U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO _________
Commission file number 0-24273
MAX INTERNET COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 75-2715335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8115 Preston Road, Eighth Floor - East
Dallas, Texas 75225
(Address of principal executive offices)
(214) 691-0055
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Number of shares outstanding of the Registrant's common stock (par value $.0001
per share) as of December 31, 1999: 15,924,492.
Transitional Small Business Disclosure Format
(Check one)
Yes No X
--- ---
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MAX INTERNET COMMUNICATIONS, INC.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 137,765 $ 8,136,585
Accounts receivable 4,868,053 169,217
Receivable from former subsidiary 5,999,030 --
Inventories 3,096,796 1,286,539
Prepaid expenses 171,130 44,475
------------ ------------
Total current assets 14,272,774 9,636,816
PROPERTY AND EQUIPMENT, AT COST
Machinery and equipment 293,351 87,830
Furnishings 76,327 67,634
------------ ------------
369,678 155,464
Less accumulated depreciation 55,525 27,969
------------ ------------
314,153 127,495
OTHER ASSETS 804,638 901,336
------------ ------------
$ 15,391,565 $ 10,665,647
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,217,956 $ 113,356
Accrued expenses 2,209,651 788,797
Deferred income 247,792 --
Notes payable to officers and directors 500,000 --
------------ ------------
Total current liabilities 4,175,399 902,153
LONG-TERM DEBT -- --
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $100 par value; Series A, authorized, 100,000
shares; issued and outstanding, 80,000 shares 8,000,000 8,000,000
Preferred stock, $.0001 par value; Series B convertible, authorized,
350,000 shares; none issued and outstanding -- --
Common stock, $.0001 par value; authorized, 50,000,000 shares;
issued and outstanding, 15,924,492 shares at December 31, 1999 and
15,772,823 shares at June 30, 1999 1,592 1,577
Additional paid-in capital 18,430,967 17,693,743
Accumulated deficit (15,003,893) (15,719,326)
------------ ------------
11,428,666 9,975,994
Less 200,000 shares of common stock in treasury - at cost (212,500) (212,500)
------------ ------------
11,216,166 9,763,494
------------ ------------
$ 15,391,565 $ 10,665,647
============ ============
</TABLE>
See notes to financial statements.
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MAX INTERNET COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 8,133,086 $ 60,127 $ 10,770,240 $ 248,559
Cost of sales 3,700,420 27,346 4,963,237 94,066
------------ ------------ ------------ ------------
Gross profit 4,432,666 32,781 5,807,003 154,493
Selling, general and administrative expenses 3,052,447 965,674 4,692,548 1,580,265
------------ ------------ ------------ ------------
Operating income (loss) 1,380,219 (932,893) 1,114,455 (1,425,772)
Gain on sale of subsidiary 86,096 -- 86,096 --
Interest income 18,882 -- 95,314 --
Interest expense (409) (26,585) (432) (72,757)
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes 1,484,788 (959,478) 1,295,433 (1,498,529)
Income taxes 412,000 -- 580,000 --
------------ ------------ ------------ ------------
Income (loss) from continuing operations 1,072,788 (959,478) 715,433 (1,498,529)
Loss from discontinued operations -- (621,786) -- (1,780,392)
Gain on disposal of discontinued operations -- -- -- 1,905,494
------------ ------------ ------------ ------------
Net earnings (loss) $ 1,072,788 $ (1,581,264) $ 715,433 $ (1,373,427)
============ ============ ============ ============
Earnings (loss) per share - basic:
From continuing operations $ .07 $(.14) $ .05 $(.23)
===== ===== ===== =====
From discontinued operations $-- $(.09) $-- $ .02
===== ===== ===== =====
Earnings (loss) per share - basic $ .07 $(.23) $ .05 $(.21)
===== ===== ===== =====
Earnings (loss) per share - diluted:
From continuing operations $ .06 $(.14) $ .04 $(.23)
===== ===== ===== =====
From discontinued operations $-- $(.09) $-- $ .02
===== ===== ===== =====
Earnings (loss) per share - diluted $ .06 $(.23) $ .04 $(.21)
===== ===== ===== =====
Weighted average shares outstanding - basic 15,841,569 6,802,000 15,824,903 6,498,231
Dilutive effect of options and warrants 2,496,247 -- 1,726,914 --
------------ ------------ ------------ ------------
Weighted average shares outstanding - diluted 18,337,816 6,802,000 17,551,817 6,498,231
============ ============ ============ ============
</TABLE>
See notes to financial statements.
