The Company has valid, unrestricted
and exclusive ownership of or rights to use the patents, trademarks,
trademark registrations, trade names, copyrights, know-how, technology and
other intellectual property necessary to the conduct of its business.
Exhibit M lists all patents, trademarks, trademark registrations, trade
names and copyrights of the Company. The Company has granted such licenses
or has assigned or otherwise transferred a portion of (or all of) such
valid, unrestricted and exclusive patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business as set forth
in Exhibit M. The Company has been granted licenses, know-how, technology
and/or other intellectual property necessary to the conduct of its business
as set forth in Exhibit M. To the best of the Company's knowledge after
due inquiry, the Company is not infringing on the intellectual property
rights of any third party, nor is any third party infringing on the
Company's intellectual property rights. There are no restrictions in any
agreements, licenses, franchises, or other instruments that preclude the
Company from engaging in its business as presently conducted.
5.9 Use of Proceeds. As of the date hereof, the Company expects
to use the proceeds from this Offering (less fees and expenses) for the
purposes and in the approximate amounts set forth on the Use of Proceeds
Schedule set forth as Exhibit L hereto. These purposes and amounts are
estimates and are subject to change without notice to any Investor.
5.10 No Rights of Participation. Other than Xxxxxx Private
Equity, LLC, no person or entity, including, but not limited to, current or
former stockholders of the Company, underwriters, brokers, agents or other
third parties, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the financing
contemplated by this Agreement which has not been waived.
5.11 Company Acknowledgment. The Company hereby acknowledges
that Investor may elect to hold the Securities for various periods of time,
as permitted by the terms of this Agreement, the Warrants, and other
agreements contemplated hereby, and the Company further acknowledges that
Investor has made no representations or warranties, either written or oral,
as to how long the Securities will be held by Investor or regarding
Investor's trading history or investment strategies.
5.12 No Advance Regulatory Approval. The Company acknowledges
that this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby have not been approved by the
SEC, or any other regulatory body and there is no guarantee that this
Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby will ever be approved by the SEC
or any other regulatory body. The Company is relying on its own analysis
and is not relying on any representation by Investor that either this
Investment Agreement, the transaction contemplated hereby or the
Registration Statement contemplated hereby has been or will be approved by
the SEC or other appropriate regulatory body.
5.13 Underwriter's Fees and Rights of First Refusal. The
Company is not obligated to pay any compensation or other fees, costs or
related expenditures in cash or securities to any underwriter, broker,
28
agent or other representative other than the Investor in connection with
this Offering.
5.14 Availability of Suitable Form for Registration. The
Company is currently eligible and agrees to maintain its eligibility to
register the resale of its Common Stock on a registration statement on a
suitable form under the Act.
5.15 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales of any of the Company's securities
or solicited any offers to buy any security under circumstances that would
prevent the parties hereto from consummating the transactions contemplated
hereby pursuant to an exemption from registration under Regulation D of the
Act or would require the issuance of any other securities to be integrated
with this Offering under the Rules of Nasdaq. The Company has not engaged
in any form of general solicitation or advertising in connection with the
offering of the Common Stock or the Warrants.
5.16 [Intentionally Left Blank].
5.17 Foreign Corrupt Practices. Neither the Company, nor any of
its subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any subsidiary has, in the course
of its actions for, or on behalf of, the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
5.18 Key Employees. Each "Key Employee" (as defined in Exhibit
N) is currently serving the Company in the capacity disclosed in Exhibit N.
No Key Employee, to the best knowledge of the Company and its subsidiaries,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each Key Employee
does not subject the Company or any of its subsidiaries to any liability
with respect to any of the foregoing matters. No Key Employee has, to the
best knowledge of the Company and its subsidiaries, any intention to
terminate his employment with, or services to, the Company or any of its
subsidiaries.
5.19 Representations Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive any Put Closing and the issuance of the shares
of Common Stock thereby.
