EXHIBIT 10.1
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of
August 24, 2000, by and among ObjectSoft Corporation, a corporation organized
under the laws of the State of Delaware (the "Company") (NASDAQ: "OSFT"), and
the Purchaser whose name is set forth on Exhibit A hereto (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase up to 450,000 shares Company's common stock,
$.0001 par value per share (the "Common Stock"); and
WHEREAS, such purchase and sale will be made in reliance upon the
provisions of Section 4(2) and Rule 506 of Regulation D ("Regulation D") of the
United States Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), or upon such other exemption from
the registration requirements of the Securities Act as may be available with
respect to any or all of the purchases of Common Stock to be made hereunder.
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Stock
Section 1.1 Purchase and Sale of Common Shares. Upon the following terms
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and subject to the conditions contained herein, the Company shall, on the date
hereof, issue and sell to the Purchaser, and the Purchaser shall purchase from
the Company, an aggregate of 450,000 shares of Common Stock (the "Common
Shares"), pursuant to the terms set forth on Exhibit B hereto, which terms are
incorporated herein and shall be considered part of the agreement between the
parties hereto.
Section 1.2 Closing. The closing of the purchase and sale of the Common
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Shares (the "Closing") to be acquired by the Purchaser from the Company shall
take place at the offices of Xxxxxx Xxxxxx LLP, The Chrysler Building, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m., eastern time, on the
date hereof (the "Closing Date").
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. In order to
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induce the Purchaser to enter into this Agreement and to purchase the Common
Shares, the Company hereby makes the following representations and warranties to
the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
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corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted and to enter into this Agreement and to perform its
obligations hereunder.
(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and perform this Agreement and the
Escrow Agreement (collectively, the "Transaction Documents") and to issue and
sell the Common Shares in accordance with the terms hereof. The execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required. Each of the Transaction Documents has been duly
executed and delivered by the Company. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) Issuance of Shares. The Common Shares to be issued at the
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Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Common Shares shall
be validly issued and outstanding, fully paid and nonassessable.
(d) SEC Documents. As of their respective dates, none of the SEC
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Documents (as defined below) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(e) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company's Certificate of Incorporation ("Articles") or Bylaws,
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party or by which
any of its respective properties or assets are bound, (iii) create or impose a
lien, mortgage, security interest, charge or encumbrance of any nature
whatsoever on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound, or (iv) result in a violation
of any rule, regulation, order, judgment or decree applicable to the Company or
by which any property or asset of the Company is bound or affected, except, in
all cases other than violations pursuant to clause (i) above, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of
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the Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole.
(f) Certain Fees. The Company has not employed any broker or finder
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or incurred any liability for any brokerage or investment banking fees,
commissions, finders' or structuring fees, financial advisory fees or other
similar fees in connection with the Transaction Documents.
Section 2.2 Representations and Warranties of the Purchaser. The
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Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchasers. If the Purchaser is
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an entity, the Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, and the Purchaser was not formed for the specific purpose of
acquiring the Common Shares.
(b) Authorization and Power. The Purchaser has the requisite power
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and authority to enter into and perform the Transaction Documents and to
purchase the Common Shares being sold to it hereunder. The execution, delivery
and performance of the Transaction Documents by the Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate, limited liability company or partnership
action, as applicable (if the Purchaser is an entity), and no further consent or
authorization of the Purchaser or its Board of Directors, stockholders, members,
managers or partners, as the case may be, is required. Each of the Transaction
Documents has been duly executed and delivered by the Purchaser on the Closing
Date. Each of the Transaction Documents constitutes a valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies or by other equitable principles
of general application.
(c) No Conflicts. The execution, delivery and performance of the
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Transaction Documents and the consummation by the Purchaser of the transactions
contemplated herein and therein do not and will not (i) result in a violation of
the Purchaser's charter documents, bylaws, partnership agreement, operating
agreement or other organizational documents, or (ii) conflict with, constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Purchaser is a party of by which the Purchaser is bound, or result in a
violation of any law, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Purchaser or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material adverse effect on the Purchaser).