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<TABLE>
<CAPTION>
MAX INTERNET COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1999
Series A
Common stock Preferred stock Additional
-------------- ----------------- paid-in Accumulated Treasury
Shares Amount Shares Amount Capital Deficit Stock
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1999 15,772,823 $ 1,577 80,000 $ 8,000,000 $ 17,693,743 $(15,719,326) $ (212,500)
Sales of common stock 126,669 12 -- -- 506,664 -- --
Stock options issued -- -- -- -- 96,188 -- --
Shares issued in payment
of liabilities 25,000 3 -- -- 134,372 -- --
Net earnings -- -- -- -- -- 715,433 --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31,
1999 15,924,492 $ 1,592 80,000 $ 8,000,000 $ 18,430,967 $(15,003,893) $ (212,500)
============ ============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
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MAX INTERNET COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended
December 31,
1999 1998
------------ ------------
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Cash flows from operating activities
Net earnings (loss) $ 715,433 $ (1,373,427)
Gain from discontinued operations -- (125,102)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Depreciation and amortization 170,183 373,795
Stock options issued for services 96,188 --
Change in operating assets and liabilities:
Prepaid expenses (129,780) (405,145)
Receivables (10,697,866) (100,699)
Inventories (1,810,257) (106,286)
Other assets (42,804) 69,824
Accounts payable and accrued expenses 2,907,621 44,384
------------ ------------
Net cash used in continuing operations (8,791,282) (1,622,656)
Net cash used by discontinued operations -- (656,885)
------------ ------------
Net cash used in operating activities (8,791,282) (2,279,541)
Cash flows from investing activities
Purchase of property and equipment (214,214) (57,522)
Cash flows from financing activities
Sales of common stock 506,676 555,000
Borrowings on notes payable to stockholders 500,000 --
------------ ------------
Net cash provided by financing activities 1,006,676 555,000
------------ ------------
Net decrease in cash (7,998,820) (1,782,063)
Cash and cash equivalents at beginning of period 8,136,585 1,774,091
------------ ------------
Cash and cash equivalents at end of period $ 137,765 $ (7,972)
============ ============
Noncash financing activities:
Issuance of common stock or options in payment of liabilities $ 230,563 $ 56,250
============ ============
Conversion of convertible debentures $ -- $ 400,000
============ ============
Conversion of Series B preferred stock $ -- $ 145,000
============ ============
</TABLE>
See notes to financial statements
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MAX INTERNET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
These financial statements have not been examined by independent certified
public accountants, but in the opinion of management, all adjustments
(consisting of normal recurring accruals and adjustments) necessary for a
fair presentation of consolidated results of operations, financial position
and cash flows at the dates and for the periods indicated, have been
included.
These financial statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Operating results for the six-month and three-month
periods ended December 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending June 30, 2000. For further
information, refer to the consolidated financial statements and notes
thereto for the fiscal year ended June 30, 1999 included in the Company's
Form 10-KSB, as filed with the Securities and Exchange Commission on
September 28, 1999.
These financial statements include the accounts of MAX Internet
Communications, Inc., (MAX) and its wholly-owned subsidiaries, MAXpc
Technologies, Inc. (MAXpc), MAX Internet Communications do Brasil LTDA
(Brasil), and MAX Internet Communications Deutschland GmbH (GmbH),
collectively, "the Company." MAX changed its name in November, 1999 from
Voxcom Holdings, Inc. (Holdings).
MAX Internet Communications Deutschland GmbH was incorporated in Frankfurt,
Germany on August 4, 1999, and MAX Internet Communications do Brasil LTDA
was formed in Rio de Janeiro, Brazil on September 14, 1999. Both of these
companies sell and service the MAX i.c. Live card in their respective
regions, as well as other products the company may develop.
Effective December 31, 1999 MAX sold the stock of Brasil to Brasil's
management. Brasil will continue to sell and service the MAX i. c. Live
card under a distributor agreement between the companies. Management
believes this arrangement will enhance the ability of Brasil to sell the
card throughout its territory in South America due to its local ownership.
The financial statements include the operations of Brasil and GmbH from the
dates of formation. Brasil is included through the effective date of sale.
NOTE B - BUSINESS
MAX assembles, through contractors, and markets a PC Internet Media
Processor Card, the MAX i.c. Live 3600, and an information appliance, the
MAX i.c. Live Video Communication Station. The core technology of both
products, the MAX i.c. Live Internet Media Processor, delivers the power to
conduct true-motion, synchronized video and audio communications and
high-quality video and audio streaming and browsing over a broadband
Internet connection. The MAX i.c. Live Internet Media Processor also
integrates full DVD and Dolby AC-3 surround sound for a complete video
communication and entertainment solution.
The MAX i.c. Live card enhances the performance of personal computers,
either as an add-in at time of manufacture or installed into existing
units. The card, with its own inbuilt processor, has the ability to perform
multi-media software functions simultaneously if need be, without
detracting from the central processor of the computer. Additional software
can be added to the card as developed.
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<PAGE>
The company continues to look for additional software applications which
may be integrated into the card, and it is believed some of these will give
rise to the availability of patent protection. The company will continue
limited research and development in this regard.
NOTE C - ACQUISITION AND DISPOSITION OF BUSINESSES
Effective October 1, 1997, the company formed Home Business Group Inc.
(HBG) to acquire certain assets and assume the liabilities of a company
engaged in the business of home-based business seminars for no
consideration. A major stockholder and officer of the acquired business is
a stockholder and officer of the company. The acquisition was accounted for
as a purchase.
On September 30, 1998, the company sold the stock of HBG to HBG's
management in exchange for the redemption of 200,000 shares of the
company's common stock previously owned by such management.
Effective January 15, 1999, the company closed AmeraPress, as it had been
unable to generate sufficient business activity to justify its ongoing
overhead following the sale of HBG described above. The company sold
AmeraPress in June 1999.
Effective February 19, 1999, the company closed Systems, as it had been
unable to generate sufficient business activity to justify its ongoing
overhead following the sale of HBG and the closure of AmeraPress described
above. The company sold Systems in June 1999.
During the quarter ended September 30, 1999, MAX formed two new
subsidiaries, both of which are 100% owned. MAX Internet Communications
Deutschland GmbH was incorporated in Frankfurt, Germany on August 4, 1999,
and MAX Internet Communications do Brasil Ltda was formed in Rio de
Janeiro, Brazil on September 14, 1999. Both of these companies will sell
and service the MAX i.c. Live card in their respective regions, as well as
other products the company may develop.
Effective December 31, 1999 MAX sold the stock of Brasil to Brasil's
management for approximately $320,000, resulting in a net gain of $86,096.
Brasil will continue to sell and service the MAX i. c. Live card under a
distributor agreement between the companies.