5.20 Tax Status. The Company has made or filed all federal and
state income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent
that the Company has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and has paid all taxes
and other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and as set aside on its books
29
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
5.21 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other
than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director,
trustee or partner.
5.22 Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination or
other similar anti-takeover provision under Florida law which is or could
become applicable to the Investor as a result of the transactions
contemplated by this Agreement, including, without limitation, the issuance
of the Common Stock, any exercise of the Warrants and ownership of the
Common Shares and Warrant Shares. The Company has not adopted and will
not adopt any "poison pill" provision that will be applicable to Investor
as a result of transactions contemplated by this Agreement.
5.23 Other Agreements. The Company has not, directly or
indirectly, made any agreements with the Investor under a subscription in
the form of this Agreement for the purchase of Common Stock, relating to
the terms or conditions of the transactions contemplated hereby or thereby
except as expressly set forth herein, respectively, or in exhibits hereto
or thereto.
5.24 Major Transactions. There are no other Major Transactions
currently pending or contemplated by the Company.
5.25 Financings. There are no other financings currently
pending or contemplated by the Company.
5.26 Shareholder Authorization. The Company shall, at its next
annual shareholder meeting following its listing on either the Nasdaq Small
Cap Market or the Nasdaq National Market, or at a special meeting to be
held as soon as practicable thereafter, use its best efforts to obtain
approval of its shareholders to (i) authorize the issuance of the full
number of shares of Common Stock which would be issuable under this
Agreement and eliminate any prohibitions under applicable law or the rules
or regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or any of
its securities with respect to the Company's ability to issue shares of
Common Stock in excess of the Cap Amount (such approvals being the "20%
Approval") and (ii) the increase in the number of authorized shares of
Common Stock of the Company (the "Share Authorization Increase Approval")
such that at least 4,000,000 shares can be reserved for this Offering. In
connection with such shareholder vote, the Company shall use its best
efforts to cause all officers and directors of the Company to promptly
enter into irrevocable agreements to vote all of their shares in favor of
30
eliminating such prohibitions. As soon as practicable after the 20%
Approval and the Share Authorization Increase Approval, the Company agrees
to use its best efforts to reserve 4,000,000 shares of Common Stock for
issuance under this Agreement.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least the
Termination Date, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at
least the Termination Date, maintain its corporate existence in good
standing and remain a "Reporting Issuer" (defined as a Company which files
periodic reports under the Exchange Act) (provided, however, that the
foregoing covenant shall not prevent the Company from entering into any
merger or corporate reorganization as long as the surviving entity in such
transaction, if not the Company, assumes the Company's obligations with
respect to the Common Stock and has Common Stock listed for trading on a
stock exchange or on Nasdaq and is a Reporting Issuer) and shall pay all
its taxes when due except for taxes which the Company disputes.
6.3 Registration Rights. The Company will enter into a
registration rights agreement covering the resale of the Common Shares and
the Warrant Shares substantially in the form of the Registration Rights
Agreement attached as Exhibit A.
6.4 [Intentionally Omitted].
6.5 Asset Transfers. The Company shall not (i) transfer, sell,
convey or otherwise dispose of any of its material assets to any Subsidiary
except for a proper business purpose or (ii) transfer, sell, convey or
otherwise dispose of any of its material assets to any Affiliate, as
defined below, during the Term of this Agreement. For purposes hereof,
"Affiliate" shall mean any officer of the Company, director of the Company
or owner of twenty percent (20%) or more of the Common Stock or other
securities of the Company.
6.6 Capital Raising Limitations; Rights of First Refusal.
6.6.1 Capital Raising Limitations. During the period from
the date of this Agreement until the earlier of (i) the date that is one
year after the Termination Date, or (ii) (a) in the case of a Company
Termination, the date that is one (1) year after the date of such Company
Termination, or (b) in the case of an Automatic Termination that is not
waived by the Investor, the date that is six (6) months after the date of
such Automatic Termination, the Company shall not issue or sell, or agree
to issue or sell, for cash in private capital raising transactions (the
following to be collectively referred to herein as, the "Equity
Securities"), either (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
Offering, without obtaining the prior written approval of the Investor of
the Offering (the limitations referred to in this subsection 6.6.1 are
collectively referred to as the "Capital Raising Limitations").