(d) Acquisition for Investment. The Purchaser is purchasing the
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Common Shares solely for its own account for the purpose of investment and not
with a view to or for sale in connection with distribution. The Purchaser does
not have a present intention to sell the Common Shares, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of the Common Shares to or through any person or entity; provided,
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however, that by making the representations herein and subject to Exhibit A
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hereto and Section 2.2(f) below, the Purchaser does not agree to hold the Common
Shares for any minimum or other specific term and reserves the right to dispose
of the Common Shares at any time in accordance with federal securities laws
applicable to such disposition. The Purchaser acknowledges that it is able to
bear the financial risks associated with an investment in the Common Shares and
that it has been given full access to such records of the Company and to the
officers of the Company as it has deemed necessary or appropriate to conduct its
due diligence investigation.
(e) Accredited Purchasers. The Purchaser is an "accredited investor"
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as defined in Regulation D promulgated under the Securities Act and is a
resident of the jurisdiction indicated on Exhibit A hereto. The Purchaser has
such knowledge and experience in financial and business matters that the
Purchaser is capable of evaluating the merits and risks of the Purchaser's
investment in the Company.
(f) Rule 144. The Purchaser understands that the Common Shares must
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be held indefinitely unless such Shares are registered under the Securities Act
or an exemption from registration is available. The Purchaser acknowledges that
the Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that the Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. The Purchaser understands that to the extent that Rule
144 is not available, the Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(g) No Broker-Dealer Affiliation. The Purchasers is not a broker-
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dealer registered with the Commission or an affiliate (as such term is defined
in Rule 144(a) promulgated under the Securities Act) of a broker-dealer
registered with the Commission.
(h) General. The Purchaser understands that the Common Shares are
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being offered and sold in reliance on a transactional exemption from the
registration requirement of federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the applicability of such exemptions and the suitability
of such Purchaser to acquire the Common Shares. The Purchaser understands that
no United States federal or state agency or any government or governmental
agency has passed upon or made any recommendation or endorsement of the Common
Shares.
(i) Commission Documents; Opportunities for Additional Information.
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The Purchaser acknowledges that the Company has made available to the Purchaser
through the SEC's Xxxxx site or otherwise prior to the date hereof, and that the
Purchaser has reviewed to its satisfaction, copies of the Company's (i) Form 10-
KSB for the year ended December 31, 1998, (ii) Form 10-KSB for the year ended
December 31, 1999, (iii) Forms 10-QSB for the quarters ended March 31, 2000 and
June 30, 2000, (iv) Registration Statements on Form S-3 (Registration Nos. 333-
92685, 333-92201, 333-30724, 333-36944, 333-41618 and 333-41620), (v) Current
Report on Form 8-K filed January 4, 2000, and (vi) Definitive Proxy Statements
filed September 15, 1999 and April 26, 2000 (collectively, the "SEC Documents").
The Purchaser has had full opportunity to review, and has reviewed to the
Purchaser's full satisfaction, the SEC Documents. The Purchaser acknowledges
that the Purchaser has had the opportunity to ask
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questions of and receive answers from, or obtain additional information from,
the executive officers of the Company concerning the financial and other affairs
of the Company, and to the extent deemed necessary in light of the Purchaser's
personal knowledge of the Company's affairs, the Purchaser has asked such
questions and received answers to the full satisfaction of the Purchaser, and
the Purchaser desires to invest in the Company.
(j) No General Solicitation. The Purchaser acknowledges that the
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Common Shares were not offered to the Purchaser by means of any form of general
or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which the Purchaser was invited by any of the foregoing means of communications.
(k) No Commissions or Similar Fees. In connection with the purchase
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of the Common Shares by the Purchaser, the Purchaser has not and will not pay,
and has no knowledge of the payment of, any commission or other direct or
indirect remuneration to any person or entity for soliciting or otherwise
coordinating the purchase of such securities, except to such persons or entities
as are duly licensed and/or registered to engage in securities offering and
selling activities (or are exempt from such licensing and/or registration
requirements) under applicable federal laws and the laws of the state(s) in
which such activities have taken place in connection with the transaction
contemplated by this Agreement.