If the disposition had taken place at the beginning of the periods, Net
Sales would have been reduced by $1,065,377 for the three and six months
ended December 31, 1999 with no material effect on Net Earnings or Earnings
per Share.
NOTE D - MAJOR CUSTOMERS
Two customers accounted for 46% and 39% of the company's sales for the six
months ended December 31, 1999.
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<PAGE>
MAX INTERNET COMMUNICATIONS, INC.
ITEM 2. Management's discussion and analysis.
Results of Operations
Six and three months ended December 31, 1999 compared to six and three months
ended December 31, 1998
Net Sales
Net sales from continuing operations were $10,770,240 for the six months ended
December 31, 1999, an increase of $10,521,681 over the $248,559 for the six
months ended December 31, 1998. Net sales were $8,133,086 for the three months
ended December 31, 1999, an increase of $8,072,959 over the $60,127 for the
three months ended December 31, 1998. Sales for the three and six months ended
December 31, 1999 are primarily comprised of sales to two customers. Recognition
of sales to certain distributors has been deferred until such time as the
product moves through the distribution channels to the distributors' customers.
The company has discontinued the businesses that were the primary operations in
the prior year and restructured its business plan to direct all resources to its
MAX i.c. Live product. The marketing of the MAX i.c. Live product was in its
early stages during the six months ended December 31, 1999. As of December 31,
1999 the marketing plan and materials are complete, and the first print ads
appeared in November 1999. Contract negotiations for sales of the MAX i.c. Live
product are ongoing, and are expected to generate increasing net sales and net
earnings in future quarters.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 197% to $4,692,548 for
the six months ended December 31, 1999 from $1,580,265 for the six months ended
December 31, 1998; and increased 216% to $3,052,447 for the three months ended
December 31, 1999 from $965,674 for the three months ended December 31, 1998.
This increase is due to significant increases in advertising, marketing and
selling expenses related to the MAX i.c. Live product, as well as the overhead
structure which has been put into place in order to generate and service
expected future increases in net sales.
Interest Income and Expense
The interest income of $95,314 and $18,882, respectively, for the six and three
months ended December 31, 1999 was earned on the available cash balances the
Company has invested in money market funds. There was virtually no interest
expense during these periods. Interest expense for the six and three months
ended December 31, 1998 of $72,757 and $26,585, respectively, was incurred
primarily on convertible debentures. This debt has been fully converted to
common stock as of November 1998, and no further interest is payable.
Income Taxes
The income tax expense of $580,000 and $412,000 for the six and three months
ended December 31, 1999 is computed on the net income in Brasil.
Discontinued Operations
On September 30, 1998, the company sold the stock of a wholly owned subsidiary,
HBG, to HBG's management in exchange for the redemption of 200,000 shares of the
Company's common stock previously owned by such management.
Effective January 15, 1999, the company closed AmeraPress, as it had been unable
to generate sufficient business activity to justify its ongoing overhead
following the sale of HBG described above. AmeraPress was sold on June 30, 1999.
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MAX INTERNET COMMUNICATIONS, INC.
Management's discussion and analysis - continued
Effective February 19, 1999, the company closed Systems, as it had been unable
to generate sufficient business activity to justify its ongoing overhead
following the sale of HBG and the closure of AmeraPress described above. Systems
was sold on June 30, 1999.
The financial statements for the six months ended December 31, 1998 reflect the
results of operations of Systems, AmeraPress and HBG as discontinued operations.
Liquidity and Capital Resources
Cash and cash equivalents decreased $7,998,820 in the six months ended December
31, 1999. Net cash used in operating activities for the period was $8,791,282.
This cash used in operating activities primarily consisted of increases in
receivables of $10,697,866, inventories of $1,810,257 and prepaid expenses of
$129,780; offset by an increase in accounts payable and accrued expenses of
$2,907,621. The company continues to increase inventories in part because of the
need to purchase certain components well in advance of the scheduled production
date, due to competition for these parts. Cash used in investing activities
consisted of approximately $214,000 in purchases of property and equipment.
Financing activities generated approximately $1,007,000, consisting of $507,000
of sales of common stock and $500,000 of borrowings from two officers/directors.
Working capital at December 31, 1999 increased by 15.6%, to $10,097,375 from
$8,734,663 at June 30, 1999. However, due to the need to purchase inventories in
advance, and the selling of product on terms to customers, the company
anticipates it will need additional working capital resources. To this end, in
February 2000 the company finalized a private equity investment that has
provided net proceeds to the company of approximately $6,500,000 in cash. In
addition, the investor has an option to acquire 400,000 additional shares for
$4,000,000 in cash. Management believes its working capital, combined with the
private equity investment, will be sufficient to fund inventory and receivable
increases and meet ongoing overhead expenses, plus pursue an aggressive
advertising and marketing campaign for the MAXpc product. Future cash resources
available to the company are expected to come from profitable operations.
Year 2000
The company began an internal assessment of its Year 2000 preparedness in the
early months of 1998, through a review of all equipment and software. Any issues
found were addressed through software and hardware updates provided to our
company by the software and/or hardware vendors. These updates were provided at
minimal cost.
The company also contacted its major component suppliers and its contract
manufacturers. None indicated that it anticipated any material internal risks.
At this date, the company has not experienced problems related to Year 2000
compliance, and is not aware of any remaining problems related to Year 2000
issues. However, the company will continue to monitor the status of suppliers
and manufacturers.
Forward Looking Statements
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MAX INTERNET COMMUNICATIONS, INC.