31
6.6.2 Investor's Right of First Refusal. For any private
capital raising transactions of Equity Securities or equity line structured
investments which close after the date hereof and on or prior to the date
that is six (6) months after the Termination Date of this Agreement, not
including any warrants issued in conjunction with this Investment
Agreement, the Company agrees to deliver to Investor, at least ten (10)
days prior to the closing of such transaction, written notice describing
the proposed transaction, including the terms and conditions thereof, and
providing the Investor and its affiliates an option during the ten (10) day
period following delivery of such notice to purchase the securities being
offered in such transaction on the same terms as contemplated by such
transaction.
6.6.3 Exceptions to the Capital Raising Limitation and
Rights of First Refusal. Notwithstanding the above, the Capital Raising
Limitations and the Rights of First Refusal 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. The Capital Raising
Limitations also shall not apply to (a) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof, (b) the grant of
additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan for the benefit of
the Company's employees, directors or consultants, or (c) the issuance of
debt securities, with no equity feature, incurred solely for working
capital purposes.
6.6.4 Effect of Payment Default by Investor. The Capital
Raising Limitations and the Investor's Right of First Refusal shall not
apply so long as the payment of the required Put Dollar Amount for any Put
Shares is more than ten (10) Business Days past due and remains unpaid for
five (5) additional Business Days after the Company notifies the Investor
in writing that it intends to effect a transaction that would trigger
either the Capital Raising Limitations or the Investor's Right of First
Refusal.
6.7 Financial 10-K Statements, Etc. and Current Reports on Form
8-K. The Company shall deliver to the Investor copies of its annual
reports on Form 10-K, and quarterly reports on Form 10-Q and shall deliver
to the Investor current reports on Form 8-K within two (2) days of filing
for the Term of this Agreement.
6.8 Opinion of Counsel. Investor shall, concurrent with the
purchase of the Common Stock and accompanying Warrants pursuant to this
Agreement, receive an opinion letter from the Company's legal counsel, in
the form attached as Exhibit B or in such form as agreed upon by the
parties, as to the Investment Commitment Closing and in the form attached
as Exhibit I or in such form as agreed upon by the parties, as to any Put
Closing.
6.9 Removal of Legend. If the certificates representing any
Securities are issued with a restrictive Legend in accordance with the
terms of this Agreement, the Legend shall be removed and the Company shall
issue a certificate without such Legend to the holder of any Security upon
which it is stamped, and a certificate for a security shall be originally
32
issued without the Legend, if (a) the sale of such Security is registered
under the Act, or (b) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions (the reasonable cost of which shall be borne by the
Investor), to the effect that a public sale or transfer of such Security
may be made without registration under the Act, or (c) such holder provides
the Company with reasonable assurances that such Security can be sold
pursuant to Rule 144. Each Investor agrees to sell all Securities,
including those represented by a certificate(s) from which the Legend has
been removed, or which were originally issued without the Legend, pursuant
to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.10 Listing. Subject to the remainder of this Section 6.10,
the Company shall ensure that its shares of Common Stock (including all
Warrant Shares) are quoted and available for trading on the O.T.C. Bulletin
Board. Thereafter, the Company shall (i) use its best efforts to continue
the listing and trading of its Common Stock on the O.T.C. Bulletin Board or
to become eligible for and listed and available for trading on the Nasdaq
Small Cap Market, the NMS, or the New York Stock Exchange ("NYSE"); and
(ii) comply in all material respects with the Company's reporting, filing
and other obligations under the By-Laws or rules of the National
Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.11 The Company's Instructions to Transfer Agent. The Company
will instruct the Transfer Agent of the Common Stock, by delivering
instructions in the form of Exhibit T hereto, to issue certificates,
registered in the name of each Investor or its nominee, for the Put Shares
and Warrant Shares in such amounts as specified from time to time by the
Company upon any exercise by the Company of a Put and/or exercise of the
Warrants by the holder thereof. Such certificates shall not bear a Legend
unless issuance with a Legend is permitted by the terms of this Agreement
and Legend removal is not permitted by Section 6.9 hereof and the Company
shall cause the Transfer Agent to issue such certificates without a Legend.