ARTICLE III
Registration
The Company covenants with the Purchaser that the Company, at its sole cost
and expense, will file a registration statement registering the resale of the
Common Shares no later than forty-five (45) days after the Closing Date and use
its best efforts to cause the registration statement to be declared effective
within ninety (90) days after the Closing Date and will keep such registration
statement effective until the Common Shares may be sold under Rule 144 without
regard to the volume limitations thereunder (the "Registration Period"). If the
Common Shares are not registered for resale on or before the 120th day after the
date hereof (the "Penalty Date"), or if after the Registration Statement becomes
effective, it is withdrawn, suspended or otherwise not available for more than
20 days on a cumulative basis for resale of the Common Shares prior to the
expiration of the Registration Period, then the Company will pay to the
Purchaser as liquidated damages a payment for the first 30 days equal to 2% of
the Closing Purchase Price apportioned to the Common Shares which the Purchaser
continues to hold (with a partial period being pro-rated) and 1% of the Closing
Purchase Price apportioned to the Common Shares which the Purchaser continues to
hold for each 30 days thereafter (pro-rated for a partial period). The
foregoing liquidated damages will cease to accrue at such time that the
registration statement is declared effective or becomes available or the
Purchaser may rely on Rule 144 for the resale of the Common Shares without
limitations, whichever is earlier. The provisions pertaining to the Company's
obligations pursuant to this Article III are set forth in the Registration
Rights Agreement attached hereto as Appendix X. To the extent there is a
conflict between the provisions of this Article III and the terms of the
Registration Rights Agreement, the provisions of this Article III will control.
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ARTICLE IV
Transfer Agreement; Voting
Section 4.1 Transfer Restrictions. The Purchaser agrees to be bound by
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the terms and conditions set forth in Exhibit B restricting the sale or transfer
of Common Shares.
Section 4.2 Agreement to Vote. For so long as the Company has not
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committed a material breach of this Agreement, and this Agreement has not been
terminated, the Purchaser agrees to vote all Common Shares beneficially held by
it in favor of all nominees to the Company's board of directors who are
nominated by the then current Board of Directors of the Company.
ARTICLE V
Stock Certificate Legend
Section 5.1 Legend. Each certificate representing the Common Shares, as
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applicable and appropriate, shall be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any legend required
by applicable federal, provincial or state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR OBJECTSOFT CORPORATION (THE "COMPANY") SHALL
HAVE RECEIVED AN OPINION IN FORM, SCOPE AND SUBSTANCE REASONABLY
ACCEPTABLE TO THE COMPANY, OF COUNSEL, WHO IS REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
VOTING, TRANSFER AND OTHER AGREEMENTS SET FORTH IN A COMMON STOCK
PURCHASE AGREEMENT DATED AS OF AUGUST 24, 2000 AMONG THE COMPANY AND
CERTAIN PURCHASERS.
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ARTICLE VI
Termination
This Agreement may be terminated at any time prior to the Closing by the
mutual written consent of the Company and the Purchaser.
ARTICLE VII
Miscellaneous
Section 7.1 Fees and Expenses. Each party shall pay the fees and expenses
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of its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement.
Section 7.2 Consent to Jurisdiction.
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Each of the Company and the Purchaser (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereunder or thereunder and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law.
Section 7.3 Entire Agreement; Amendment. This Agreement contains the
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entire understanding and agreement of the parties with respect to the matters
covered hereby and, except as specifically set forth herein or in the
Transaction Documents, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters,
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended, except by a written instrument signed by the Company
and the Purchaser.
Section 7.4 Notices. Any notice, demand, request, waiver or other
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communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
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If to the Company: ObjectSoft Corporation
Continental Plaza III
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn.: Xxxxx X.X. Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
with copies to:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchaser: At the address of the Purchaser as set forth on
Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 7.5 Waivers. No waiver by either party of any default with
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respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings in
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this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding upon
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and inure to the benefit of the parties and their successors and assigns. No
rights or obligations hereunder may be assigned by either party hereto, except
that the rights and obligations of the Company may be assigned.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended for
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the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
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construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
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Section 7.10 Survival. The representations, warranties, agreements and
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covenants set forth in this Agreement shall survive the execution and delivery
hereof and the Closing hereunder indefinitely.