Management's discussion and analysis - continued
This document includes statements which may constitute "forward-looking"
statements, usually containing the words "believe", "estimate", "project",
"expect" or similar expressions. These statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements inherently involve risks and uncertainties that
could cause actual results to differ materially from the forward-looking
statements. Factors that would cause or contribute to such differences include,
but are not limited to, continued acceptance of the Company's products in the
marketplace, competitive factors, changes in regulatory environments, and other
risks detailed in the Company's periodic report filings with the Securities and
Exchange Commission. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or changes
after the date of this filing.
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<PAGE>
MAX INTERNET COMMUNICATIONS, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company has filed a lawsuit alleging breach of contract against
Heartland Payment Systems, LLC (Heartland), a credit card processing
company which has performed this function for the company. Heartland then
filed suit against the company alleging breach of contract, and asking
for an unspecified amount. As yet, this case has not yet reached the
discovery stage. Management believes that the ultimate resolution of this
case will not have a material effect on financial position, results of
operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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<CAPTION>
The company held its Annual Meeting of Stockholders on November 15, 1999.
Following are descriptions of the matters voted on and the results of
such votes:
Matter Voted On For Against Abstain
<S> <C> <C> <C>
1. Election of Directors
Lawrence R. Biggs 12,348,891 - 1,700
Donald G. McLellan 12,348,891 - 1,700
Larry Cahill 12,348,891 - 1,700
Ronald L. Brown 12,348,891 - 1,700
Harold C. Clark 12,348,891 - 1,700
Brahil Santos 12,348,891 - 1,700
Brian K. Norman 12,348,891 - 1,700
Dr. Alexander Dehmel 12,348,891 - 1,700
2. Amend the Articles of Incorporation
to change the name of the company
to MAX Internet Communications, Inc. 12,350,391 - 200
3. Amend the Articles of Incorporation
to increase the number of authorized
shares to 50,000,000 12,318,878 25,013 6,700
4. Adopt the 1999 Stock Option Plan 12,326,099 14,406 10,086
5. Approve Grant Thornton LLP as the
company's auditors for the year 2000 12,338,408 11,000 1,183
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.9.1 Securities Purchase Agreement with Boxer Partners LLC dated
January 26, 2000 to purchase 727,273 shares of Common Stock.
10.9.2 Warrant issued to Boxer Partners, LLC
10.9.3 Registration Rights Agreement with Boxer Partners, LLC
10.10 Subscription Agreement with Nexus Co., Ltd. to purchase 125,000
shares of Common Stock
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10.11 Subscription Agreement with OBM Corporation to purchase 125,000
shares of Common Stock
10.12 Subscription Agreement with Private Equity Japan Co., Ltd. to
purchase 125,000 shares of Common Stock
10.13 Stock Purchase Agreement with Clear Springs Investments Ltd. dated
December 31, 1999 for the sale of MAX Internet Communications do
Brasil Ltda.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAX Internet Communications, Inc.
(Registrant)
Date: February 21, 2000
/s/ Donald G. McLellan
--------------------------------------------
Donald L. McLellan, President
/s/ Leslie D. Crone
---------------------------------------------
Leslie D. Crone, Chief Financial Officer
-11-
Exhibit 10.9.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of January 26, 2000, is
entered into by and between Max Internet Communications, Inc. (the "Company"),
and Boxer Partners LLC, a Delaware limited liability company (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering
this Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), or by Section 4(2) of the Securities Act; and
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to
issue, upon the terms and subject to the conditions of this Agreement, 727,273
shares of the Company's Common Stock par value $.0001 per share (the "Common
Stock") and warrants (the "Warrants") to purchase four hundred thousand
(400,000) shares of the Company's common stock, for the aggregate purchase price
of four million dollars ($4,000,000) (the "Purchase Price"). The Warrants may be
exercised for the purchase of Common Stock, on the terms set forth therein; and
WHEREAS, the Purchaser has previously loaned to the Company the sum of
two million dollars ($2,000,000), which loan is represented by a promissory
note, dated January 20, 2000, issued by the Company (the Note"), and the
Purchaser has the right (i) to convert the Note into shares of Common Stock and
the Common Stock issued by the Company upon such conversion shall be deemed to
be credited against the issuance of the shares of Common Stock hereunder or (ii)
to have the principal and accrued interest under the Note applied towards
payment of the Purchase Price.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. Purchase of Common Stock and Warrants. On the Closing Date
(as defined herein), the Purchaser hereby agrees to purchase from the Company
(i) the Common Stock and (ii) the Warrants to purchase four hundred thousand
(400,000) shares of Common Stock, which shall be issued in substantially the
form attached hereto as Exhibit A. The aggregate purchase price for the Common
Stock, and the Warrants (together, the "Securities") shall be four million
dollars ($4,000,000) and shall be payable in same day funds. The Company and the
Purchaser acknowledge and agree that the Purchaser is applying the principal and
interest accrued under the Note towards payment of the Purchase Price.
<PAGE>
b. Closing. The Securities to be purchased by the Purchaser
hereunder, shall be delivered by or on behalf of the Company for the account of
the Purchaser in definitive form, and in such denominations and registered in
such names as the Purchaser or its representative, if any, may request upon
notice to the Company, against payment by the Purchaser or on its behalf of the
purchase price therefor by wire transfer to an account of the Company, all at
the offices of Cohen Tauber Spievack & Wagner LLP, 1350 Avenue of the Americas,
26th Floor, New York, New York 10019, at 9:30 a.m., New York time on January 25,
2000, or at such other time and date as the Purchaser or its representative, if
any, and the Company may agree upon in writing (the "Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Purchaser represents and warrants to, and covenants and
agrees with, the Company as follows:
a. The Purchaser and each of its equity owners is (i)
experienced in making investments of the kind described in this Agreement and
the related documents, (ii) able, by reason of the business and financial
experience of its management, to protect its own interests in connection with
the transactions described in this Agreement and the related documents, (iii)
able to afford the entire loss of its investment in the Securities and (iv) an
accredited investor.