Nothing in this Section shall affect in any way Investor's obligations and
agreement set forth in Sections 3.3.3 or 3.3.4 hereof to resell the
Securities pursuant to an effective registration statement and to deliver a
prospectus in connection with such sale or in compliance with an exemption
from the registration requirements of applicable securities laws. If (a)
an Investor provides the Company with an opinion of counsel, which opinion
of counsel shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption
from registration or (b) pursuant to Rule 144, an Investor transfers
Securities to an affiliate which is an accredited investor, the Company
shall permit the transfer, and, in the case of Put Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denomination as specified by such
Investor. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to an Investor by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 6.11 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this Section 6.11, that an Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and
33
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6.12 Stockholder 20% Approval. Prior to the closing of any Put
that would cause the Aggregate Issued Shares to exceed the Cap Amount, the
Company shall obtain approval of its stockholders to authorize (i) the
issuance of the full number of shares of Common Stock which would be
issuable pursuant to this Agreement but for the Cap Amount and eliminate
any prohibitions under applicable law or the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or any of its securities
with respect to the Company's ability to issue shares of Common Stock in
excess of the Cap Amount (such approvals being the "Stockholder 20%
Approval").
6.13 Press Release. The Company agrees that the Investor shall
have the right to review and comment upon any press release issued by the
Company in connection with the Offering which approval shall not be
unreasonably withheld by Investor.
6.14 Change in Law or Policy. In the event of a change in law,
or policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be unable to
perform its obligations hereunder, this Agreement shall be automatically
terminated and no further Commitment Fees shall be due.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing;
Severability. Investor's and the Company's representations and warranties
shall survive the Investment Date and any Put Closing contemplated by this
Agreement notwithstanding any due diligence investigation made by or on
behalf of the party seeking to rely thereon. 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, or is altered by a term
required by the Securities Exchange Commission to be included in the
Registration Statement, this Agreement shall continue in full force and
effect without said provision; provided that if the removal of such
provision materially changes the economic benefit of this Agreement to
either party, the affected party, at its option, may terminate this
Agreement or require that other terms of the Agreement be amended to
compensate for such material economic changes.
7.2 Successors and Assigns. This Agreement shall not be
assignable without the Company's written consent, If assigned, the terms
and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement. Investor
may assign Investor's rights hereunder, in connection with any private sale
of the Common Stock of such Investor, so long as, as a condition precedent
to such transfer, the transferee executes an acknowledgment agreeing to be
bound by the applicable provisions of this Agreement in a form acceptable
to the Company and provides an original copy of such acknowledgment to the
Company.
34
7.3 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. 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. The use in this
Agreement of a masculine, feminine or neither pronoun shall be deemed to
include a reference to the others.
