SONIC JET PERFORMANCE, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Agreement is made as of December 27, 2001, by and between Sonic
Jet Performance, Inc., a Colorado corporation (the "Company"), and Ashford
Capital, LLC, a California limited liability company (the "Purchaser").
RECITALS
On the terms and conditions set forth herein, the Company desires to
sell to the Purchaser, and the Purchaser desires to purchase from the Company,
shares of the Company's Series B Convertible Preferred Stock (the "Series B
Preferred Stock") which are convertible into shares of the Company's common
stock (the "Common Stock"), on the terms and conditions set forth in the
Certificate of Designation of Series B Convertible Preferred Stock in the form
attached hereto as Exhibit A (the "Designation");
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENTS
SECTION 1
AUTHORIZATION AND SALE OF THE SHARES
1.1 Authorization of the Shares.
(a) The Company has authorized, or before the Closing (as
defined in Section 2.1 below) will have authorized, a new series of preferred
stock, designated as "Series B Convertible Preferred Stock", which shall have
the rights, preferences and privileges provided for in the Designation.
(b) In addition, prior to the Closing, the Company will have
authorized the issuance and sale to the Purchaser of ten (10) shares (the
"Shares") of the Series B Preferred Stock, each of which shall be convertible at
an exercise price per share of Ten Dollars ($10.00), into a number of shares of
common stock of the Company (the "Common Stock") that upon conversion equals two
percent (2%) of the then issued and outstanding Common Stock, on a fully diluted
basis, pursuant to the terms of the Designation.
1.2 Sale of the Shares. Subject to the terms and conditions hereof, at
the Closing, the Company will issue and sell the Shares to the Purchaser and the
Purchaser will purchase such Shares from the Company for an aggregate purchase
price of Twenty Five Thousand Dollars ($25,000) (the "Purchase Price"). The
Common Stock issued or issuable upon conversion of the Shares is referred to as
the "Conversion Stock." The Shares, the Conversion Stock and any other
securities issued or issuable in respect of the Shares are sometimes
collectively referred to herein as the "Securities."
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The purchase and sale of the Shares shall
occur at a closing (the "Closing") to be held at such time as shall be
designated by the Purchaser (the "Closing Date").
2.2 Delivery. At the Closing, the Company shall deliver to the
Purchaser a certificate, registered in Purchaser's name and representing the
Shares, against delivery to the Company of a check or wire transfer payable to
the order of the Company in the amount of Twenty-Five Thousand Dollars
($25,000). The Shares shall be delivered free of any claims, liens or
encumbrances.
SECTION 3
COMPANY REPRESENTATIONS AND WARRANTIES
Except as disclosed in the Schedules attached hereto, the Company makes
the following representations and warranties to the Purchaser:
3.1 Organization and Standing. Each of the Company and its subsidiaries
(i) is a corporation duly organized and validly existing under the laws of its
respective jurisdiction of incorporation and is in good standing as a domestic
corporation under the laws of said state or country, (ii) has all requisite
corporate power and authority to own and lease its properties and to conduct its
business as presently conducted, and (iii) is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified does
not and is not reasonably expected to (x) individually or in the aggregate, have
a material adverse effect on the properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of the Company and its
subsidiaries, taken as a whole, (y) interfere with or impair the Company's
ability to perform its obligations under this Agreement, or (z) interfere with
or prevent the consummation of any of the transactions contemplated by said
instruments (any of the events set forth in clauses (x), (y) or (z), a "Material
Adverse Effect").
3.2 Corporate Power. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, to sell and issue the Shares, to
issue the Conversion Stock issuable upon conversion of the Shares, and to carry
out and perform its obligations under the terms of this Agreement and under the
terms of all other agreements and other documents executed in connection
herewith.