b. All subsequent offers and sales of the Securities,
including, without limitation the Warrants and the Common Stock issuable upon
exercise the Warrants, shall be made pursuant to an effective registration
statement under the Securities Act or pursuant to an applicable exemption from
such registration.
c. The Purchaser understands that the Securities are being
offered and sold to it in reliance upon exemptions from the registration
requirements of the United States federal securities laws, and that the Company
is relying upon the truth and accuracy of the Purchaser's representations and
warranties, and the Purchaser's compliance with its agreements, each as set
forth herein, in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.
d. The Purchaser: (i) has been provided with sufficient
information with respect to the business of the Company and such documents
relating to the Company as the Purchaser has requested and Purchaser has
carefully reviewed the same including, without limitation, the Company's Proxy
Statement for its 1999 annual meeting of shareholders, Form 10KSB for the year
ended June 30, 1999 and Form 10-QSB for the quarter ended September 30, 1999
filed with the Securities and Exchange Commission ("the Commission"), (ii) has
been provided with such additional information with respect to the Company and
its business and financial condition as the Purchaser, or the Purchaser's agent
or attorney, has requested, and (iii) has had access to management of the
Company and the opportunity to discuss the information provided by management of
the Company and any questions that the Purchaser has had with respect thereto
have been answered to the full satisfaction of the Purchaser.
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e. The Purchaser has the requisite power and authority to
enter into this Agreement and the registration rights agreement, dated the date
hereof, between the Company and the Purchaser (the "Registration Rights
Agreement") attached hereto as Exhibit B, and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Purchaser; and
such agreements, when executed and delivered by each of the Purchaser and the
Company will each be a valid and binding agreement of the Purchaser, enforceable
in accordance with their respective terms, except to the extent that enforcement
of each such agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and to general principles of
equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Each of the Company's subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction.
Each of the Company and its subsidiaries is duly qualified as a foreign
corporation in all jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken as a whole.
Schedule 3(a) lists all subsidiaries of the Company and, except as noted
therein, all of the outstanding capital stock of such subsidiaries is owned of
record and beneficially by the Company.
b. Capitalization. On the date hereof, the authorized capital
of the Company consists of 50,000,000 shares of Common Stock, par value $.0001
per share, of which 15,924,492 are issued and outstanding and 50,000,000 shares
of preferred stock, par value $.0001 per share of which no shares are issued and
outstanding. Schedule 3(b) sets forth all of the options, warrants and
convertible securities of the Company, and any other rights to acquire
securities of the Company (collectively, the "Derivative Securities") which are
outstanding on the date hereof, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such Derivative Securities,
(iii) the number of shares of Common Stock of the Company into which such
Derivative Securities are convertible as of the date hereof, (iv) the conversion
or exercise price or prices of such Derivative Securities as of the date hereof,
(v) the expiration date of any conversion or exercise rights held by the owners
of such Derivative Securities and (vi) any registration rights associated with
such Derivative Securities or outstanding Common Stock..
c. Concerning the Common Stock and the Warrants. The Common
Stock and the Common Stock issuable upon exercise of the Warrants when issued,
shall be duly and validly issued, fully paid and non-assessable, and will not
subject the holder thereof to personal liability by reason of being such a
holder. There are no preemptive rights of any stockholder of the Company, as
such, to acquire any of the Securities, or the Common Stock issuable to the
Purchaser pursuant to the terms of the Securities Purchase Agreement Warrants.
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d. Reporting Company Status. The Common Stock is registered as
a reporting company under Section 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Company has duly filed all materials and
documents required to be filed pursuant to all reporting obligations under
either Section 13(a) or 15(d) of the Exchange Act, if any, prior to the offer
and sale of the Securities. The Common Stock is listed and traded on the OTC
Bulletin Board, and the Company is not aware of any pending or contemplated
action or proceeding of any kind to suspend the trading of the Common Stock.
e. Authorized Shares. The Company has legally available a
sufficient number of authorized and unissued shares of Common Stock as may be
necessary to (i) issue the shares of Common Stock being purchased by the
Purchaser and (ii) effect the exercise of the Warrants. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of shares of Common Stock upon (i) issuance of the shares of Common
Stock purchasable hereunder by the Purchaser and (ii) the exercise of the
Warrants. The Company further acknowledges that its obligation to issue shares
of Common Stock (i) purchasable by Purchaser hereunder and (ii) upon exercise of
the Warrants, is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company and notwithstanding the commencement of any case under 11 U.S.C. ss.
101 et seq. (the "Bankruptcy Code"). In the event the Company becomes a debtor
under the Bankruptcy Code, the Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. ss. 362 in respect of
the exercise of the Warrants. The Company agrees, without cost or expense to the
Purchaser, to take or consent to any and all action necessary to effectuate
relief under 11 U.S.C. ss. 362.
f. Legality. The Company has the requisite corporate power
and authority to enter into this Agreement and to issue and deliver (i) the
shares of Common Stock purchasable hereunder and the Warrants, and (ii) the
Common Stock issuable upon the exercise of the Warrants.
g. Transaction Agreements. This Agreement, the Registration
Rights Agreement, and the Warrants (collectively, the "Primary Documents"), and
the transactions contemplated hereby and thereby, have been duly and validly
authorized by the Company; this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the other Primary Documents, which are
being executed and delivered by the Company simultaneously with the execution
and delivery of this Agreement, are the legal, valid and binding agreement of
the Company, enforceable in accordance with their respective terms, except to
the extent that enforcement of each of the Primary Documents may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity.
h. Non-contravention. The execution and delivery of this
Agreement and each of the other Primary Documents, and the consummation by the
Company of the other transactions contemplated by this Agreement and each of the
other Primary Documents, does not and will not conflict with or result in a
breach by the Company of any of the terms or provisions of, or constitute a
default under, the Articles of Incorporation or By-laws of the Company, or any
material indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which they or any
of their properties or assets are bound, or any existing applicable law, rule,
or regulation or any applicable decree, judgment or order of any court or United
States federal or state regulatory body, administrative agency, or any other
governmental body having jurisdiction over the Company, or its subsidiaries.