Section 7.11 Counterparts. This Agreement may be executed in any number
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of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
Section 7.12 Severability. The provisions of this Agreement are severable
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and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 7.13 Further Assurances. From and after the date of this
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Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
OBJECTSOFT CORPORATION
By: /s/ Xxxxx X.X. Xxxxx
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Name: Xxxxx X.X. Xxxxx
Title: Chairman
LA JOLLA COVE INVESTORS, INC.
By: /s/ Xxxxxx Xxxx
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Name: Xxxxxx Xxxx
Title: President
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EXHIBIT A
to the
COMMON STOCK PURCHASE AGREEMENT
OBJECTSOFT CORPORATION
Purchaser Number of Common Shares Initial Purchase Price
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La Jolla Cove Investors, Inc. 450,000 Common Shares $410,690.70
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxx, President
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
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Exhibit B
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1. On the date hereof, the Company will issue and sell to the Purchaser, and
the Purchaser will purchase from the Company, the Common Shares at $.91265
per Share (the "Closing Price Per Share") (which is 73% of the lower of (a)
the closing bid price of the Common Stock on the last trading day prior to
the date hereof or (b) the average of the closing bid prices for the five
trading days prior to the date hereof), for a total purchase price for all
of the Common Shares of $410690.7 (the "Closing Purchase Price"). Upon
receipt of the shares, 30% of the Closing Purchase Price shall be paid by
wire transfer directly to the Company and 70% of the Closing Purchase Price
shall be paid into escrow (the "Initial Escrow Amount"). 20% of the original
Closing Purchase Price (the "Initial Release Amount") shall be released from
escrow to the Company on the date that the Company notifies (a) the
Purchaser as to the effectiveness of the registration statement referred to
in Article III (the "Registration Statement") and (b) its transfer agent
that the Common Shares may be freely sold thereunder subject to the
prospectus delivery requirements (the "Registration Date"), provided that
the closing bid price of the Common Stock is at least $0.75 per share, based
on an average of the five trading days preceding the effective date of the
Registration Statement. (In the event that this $0.75 per share condition is
not met, the 20% of the original Closing Purchase Price shall be released
once such condition is met.) The remaining escrowed 50% of the Closing
Purchase Price shall be distributed pursuant to the provisions of Section 4
hereof. Notwithstanding anything herein to the contrary, if on the 140th day
from the Closing Date, the Initial Release Amount has not been released from
escrow because the Registration Statement has not become effective, the
Initial Escrow Amount shall be delivered by the escrow agent to the
Purchaser to be held by the Purchaser until the Company becomes entitled to
the Initial Release Amount, at which time the Initial Release Amount shall
be delivered to the Company and the remaining balance returned to the
escrow.
2. The Purchaser agrees that it may not sell or transfer the Common Shares
before the date (the "Effective Date") which is the earlier of (a) the
Registration Date and (b) one year after the date hereof. The Purchaser also
agrees that, on and after the Effective Date, it will not sell or transfer
any of the Common Shares except in accordance with the following schedule:
beginning the Effective Date and on each 30th day thereafter until the 120th
day after the Effective Date (the Effective Date and each such 30th day, a
"Monthly Release Date"), the Purchaser may sell or transfer one-fifth
(1/5th) of the original number of Common Shares (that is, 450,000 Common
Shares) on and after each Monthly Release Date plus any amounts unsold from
the prior month(s).