3.3 Capitalization. The authorized capital stock of the Company upon
the filing of the Designation with the Secretary of State of the State of
Colorado will consist of (a) 100,000,000 shares of Common Stock of which
18,583,936 shares are issued and outstanding, and (b) 20,000,000 shares of
Preferred Stock of which (i) 1,600 shares have been designated "Series A
Convertible Preferred Stock", none of which are issued or outstanding; and (ii)
ten shares shall be designated as "Series B Convertible Preferred Stock" and
sold to the Purchaser at the Closing. All of the outstanding shares of Common
Stock have been, and all of the shares of Series B Preferred Stock when issued
and sold, will be, validly issued, fully paid and nonassessable, and free of any
liens or encumbrances. The Series B Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Designation. Except as
set forth in Schedule 3.3, no subscription, warrant, option or other right to
purchase or acquire any shares of any class of capital stock of the Company or
securities convertible into or exchangeable for such capital stock are
outstanding. No securities of the Company have any anti-dilution rights,
preemptive rights or rights of first refusal.
3.4 Authorization. The execution, delivery and performance of this
Agreement, and any other agreements related to this Agreement, by the Company
have been properly and duly authorized by all requisite corporate action. In
addition, all other actions taken by the Company in connection with the
transactions contemplated by this Agreement were properly and duly authorized by
all requisite corporate action. This Agreement and all documents and agreements
executed in connection herewith, constitute valid and binding obligations of the
Company. The issuance and sale of the Shares will not give rise to any
preemptive rights or rights of first refusal on behalf of any person in
existence on the date hereof.
3.5 Conversion Stock. The Conversion Stock (i) has been duly and
validly reserved for issuance, and (ii) is not subject to preemptive or any
other similar rights of shareholders of the Company.
3.6 Accuracy of Reports. All reports (the "SEC Reports") required to be
filed by the Company during the period from January 1, 1999 to the date of this
Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), have been duly filed, complied in all material respects with the Exchange
Act and the requirements of their respective forms (as of their respective
filing dates), were complete and correct in all material respects as of the
dates at which the information was furnished, and none contains (as of their
respective dates of filing) any untrue statement of a material fact nor omitted
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances in which made, not misleading.
3.7 Financial Statements and Changes. Since January 1, 1999, the
financial statements of the Company included in the SEC Reports (the "Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows (or changes in financial position prior to the
approval of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 95) for the periods then ending in accordance with GAAP
(subject, in the case of the unaudited statements, to normal year end audit
adjustments). Except as set forth in the filed SEC Reports, neither the Company
nor any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto and which could reasonably be expected to
have a Material Adverse Effect.
3.8 No Conflict. The provisions of each of this Agreement and the
Designation does not constitute any violation, or conflict with or constitute a
default under, any indenture, mortgage, deed of trust or other agreement,
instrument, court order, judgment, decree, statute, rule or regulation (each a
"Term" and collectively the "Terms") to which the Company or any of its
subsidiaries is a party or by which it is bound. The execution, delivery and
performance of and compliance with this Agreement, the issuance of the
Securities pursuant to the terms hereof and the performance of the Company's
obligations hereunder and thereunder (i) will not result in any violation or be
in conflict with or constitute a default under any Term, (ii) will not result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company or its subsidiaries pursuant to any such
Term, and (iii) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Company, any of its
subsidiaries, or any of the Company's or subsidiaries' assets or properties,
subject to such exceptions as would not have a Material Adverse Effect.
3.9 Governmental Consents. No consent, approval or authorization of, or
designation, declaration or filing with, any federal, state or foreign
governmental authority is required on the part of the Company in connection with
the valid execution and delivery of this Agreement, the offer, sale or the
issuance of the Securities or the consummation of any other transaction
contemplated hereby, except (i) the filing of the Designation in the office of
the State of Colorado, and (ii) if required, qualifications or filings in
connection with exemptions under any applicable state "blue sky" laws and
Federal securities laws, which qualifications or exemptions, if required, will
have been obtained and will be effective on the Closing Date, or will be
obtained or filed after the Closing Date within the prescribed time in order to
secure such exemptions or qualifications.
3.10 Patents, Trademarks, Etc. The Company and its subsidiaries own or
have the right, or prior to the Closing will own or have the right, to use all
patents, trademarks, service marks, trade names, copyrights, licenses and rights
necessary to their business as now conducted, as conducted at the time of the
Closing and as contemplated being conducted thereafter, and, are not infringing
upon any person's or company's rights under or with respect to any of the
foregoing. Neither the Company nor any of its subsidiaries has received any
written communications alleging that the Company or a subsidiary has violated
any patent, trademark, service xxxx, trade name, copyright or trade secret or
other proprietary right of any other person or entity.