Except as set forth on Schedule 3(h), neither the filing of the registration
statement required to be filed by the Company pursuant to the Registration
Rights Agreement nor the offering or sale of the Warrant and if the Warrant is
exercised, the Common Stock issuable upon such exercise, as applicable, gives
rise to any rights, other than those which have been waived or satisfied on or
prior to the Closing Date, for or relating to the registration of any shares of
the Common Stock.
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i. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the performance of this Agreement and the
other Primary Documents.
j. SEC Filings. None of the reports or documents filed by the
Company with the Commission (the "SEC Documents") contained, at the time they
were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein, or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
k. Stabilization. Neither the Company, nor any of its
affiliates, has taken or may take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock.
l. Absence of Certain Changes. Except as disclosed in the
Company's SEC Documents and since June 30, 1999, there has been no material
adverse change nor any material adverse development in the business, properties,
operations, financial condition, prospects, outstanding securities or results of
operations of the Company.
m. Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally) that has
not been disclosed in writing to the Purchaser (i) that could reasonably be
expected to have a material adverse effect upon the condition (financial or
otherwise) or the earnings, business affairs, properties or assets of the
Company or (ii) that could reasonably be expected to materially and adversely
affect the ability of the Company to perform the obligations set forth in the
Primary Documents. The representations and warranties of the Company set forth
in this Agreement (and the schedules hereto) do not contain any untrue statement
of a material fact or omit any material fact necessary to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading.
n. Title to Properties; Liens and Encumbrances. The Company
has good and marketable title to all of its material properties and assets, both
real and personal, and has good title to all its leasehold interests, in each
case subject only to mortgages, pledges, liens, security interests, conditional
sale agreements, encumbrances or charges created in the ordinary course of
business.
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o. Patents and Other Proprietary Rights. The Company has
sufficient title and ownership or holds under valid license of all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes necessary for the conduct of its business as
now conducted and as proposed to be conducted, and such business does not and
would not conflict with or constitute an infringement on the rights of others.
p. Permits. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now
conducted, the lack of which would materially and adversely affect the business
or financial condition of the Company. The Company is not in default in any
respect under any of such franchises, permits, licenses or similar authority.
q. Absence of Litigation. Except as disclosed in the Company's
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, in which an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, or the transactions contemplated by the Primary
Documents, or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, the
Primary Documents.
r. No Default. Each of the Company and its subsidiaries is
not in default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its property
may be bound.
s. Transactions with Affiliates. Except as disclosed in the
Company's public filings with the Commission, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors or affiliates that, had they existed June 30, 1999, would
have been required to be disclosed in the Company's 1999 Annual Report to
stockholders.
t. Employment Matters. The Company is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
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u. Insurance. The Company maintains property and casualty,
general liability, personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate, consistent with
industry standards and the Company's historical claims experience. The Company
has not received notice from, and has no knowledge of any threat by, any insurer
(that has issued any insurance policy to the Company) that such insurer intends
to deny coverage under or cancel, discontinue or not renew any insurance policy
covering the Company, or any of its subsidiaries, presently in force.
v. Taxes. All applicable tax returns required to be filed by
the Company and each of its subsidiaries have been prepared and filed in
compliance with all applicable laws, or, if not yet filed, have been granted
extensions of the filing dates which extensions have not expired, and all taxes,
assessments, fees and other governmental charges upon the Company, its
subsidiaries, or upon any of their respective properties, income or franchises,
shown in such returns and on assessments received by the Company or its
subsidiaries to be due and payable have been paid, or adequate reserves therefor
have been set up if any of such taxes are being contested in good faith; or if
any of such tax returns have not been filed or if any such taxes have not been
paid or so reserved for, the failure to so file or to pay would not in the
aggregate have a material adverse effect on the business or financial condition
of the Company and its subsidiaries, taken as a whole.
w. Foreign Corrupt Practices Act. Neither the Company nor any
of its directors, officers or other employees has (i) used any Company funds for
any unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
x. Investment Company Act. The Company is not conducting,
and does not intend to conduct, its business in a manner which would cause it to
become, an "investment company," as defined in Section 3(a) of the Investment
Company Act of 1940, as amended.
y. Agent Fees. Except for fees payable to Coleman & Company
Securities, Inc. as set forth on Schedule 3(y) hereto, which fees shall be paid
by the Company, the Company has not incurred any liability for any finder's or
brokerage fees or agent's commissions in connection with the offer and sale of
the transactions contemplated by this Agreement.
z. Private Offering. Subject to the accuracy of the
Purchaser's representations and warranties set forth in Section 2 hereof, the
offer, sale and issuance of (i) the Securities or (ii) the issuance of Common
Stock upon exercise of the Warrant are exempt from the registration requirements
of the Securities Act. The Company agrees that neither the Company nor anyone
acting on its behalf will offer any of the Common Stock or the Warrants, or any
similar securities for issuance or sale, or solicit any offer to acquire any of
the same from anyone so as to render the issuance and sale of such securities
subject to the registration requirements of the Securities Act. The Company has
not offered or sold the Securities by any form of general solicitation or
general advertising, as such terms are used in Rule 502(c) under the Securities
Act.