7.5 Written Notices, Etc. Any notice, demand or request
required or permitted to be given by the Company or Investor pursuant to
the terms of this Agreement shall be in writing and shall be deemed given
when delivered personally, or by facsimile or upon receipt if by overnight
or two (2) day courier, addressed to the parties at the addresses and/or
facsimile telephone number of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the
other in writing; provided, however, that in order for any notice to be
effective as to the Investor such notice shall be delivered and sent, as
specified herein, to all the addresses and facsimile telephone numbers of
the Investor set forth at the end of this Agreement or such other address
and/or facsimile telephone number as Investor may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights
Agreement, each of the Company and Investor shall pay all costs and
expenses that it respectively incurs, with respect to the negotiation,
execution, delivery and performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This
Agreement, including the Exhibits attached hereto, the Common Stock
certificates, the Warrants, the Registration Rights Agreement, and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants,
whether oral, written, or otherwise, except as specifically set forth
herein or therein. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
7.8 Actions at Law or Equity; Jurisdiction and Venue. The
parties acknowledge that any and all actions, whether at law or at equity,
and whether or not said actions are based upon this Agreement between the
parties hereto, shall be filed in any state or federal court sitting in
Atlanta, Georgia. Georgia law shall govern both the proceeding as well as
the interpretation and construction of the Transaction Documents and the
transaction as a whole. In any litigation between the parties hereto, the
prevailing party, as found by the court, shall be entitled to an award of
all attorney's fees and costs of court. Should the court refuse to find a
prevailing party, each party shall bear its own legal fees and costs.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
35
(a) Wire transfer of Subscription Funds. Investor shall
deliver Put Dollar Amounts (as payment towards any Put Share Price) by wire
transfer, to the Company pursuant to a wire instruction letter to be
provided by the Company, and signed by the Company.
(b) Irrevocable Subscription. Investor hereby acknowledges
and agrees, subject to the provisions of any applicable laws providing for
the refund of subscription amounts submitted by Investor, that this
Agreement is irrevocable and that Investor is not entitled to cancel,
terminate or revoke this Agreement or any other agreements executed by such
Investor and delivered pursuant hereto, and that this Agreement and such
other agreements shall survive the death or disability of such Investor and
shall be binding upon and inure to the benefit of the parties and their
heirs, executors, administrators, successors, legal representatives and
assigns. If the Securities subscribed for are to be owned by more than one
person, the obligations of all such owners under this Agreement shall be
joint and several, and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be
binding upon each such person and his heirs, executors, administrators,
successors, legal representatives and assigns.
8.2 Acceptance of Subscription. Ownership of the number of
securities purchased hereby will pass to Investor upon the Warrant Closing
or any Put Closing.
8.3 [Intentionally Omitted]
9. Indemnification.
In consideration of the Investor's execution and delivery of the
Investment Agreement, the Registration Rights Agreement and the Warrants
(the "Transaction Documents") and acquiring the Securities thereunder and
in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless
Investor and all of its stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing person's agents,
members, partners or other representatives (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorney's
fees and disbursements (the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument
or documents contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim,
derivative or otherwise, by any stockholder of the Company based on a
breach or alleged breach by the Company or any of its officers or directors
of their fiduciary or other obligations to the stockholders of the Company.
The Investor shall defend, protect, indemnify and hold harmless
Company and all of its stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing person's agents,
members, partners or other representatives (including, without limitation,
36
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorney's
fees and disbursements (the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Investor in the Transaction Documents, or (b) any breach of any covenant,
agreement or obligation of the Investor contained in the Transaction
Documents or any other certificate, instrument or document contemplated
hereby or thereby.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which it would be required to make if such foregoing
undertaking was enforceable which is permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought,
such Indemnified Party will, if a claim in respect thereof is to be made
against the other party (hereinafter "Indemnitor") under this Section 9,
deliver to the Indemnitor a written notice of the commencement thereof and
the Indemnitor shall have the right to participate in and to assume the
defense thereof with counsel reasonably selected by the Indemnitor,
provided, however, that an Indemnified Party shall have the right to retain
its own counsel, with the reasonably incurred fees and expenses of such
counsel to be paid by the Indemnitor, if representation of such Indemnified
Party by the counsel retained by the Indemnitor would be inappropriate due
to actual or potential conflicts of interest between such Indemnified Party
and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the Indemnitor within a reasonable
time of the commencement of any such action, if prejudicial to the
Indemnitor's ability to defend such action, shall relieve the Indemnitor of
any liability to the Indemnified Party under this Section 9, but the
omission to so deliver written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under
this Section 9 to the extent it is prejudicial.
10. [Intentionally Left Blank].
11. [Intentionally Left Blank].