3.11 Litigation. Except as set forth on Schedule 3.11, there is no
suit, action or proceeding pending or affecting the Company or any of its
subsidiaries, nor is there any judgment, decree, injunction, rule or order of
any governmental entity or arbitrator outstanding against the Company or any of
its subsidiaries.
3.12 Compliance with Laws. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which could
reasonably be expected to have a Material Adverse Effect.
3.13 Offering of the Shares. Neither the Company nor any person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require, under the Securities Act of 1933, as amended (the "Securities Act"),
the integration of such offering with the offering and sale of the Securities)
which might subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act.
3.14 Finder's Fee. The Company (i) represents and warrants that other
than as set forth on Schedule 3.14, the Company has retained no finder or broker
in connection with the transactions contemplated by this Agreement, and (ii)
hereby agrees to indemnify and to hold the Purchaser harmless of and from any
liability for commission or compensation in the nature of a finder's fee to any
broker or other person or firm (and the costs and expenses of defending against
such liability or asserted liability) for which the Company, or any of its
employees or representatives, is responsible.
3.15 Tax Matters. Except as set forth on Schedule 3.15, the Company and
each of its subsidiaries has timely filed with the appropriate taxing authority
all tax returns required to be filed by it or has timely requested extensions
and any such request has been granted and has not expired. Each such tax return
is complete and accurate in all respects. All taxes shown as owed by the Company
or any of its subsidiaries on any tax return or claimed or asserted to be due,
from or with respect to any of them, have been paid, except for taxes being
contested in good faith and for which adequate reserves have been taken. The
Company and each of its subsidiaries have properly made due and sufficient
accruals for all taxes for such periods subsequent to the periods covered by
such tax returns as required by GAAP. None of the Company or any of its
subsidiaries are being audited or examined by any taxing authority with respect
to any tax or is a party to any pending action or proceedings by any taxing
authority for assessment or collection of any tax, and no claim for assessment
or collection of any tax has been asserted against it or any of its
subsidiaries. No claim has been made by any authority in a jurisdiction where
the Company or any of its subsidiaries does not file tax returns that it is or
may be subject to taxation by that jurisdiction. There is no dispute or claim
concerning any tax liability.
3.16 Environmental Matters. Each of the Company and its subsidiaries
has obtained, and now maintains as currently valid and effective, all permits,
certificates of financial responsibility, and other governmental authorizations
(collectively, "Environmental Permits") that are required to be obtained by the
Company or any of its subsidiaries under any state, federal, municipal, foreign
or other environmental laws, rules or regulations applicable to any aspect of
the Company or such subsidiary, including, but not limited to, in connection
with the operation of its businesses and properties ("Environmental Laws"). Each
of the Company and its subsidiaries has been in compliance with all terms and
conditions of the Environmental Permits and all Environmental Laws and no
liability exists under any Environmental Laws or otherwise with respect to prior
operations or activities.
SECTION 4
PURCHASER REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company, as follows:
4.1 Corporate Power. Purchaser has all requisite legal and corporate
power to execute and deliver this Agreement and to carry out and perform its
obligations under the terms of this Agreement.
4.2 Authorization. The execution, delivery and performance of this
Agreement by the Purchaser has been duly authorized by all requisite corporate
action, and this Agreement constitutes a valid and binding obligation of
Purchaser enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
SECTION 5
CONDITIONS TO CLOSING
5.1 Conditions to Purchaser's Obligations. The obligation of the
Purchaser to purchase the Shares at the Closing is subject to the fulfillment to
the reasonable satisfaction of the Purchaser, on or prior to the Closing Date,
of the following conditions any of which may be waived in writing, in whole or
in part, by the Purchaser:
(a) The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date;
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects;
(c) The Designation shall have been filed with and accepted by
the Colorado Secretary of State;
(d) Xxxxxx Xxxxxxxxx shall have executed a Side Letter
Agreement with the Company in the form attached hereto as Exhibit B.