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aa. Year 2000 Processing. The computer systems used by the
Company and its subsidiaries (the "Systems"), both hardware and software, are in
good working order. The Company has taken steps that are reasonable to ensure
that the occurrence of the year 2000 will not materially and adversely affect
the Systems of the Company, its subsidiaries, or their business, and no material
expenditures in excess of currently budgeted items will be required in order to
cause such Systems to operate properly following the change of the year 1999 to
2000. The Company and its subsidiaries have resolved or are in the process of
resolving any issues discovered as a result of year 2000 inquires or compliance
testing or otherwise known to the Company.
bb. Environmental Matters. Neither the Company and its
subsidiaries, nor any predecessor in interest nor, to the Company's knowledge,
after due inquiry, any other person has ever caused or permitted any Hazardous
Material (as defined below) to be released, treated or disposed of on, at, under
or within any real property owned, leased or operated by the Company and its
subsidiaries or any predecessor in interest, and no such real property has ever
been used (either by the Company and its subsidiaries, any predecessor in
interest or, to the Company's knowledge, after due inquiry, by any other person)
as a treatment, storage or disposal site for any Hazardous Material. The Company
has no liabilities with respect to Hazardous Materials, and to the knowledge of
the Company, after due inquiry, no facts or circumstances exist which could give
rise to liabilities with respect to Hazardous Materials, which could have any
reasonable likelihood of having a material adverse effect on the Company. For
purposes of this Agreement "Hazardous Materials" shall mean (i) any pollutants
or contaminations, (ii) any asbestos or insulation or other material composed of
or containing asbestos and (iii) any petroleum product and any hazardous, toxic
or dangerous waste, substance or material defined as such in, or for purposes
of, the Comprehensive Environmental Response, Compensation and Liability Act,
any so-called "Superfund" or "Superlien" law, or any other applicable federal,
state, local or other statute, law, ordinance, code, rule, regulation, order or
decree concerning the protection of human health or the environment or otherwise
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or material, as
now or at any time hereafter in effect.
cc. Intellectual Property. Except as set forth in the SEC
Documents, to the best of the Company's knowledge, each of the Company and its
subsidiaries owns or possesses adequate rights to use all material patents,
patent rights, inventions, trade secrets, know-how, trademarks, service marks,
trade names and copyrights which are described in the SEC Documents; except as
set forth in the SEC Documents, the Company has not received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business of the Company and its subsidiaries,
taken as a whole, as presently conducted; and, except as set forth in the SEC
Documents, the Company has not received any notice of, and has no knowledge of,
any infringement of or conflict with the asserted rights of others with respect
to any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names and copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
or business of the Company and its subsidiaries, taken as a whole, as presently
conducted.
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4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, (i) neither (A) the
Securities, including without limitation, the Warrant, or Common Stock issuable
upon exercise of the Warrant, may not be transferred unless they are (1)
subsequently registered thereunder or otherwise registered pursuant to the
Securities Act, or (2) they are transferred pursuant to an exemption from such
registration; and (ii) any sale of the Securities, including without limitation
the Warrant, or the Common Stock issuable upon exercise of the Warrant made in
reliance upon Rule 144 under the Securities Act may be made only in accordance
with the terms of said Rule and further, if said Rule is not applicable, any
such resale under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the Securities Act, may require compliance with another exemption under the
Securities Act and the rules and regulations of the Commission thereunder. The
provisions of Section 4(a) and 4(b) hereof, together with the rights of the
Purchaser under this Agreement and the other Primary Documents, shall be binding
upon any subsequent transferee of the Securities and the Warrant.
b. Restrictive Legend. The Purchaser acknowledges and agrees
that, until such time as the Securities or the Common Stock issuable upon
exchange thereof shall have been registered under the Securities Act or the
Purchaser demonstrates to the reasonable satisfaction of the Company and its
counsel that such registration shall no longer be required, such Securities or
the Common Stock issuable upon exchange thereof may be subject to a
stop-transfer order placed against the transfer of such Securities, and such
Securities shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO
LONGER BE REQUIRED.
c. Filings. The Company undertakes and agrees that it will
make all required filings in connection with the sale of the Securities,
including shares of Common Stock issuable upon exercise of the Warrants, to the
Purchaser as required by United States laws and regulations, or by any domestic
securities exchange or trading market, including, upon exercise of the Warrants
for trading on the OTC Bulletin Board or the filing of a listing application
with NASDAQ to list all of the shares of Common Stock issuable upon the exercise
of the Warrants, as applicable, and if applicable, the filing of a notice on
Form D (at such time and in such manner as required by the rules and regulations
of the Commission), and to provide copies thereof to the Purchaser promptly
after such filing or filings.
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d. Reporting Status. So long as the Purchaser beneficially
owns any of the Securities, the Company shall timely file all reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act and shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
e. State Securities Filings. The Company shall from time to
time promptly take such action as the Purchaser or any of its representatives,
if applicable, may reasonably request to qualify the Securities or the Common
Stock issuable upon exercise of the Warrants for offering and sale under the
securities laws (other than United States federal securities laws) of the
jurisdictions in the United States as shall be so identified to the Company, and
to comply with such laws so as to permit the continuance of sales therein,
provided that in connection therewith, the Company shall not be required to
qualify as a foreign corporation or to file a general consent to the service of
process in any jurisdiction.
f. Use of Proceeds. The Company will use all of the net
proceeds from the issuance of the Securities for technology application
developments and working capital.
g. Reservation of Common Stock. The Company will at all
times have authorized and reserved for the purpose of issuance a sufficient
number of shares of Common Stock to provide for the exercise of the Warrants.
h. Sales of Additional Shares. The Company shall not, directly
or indirectly, without the prior written consent of the Purchaser, offer, sell,
offer to sell, contract to sell or otherwise dispose of any of its securities or
any security or other instrument convertible into or exchangeable for shares of
its capital stock (each a "Capital Issuance Event"), in each case, for a period
beginning on the date hereof and ending two hundred seventy (270) days after the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the Commission (the "Lock-Up Period"), which (i) are
issued at or convertible into or contain rights to purchase Common Stock at a
price of less than $5.50 per share, (ii) contain provisions for re-pricing or
(iii) are convertible into Common Stock at a price which adjusts based upon
changes in market price.