12. Accredited Investor. Investor is an "accredited investor"
because (check all applicable boxes):
(a) [ ] it is an organization described in Section 501(c)(3)
of the Internal Revenue Code, or a corporation, limited duration company,
limited liability company, business trust, or partnership not formed for
the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person who has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment.
37
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner of
the issuer of the securities being offered or sold or a director, executive
officer or general partner of a general partner of that issuer.
[ ] has an individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceeding $1,000,000.
[ ] had an individual income in excess of $200,000 in each
of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current year.
(d) [ ] an entity each equity owner of which is an entity
described in a - b above or is an individual who could check one (1) of the
last three (3) boxes under subparagraph (c) above.
(e) [ ] other [specify]
___________________________________________________________
The undersigned hereby subscribes for the Maximum Offering Amount and
acknowledges that this Agreement and the subscription represented hereby
shall not be effective unless accepted by the Company as indicated below.
38
IN WITNESS WHEREOF, the undersigned Investor does represent and
certify under penalty of perjury that the foregoing statements are true and
correct and that Investor by the following signature(s) executed this
Agreement.
Dated this 13 day of May, 1999.
/s/ Xxxx X. Xxxxxx XXXXXX PRIVATE EQUITY, LLC
-------------------------------- -----------------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
Xxxx X. Xxxxxx SECURITY DELIVERY INSTRUCTIONS:
------------------------------- Please type or print address where your
Name: Please Print security is to be delivered
Manager ATTN: Xxxx X. Xxxxxx
------------------------------- ----------------------------------------
Title/Representative Capacity
(if applicable)
000 Xxxxxxx Xxxxxx, Xxxxx 000
XXXXXX PRIVATE EQUITY, LLC 0000 Xxxxxxx Xxxxxx Xxxx
------------------------------- ----------------------------------------
Name of Company You Represent Street Address
(if applicable)
Roswell, Georgia, U.S.A. Xxxxxxx, Xxxxxxx 00000 X.X.X.
------------------------------- ----------------------------------------
Place of Execution of this City, State or Province, Country,
Agreement Offshore Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
Please print address where any Please print address where Copy is to
Notice is to be delivered be delivered
ATTN: ____________________________ ATTN: _______________________________
__________________________________ _____________________________________
Xxxxxx Xxxxxxx Xxxxxx Xxxxxxx
__________________________________ _____________________________________
City, State or Province, Country, City, State or Country, Offshore
Offshore Postal Code Postal Code
Telephone: _______________________ Telephone: __________________________
Facsimile: _______________________ Facsimile: __________________________
Facsimile: _______________________ Facsimile: __________________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT THE MAXIMUM
OFFERING AMOUNT ON THE ____ DAY OF MAY 1999.
ECOM XXXX.XXX, INC.
By:/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, CEO
Address:
ECOM XXXX.XXX, INC.
0000 Xxxxxxxx Xxxxx, Xxxxx X0
Xxxxxxx Xxxxx, XX 00000
Telephone (000) 000-0000
Facsimile: (000) 000-0000
39
ADVANCE PUT NOTICE
ECOM XXXX.XXX, INC. (the "Company") hereby intends, subject to the
Individual Put Limit (as defined in the Investment Agreement), to elect to
exercise a Put to sell the number of shares of Common Stock of the Company
specified below, to _____________________________, the Investor, as of the
Intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and
Xxxxxx Private Equity, LLC dated on or about May ___, 1999.
Date of Advance Put Notice: ___________________
Intended Put Date: ____________________________
Intended Put Share Amount: ____________________
Company Designation Maximum Put Dollar Amount (Optional):
________________________________________.
Company Designation Minimum Put Share Price (Optional):
________________________________________.
ECOM XXXX.XXX, INC.
By: ________________________________
Xxxxx Xxxxxx, CEO
Address:
ECOM XXXX.XXX, INC.
0000 Xxxxxxxx Xxxxx, Xxxxx X0
Xxxxxxx Xxxxx, XX 00000
Telephone (000) 000-0000
Facsimile: (000) 000-0000
40