(e) The Shares and Conversion Stock shall be free of any
claims, liens or encumbrances.
5.2 Conditions to Company's Obligations. The Company's obligation to
sell and issue the Shares to the Purchaser at the Closing is subject to the
fulfillment to the Company's reasonable satisfaction, on or prior to the Closing
Date, of the following conditions, any of which may be waived in writing, in
whole or in part, by the Company:
(a) The representations and warranties made by the Purchaser
in Section 4 hereof shall be true and correct in all material respects when
made, and shall be true and correct in all material respects on the Closing
Date;
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchaser on or prior to the Closing Date shall
have been performed or complied with in all material respects; and
(c) The Purchaser shall have delivered the Purchase Price to
the Company.
SECTION 6
COVENANTS
6.1 Additional Funding. No later than June 30, 2002, the Purchaser
shall have secured for the Company a commitment from one or more funding sources
selected by the Purchaser, in its sole discretion, to make a minimum equity
infusion into the Company of an aggregate of $500,000.
6.2 Board of Director Representation. As soon as practicable after the
Closing, the Company's board will be expanded to include three directors to be
nominated by the Purchaser. Thereafter, so long as the Purchaser continues to
hold the Shares or Conversion Shares, the Purchaser, or any party to which the
Purchaser has transferred its rights under this Agreement, or this Section 6.2,
shall have the right to have three representatives sitting as directors on the
board.
6.3 Registration Rights. If, at any time commencing after the date
hereof, the Company registers any of its equity securities under the Act (other
than pursuant to Form S-8 or a comparable registration statement) it will give
written notice, at least thirty (30) days prior to the filing of each such
registration statement, to the Purchaser of its intention to do so. If the
Purchaser notifies the Company within twenty (20) days after receipt of any such
notice of its desire to include any of the Shares (or the securities issuable,
directly or indirectly, upon conversion of the Shares) in such proposed
registration statement, the Company shall afford the Purchaser the opportunity
to have any such Shares (or the securities issuable, directly or indirectly,
upon conversion of the Shares) registered on such registration statement.
6.4 Company Debts. On or before December 31, 2001, the Company shall
formalize a plan, subject to the approval of the Purchaser, in its sole
discretion, to repay all of the Company's outstanding debts owed to the landlord
of the Company's facilities in Huntington Beach, California, and to current and
former employees, consultants and independent contractors.
6.5 Reasonable Best Efforts. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use commercially
reasonable best efforts to promptly take, or cause to be taken, all actions, and
to promptly do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings and to remove
any injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
6.6 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
SECTION 7
INDEMNIFICATION
7.1 Indemnification. The Company hereby agrees to indemnify, defend and
hold harmless Purchaser and its affiliates from and against any and all costs,
losses, liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, reasonable attorneys' fees
and all amounts paid in investigation, defense or settlement of any of the
foregoing (collectively, "Damages"), incurred in connection with, arising out
of, resulting from, or incident to, (a) any claim by any person brought against
the Purchaser and/or any of its affiliates in connection with any breach of any
representation or warranty made by the Company in this Agreement, (b) any claim
that any corporate action was improperly taken by the Company prior to or in
connection with the Closing, including, but not limited to, the improper
engagement by the Company in any "conflicting interest transaction" as that term
is defined under Section 0-000-000 of the Colorado Corporations and Associations
Code.
SECTION 8
MISCELLANEOUS
8.1 Public Announcements. The Company shall obtain the consent of the
Purchaser prior to any public announcement relating to this Agreement; provided,
however, the Company shall, upon Purchaser's request, seek confidential
treatment of such materials or information that the Purchaser may reasonably
designate.
8.2 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or the Purchaser, upon any breach or
default under this Agreement, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character by the Company or the Purchaser of
any breach or default under this Agreement, or any waiver by the Company or the
Purchaser of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in writing, and
all remedies, either under this Agreement, or by law or otherwise afforded to
the Company or the Purchaser, shall be cumulative.