3. On the 30th day after the Effective Date ("Initial Determination Date"),
provided that (a) the Registration Statement is then effective or (b) all
steps required to be taken on the part of the Company have been taken to
allow Purchaser to effect a sale under Rule 144 which Purchaser has elected
to make (the "Resale Conditions"), the Purchaser will pay to the Company the
amount, if any, by which the Redetermined Purchase Price (as defined herein)
of the Common Shares determined as of the Initial Determination Date exceeds
one-third of the Closing Purchase Price (provided that such amount shall be
paid only if, as of the Initial Determination Date, the Redetermined
Purchase Price per share of the Common Shares exceeds the Closing Price Per
Share by at least $.50). Thereafter, on the 75th day after the Effective
Date provided that the Resale Conditions have been satisfied
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("Interim Determination Date"), the Purchaser will pay to the Company the
amount, if any, by which the Redetermined Purchase Price of the Common
Shares determined as of the Interim Determination Date exceeds one-third of
the Closing Purchase Price (provided that such amount shall be paid only if,
as of the Interim Determination Date, the Redetermined Purchase Price per
share of the Common Shares exceeds the Closing Price Per Share by at least
$.50). In no event will the Company be required to make any payment or issue
any shares of stock to the Purchaser as a result of any of the foregoing
determinations (except to the extent provided in Section 4 in connection
with the Final Determination Date (as defined herein)). 40% of each payment
required to be made to the Company under this Section 3 will be paid
directly to the Company by wire transfer of immediately available funds and
60% of each such payment will be paid into the Escrow to be distributed
pursuant to the provisions of Section 4 hereof. For purposes of this
Agreement, the "Redetermined Purchase Price" for the Common Shares as of a
particular date of determination shall mean (a) 73% of the average of the
closing bid prices of the Common Stock for all of the trading days in the 30
calendar days preceding the date of determination, multiplied by (b) one-
third of the original number of shares of Common Stock representing the
Common Shares.
4. On the 120th day after the Effective Date ("Final Determination Date"), a
final determination will be made as of such date based upon the following
formula. The "Final Price" for the Common Shares will be 73% of (a) the
average of all the closing bid prices for the Common Stock for all trading
days in the 120 day period prior to the Final Determination Date, multiplied
by (b) the original number of shares of Common Stock representing the Common
Shares. If the Final Price for the Common Shares is less than the sum of the
Closing Purchase Price and all amounts, if any, previously paid to the
Company (including amounts paid into the Escrow) under Section 3 hereof,
then the Company will pay to the Purchaser, no later than 10 days after the
Final Determination Date, the amount of such difference (the "Deficiency")
as follows: the amount in the Escrow shall first be used to pay the
Deficiency and any Escrow balance shall be paid immediately to the Company.
If the total amount in Escrow is insufficient to pay the Deficiency, then
the Company shall pay the balance of the Deficiency, after the remaining
escrowed amount is used, at the Company's sole discretion, either in cash,
or in shares of Common Stock valued at 73% of the average of all of the
closing bid prices of the Common Stock for the 15 trading days preceding the
date of such payment (such discounted valuation herein referred to as the
"Deficiency Share Price"), or by combination of cash and shares of Common
Stock valued as aforesaid. (Notwithstanding anything herein to the contrary,
the Company will not be permitted to issue shares of Common Stock under this
Section 4 to the extent such issuance would exceed the maximum number of
shares which the Company may issue under this Agreement without breaching
the Company's obligations under Section 4310(c)(25)(H) of the Nasdaq
Marketplace Rules or other similar requirement and, to such extent, the
balance of the Deficiency must be paid in cash.) If the Final Price for the
Common Shares is more than the sum of the Closing Purchase Price and all
amounts, if any, previously paid to the Company (including amounts paid into
the Escrow) under Section 3 hereof, then, Purchaser will pay to the Company,
no later than 10 days after the Final Determination Date or, if the Resale
Conditions have not been satisfied as of the Final Determination Date, ten
days after the Resale Conditions have been satisfied, the amount of such
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difference in full and the remaining escrowed amount will be immediately
released and paid to the Company.
5. On the date hereof, the Company, the Purchaser and Loeb & Loeb LLP, as
Escrow Agent (the "Escrow Agent"), have entered into an Escrow Agreement
(the "Escrow Agreement") providing for the escrow to hold a portion of the
cash otherwise payable to the Company. The parties hereto agree to give the
Escrow Agent the joint instructions necessary to implement the provisions of
Section 4 hereof. Income earned on escrowed amounts will be distributed
along with the escrowed amount to the party receiving the distribution. The
Company agrees, no later than 10 days after the Final Determination Date, to
reimburse the Purchaser for one-half of the Escrow Agent's fees actually
paid by the Purchaser in connection with the performance of the Escrow
Agent's obligations under the Escrow Agreement, in an amount not to exceed
$1,750; to the extent any amounts are payable to the Company by the
Purchaser or the Escrow Agent under Section 4, this reimbursement obligation
will be paid from, and offset against, the amounts so payable under Section
4.
6. The Company covenants with the Purchaser that, if the Company elects to
issue shares of Common Stock to the Purchaser under Section 4 ("Deficiency
Shares"), the Company, at its sole cost and expense, will file a
registration statement registering the resale of the Deficiency Shares no
later than forty-five (45) days after the Final Determination Date and use
its best efforts to cause the registration statement to be declared
effective within ninety (90) days after the Final Determination Date and
will keep such registration statement effective until the Deficiency Shares
may be resold under Rule 144 without regard to the volume limitation rules
thereunder (the "Registration Period"). If the Deficiency Shares are not
registered for resale on or before the 120th day after the Final
Determination Date (the "Non-Registration Penalty Date") or if after the
registration statement becomes effective, it is withdrawn, suspended or
otherwise not available for more than twenty days on a cumulative basis for
resale of the Deficiency Shares prior to the expiration of the Registration
Period, then the Company will pay to the Purchaser as liquidated damages a
payment for the first 30 days after the Non-Registration Penalty Date equal
to 2% of the Deficiency Share Price apportioned to the Deficiency Shares
which the Purchaser continues to hold (with a partial period being pro-
rated) and 1% of the Deficiency Share Price apportioned to the Deficiency
Shares which the Purchaser continues to hold for each 30 days thereafter
(pro-rated for a partial period). The foregoing liquidated damages will
cease to accrue at such time that the registration statement is declared
effective or becomes available or the Purchaser may rely on Rule 144 for the
resale of the Deficiency Shares without limitations, whichever is earlier.
The provisions pertaining to the Company's obligations pursuant to this
paragraph 6 are set forth in the Registration Rights Agreement.
7. Examples illustrating the foregoing are set forth on Exhibit C to the Common
Stock Purchase Agreement.
8. All share and dollar amounts set forth herein shall be appropriately
adjusted for any stock splits, stock dividends, recapitalizations and
similar events
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Exhibit C
---------
The following examples assume that the closing bid price of the Common
Stock on the Closing Date and for the five trading days prior to the Closing
Date is $1.50 per share and that the Purchaser purchases an aggregate of 400,000
shares of Common Stock (the "Common Shares"). Therefore, the Closing Purchase
Price would be $438,000 (face value of the Common Shares would be $600,000). On
the Closing Date, the Purchaser would wire $131,400 to the Company (30% of the
Closing Purchase Price) and the remaining $306,600 to the escrow account.
Example 1
---------
From Effective Date until Final Determination Date, average closing bid price is
$1.50.
On Effective Date, $87,600 is released from escrow to the Company, leaving
$219,000.
On the 30/th/ day after Effective Date, $0.00 released to the Company.
On the 75/th/ day after Effective Date, $0.00 released to the Company.
On the Final Determination Date--The "Deficiency" (as defined) would be zero,
(400,000shrs x $1.50 x .73 - $438,000). The $219,000 in escrow would be paid to
the Company.
Example 2
---------
From Effective Date until Final Determination Date, average closing bid is
$1.00.
On Effective Date, $87,600 is released from escrow to the Company, leaving
$219,000.
On the 30/th/ day after Effective Date, $0.00 released to the Company.
On the 75/th/ day after Effective Date, $0.00 released to the Company.
On the Final Determination Date--The Deficiency would be $146,000,
(400,000shrs x $1.00 x .73 - $438,000). The Deficiency of $146,000 is released
to the Purchaser from escrow and the balance of $73,000 would be released to the
Company.