8.3 Waivers and Amendments. This Agreement and the provisions hereof
may not be waived or amended except pursuant to a written instrument signed by
the required party or parties as aforesaid.
8.4 Severability. In the event that any provision of this Agreement
shall be deemed to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
8.5 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the Company
and shall survive the Closing of the transactions contemplated hereby for a
period of five (5) years.
8.6 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
8.7 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered either (i)
personally, (ii) by facsimile transmission, or (iii) by a nationally recognized
overnight courier, in each case with all delivery or postal charges pre-paid,
and in each case, addressed attention: President. All notices and communications
shall be sent or delivered to the address or fax number, as applicable, for the
applicable party as set forth on the signature page of this Agreement, or at
such other address or fax number as the applicable party shall have furnished in
writing to the other party (or its transferees). Each such notice or
communication, addressed and posted as aforesaid, shall for all purposes of this
Agreement be treated as effective or having been given (i) when delivered, if
delivered personally, (ii) the business day on which the notice or communication
is sent, if delivered by facsimile transmission, or (iii) upon the earlier of
its receipt or two (2) business days after the business day of deposit with a
nationally recognized overnight courier, if delivered by such means.
8.8 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement among
the parties with regard to the subject matters hereof and thereof, and supersede
any and all prior agreements and understandings among the parties.
8.9 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California as they
apply to contracts entered into and wholly to be performed within such state,
and without reference to its principles of conflicts of law or choice of law.
8.10 Attorneys' Fees. In the event of any litigation in a court of
competent jurisdiction arising in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in judgment shall be
entitled to recover reasonable legal fees and costs in connection with such
action including any appeals.
8.11 Independent Advice of Counsel. THE PARTIES REPRESENT AND DECLARE
THAT, IN EXECUTING THIS AGREEMENT, THEY RELIED SOLELY UPON THEIR OWN JUDGMENT,
BELIEF AND KNOWLEDGE, AND HAD THE ABILITY TO SEEK THE ADVICE OF THEIR OWN
INDEPENDENTLY SELECTED COUNSEL CONCERNING THE NATURE, EXTENT AND DURATION OF
THEIR DUTIES AND RIGHTS CONTAINED IN THIS AGREEMENT. THE PARTIES FURTHER
REPRESENT AND AGREE THAT THEY HAVE NOT BEEN INFLUENCED BY ANY REPRESENTATIONS OR
STATEMENTS CONCERNING ANY MATTERS MADE BY ANY OTHER PARTY OR BY ANY PERSON OR
ATTORNEY REPRESENTING ANY OTHER PARTY.
8.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together
shall constitute one instrument.
[Signatures on following page]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY
SONIC JET PERFORMANCE, INC.,
a Colorado corporation
By: /s/ M.S. Madhava
--------------------------------------
Xxxxxxx Xxx Xxxxxx,
Chief Financial Officer
Address: 00000 Xxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX. 00000
Fax: (000) 000-0000
PURCHASER
ASHFORD CAPITAL, LLC,
a California limited liability company
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx, Director
Address: 0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX. 00000
Fax: (000) 000-0000
Schedules to Series B Convertible Preferred Stock Purchase Agreement
Schedule 3.3
Outstanding Rights
There are currently outstanding options to purchase an aggregate of 6,667 shares
of common stock of the Company.
Schedule 3.11
Litigation
Good v. Sonic Jet Performance, Inc.
Xxxxxx and Xxxxxx v. Sonic Jet Performance, Inc.
Xxxxxxx Engineering Co., Inc. v. Sonic Jet Performance, LLC
Schedule 3.14
Finder's Fees
Xxxxxx Xxxxxxx and Xxxxxx Corporation will each receive 250,000 shares of the
Company's common stock, in full satisfaction of consulting services rendered in
facilitating this Agreement.
Schedule 3.15
Tax Matters
The Company is late in filing its 2000 tax returns with the California
Department of Taxation, however, shall file such tax returns and pay all amounts
due, including late filing penalties, to the state by December 25, 2001.
Exhibit A
Certificate of Designation for Series B Convertible Preferred Stock
Exhibit B
Side Letter Agreement