Example 3
---------
From Effective Date until Final Determination Date, average closing bid is $0.40
On Effective Date, $0.00 is released to the Company.
On the 30/th/ day after Effective Date, $0.00 released to the Company.
On the 75/th/ day after Effective Date, $0.00 released to the Company.
On the Final Determination Date--The Deficiency would be $321,200 (400,000shrs x
$0.40 x .73 - $438,000). All escrowed monies ($306,600) would be released to
Purchaser and the balance of the Deficiency - $14,600 -- would be payable by the
Company to the Purchaser. Furthermore, assuming that the average closing bid
price were $0.40 per share during the 15 trading days preceding the date of
payment, and the Company elected to make the payment in shares of the Company,
the share amount to be delivered would be 50,000 shares.
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Example 4
---------
From Effective Date until Final Determination Date, average closing bid is
$2.0625.
On Effective Date, $87,600 is released to the Company (leaving $219,000 in
escrow).
On the 30/th/ day after Effective Date a $54,750 payment would be made by
Purchaser ($2.0625 x .73 x 1/3 of 400,000shrs) - (1/3 of $438,000). Of this,
$21,900 would be paid to the Company and $32,850 would go to escrow, (making a
total of $251,850 in escrow).
On the 75/th/ day after the Effective Date a $54,750 payment would be made by
Purchaser ($2.0625 x .73 x 1/3 of 400,000shrs) - (1/3 of $438,000). Of this,
$21,900 would be paid to the Company and $32,850 would go to escrow, (making a
total of $284,700 in escrow).
On the Final Determination Date--The Purchaser would be required to pay the
Company the additional amount of $54,750 (400,000shrs x $2.0625 x .73 -$438,000
-$54,750 -$54,750) and the entire amount of $284,700 would be released to the
Company from escrow.
Example 5
---------
From the Effective Date until the 30/th/ day after, the average closing bid is
$10.00.
From the 31/st/ day until the Final Determination Date the average closing bid
is $1.00
On the Effective Date, $87,600 is released from escrow to the Company, (leaving
$219,000 in escrow).
On the 30/th/ day after the Effective Date a $827,333.33 payment would be made
by Purchaser ($10.00 x .73 x 1/3 of 400,000shrs) - (1/3 of $438,000). Of this,
$330,933.33 would be paid to the Company and $496,400 would go to escrow, making
a total of $715,400 in escrow.
On the 75/th/ day after Effective Date, $0.00 released to the Company.
On the Final Determination Date--The Deficiency would be $316,333.33
(400,000shrs x $3.25 x .73 -$438,000 - $827,333.33) which would be paid to the
Purchaser from escrow, and the balance of $399,066.67 would be released to the
Company from escrow.
Example 6
---------
From the Effective Date until the 30/th/ day after, the average closing bid is
$2.0625.
From the 31/st/ day until the 75/th/ day after, the average closing bid is
$0.70.
From the 76/th/ day until the Final Determination Date the average closing bid
is $0.05.
On the Effective Date, $87,600 is released from escrow to the Company, (leaving
$219,000 in escrow).
On the 30/th/ day after the Effective Date a $54,750 payment would be made by
Purchaser ($2.0625 x .73 x 1/3 of 400,000shrs) - ($1/3 of $438,000). Of this,
$21,900 would be paid to the Company and $32,850 would go to escrow (making a
total of $251,850 in escrow).
On the 75/th/ day after the Effective Date, $0.00 would be released to the
Company.
On the Final Determination Date--The Deficiency would be $260,026. (average
closing bid of $0.797 x .73 x 400,000shrs - $438,00-$54,750). All escrowed
monies ($251,850) would be released to the Purchaser and the balance of $8,176
would be paid by the
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Company to the Purchaser. Furthermore, assuming that the average closing bid
price were $0.05 per share during the 15 trading days preceding the date of
payment, and the Company elects to pay such balance in shares of the Company,
the share amount to be delivered would be 224,000.
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