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i. Right of First Refusal. Subject to Section 4(h), if during
the nine (9) month period following the Lock-Up Period the Company shall desire
to sell, offer to sell, contract to sell or otherwise dispose of any securities
or any security or other instrument convertible into or exchangeable for shares
of Common Stock (collectively, the "Offered Securities") to a prospective
investor (the "Prospective Investor"), the Company shall notify (the "Offer
Notice") the Purchaser in accordance with Section 10 hereof of the terms (the
"Third Party Terms") on which the Company proposes to sell, contract to sell or
otherwise dispose of the Offered Securities to the Prospective Investor. If,
within the five (5) day period following the Purchaser's receipt of the Offer
Notice, the Purchaser delivers a written notice (the "Acceptance Notice") to the
Company stating its desire to purchase all or any portion of the Offered
Securities on the Third Party Terms, the Company shall be required to sell the
Offered Securities (or any portion thereof so desired by the Purchaser) to the
Purchaser at the price and on the terms set forth in the Offer Notice and the
Company shall not be permitted to sell such Offered Securities to the
Prospective Investor. If the Purchaser does not deliver an Acceptance Notice to
the Company in such five (5) day period, then for a period of sixty (60) days
following the date of the Offer Notice the Company may sell the Offered
Securities to the Prospective Investor on the terms set forth in the Offer
Notice. Notwithstanding the foregoing, the Purchaser shall not have a right to
purchase any portion of the Offered Securities if such Offered Securities
consist of shares of Common Stock and are to be sold or issued by the Company
(i) for the aggregate consideration of at least $15 million in connection with a
bona fide, firm commitment, underwritten public offering under the Securities
Act; (ii) in connection with a bona fide transaction involving the acquisition
of another business entity or segment of any such entity by the Company by
merger, asset, purchase, stock purchase or otherwise; (iii) in connection with a
stock split, stock dividend or similar recapitalization of the Company which
affects all holders of the Company's Common Stock on an equivalent basis, or
(iv) on arms length terms to a strategic third party investor providing business
services directly relating to the Company, in each case, without the prior
written consent of the Purchaser (each a "Capital Issuance Event"); provided,
however, that the Company shall give the Purchaser at least fifteen (15) days
prior written notice of the occurrence of any Capital Issuance Event. In
addition, the Company agrees that it will not cause any shares of its capital
stock that are issued in connection with a transaction of the type contemplated
by clause (ii) (or upon the conversion or exercise of other securities that are
issued in connection with such transaction) or that were issued in connection
with financing, acquisition or other transaction that occurred prior or
subsequent to the date of this Agreement to be covered by a registration
statement that is filed with the Commission or declared effective by the
Commission prior to the time that the Common Stock, Warrants and Common Stock
issuable upon exercise thereof are covered by a registration statement filed by
the Company pursuant to its obligations under the Registration Rights Agreement
has been effective under the Securities Act for a period of at least one hundred
twenty (120) days during which one hundred twenty (120) day period the Company
has not notified the Purchaser that such registration statement or the
prospectus included in such registration statement includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
j. Ownership. At no time shall the Purchaser (including its
officers, directors and affiliates) maintain in the aggregate beneficial
ownership (as defined for purposes of Section 16 of the Securities Exchange Act
of 1934, as amended) of shares of Common Stock in excess of 9.999% of the
Company's outstanding Common Stock unless the Purchaser gives the Company at
least sixty-one days notice that it intends to increase its ownership position.
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5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Sections 4(a) and 4(b) hereof prior to the registration and sale
of the Securities in the manner contemplated by the Registration Rights
Agreement, will be given by the Company to the transfer agent and that the
shares of Common Stock issuable upon exercise of the Warrants shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing in this Section shall affect in any way the Purchaser's obligations
and agreement to comply with all applicable securities laws upon resale of the
Securities. If the Purchaser provides the Company with an opinion of counsel
reasonably satisfactory (as to both the identity of such counsel and the content
of such opinion) to the Company and its counsel that registration of a resale by
the Purchaser of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the Securities Act, the
Company shall permit the transfer of the Securities and, in the case of the
Common Stock, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legend in such names and in such
denominations as specified by the Purchaser.
b. The Company will permit the Purchaser to exercise its right
to exercise the Warrants by faxing an executed and completed Form of Election to
Purchase, as applicable, to the Company, and delivering within three (3)
business days thereafter, the original Form of Election to Purchase (and the
Warrant) to the Company by hand delivery or by express courier, duly endorsed.
Each date on which a Form of Election to Purchase is faxed to the Company in
accordance with the provisions hereof shall be deemed a "Conversion Date." The
Company will transmit the certificates representing the Common Stock issuable
upon exercise of the to the Purchaser via express courier as soon as
practicable, but in all events no later than five (5) business days in the case
of the exercise of the Warrant after the Conversion Date (the "Delivery Date").
For purposes of this Agreement, any exercise of the Warrants shall be deemed to
have been made immediately prior to the close of business on the Conversion
Date.
c. In lieu of delivering physical certificates representing
the Common Stock issuable upon the exercise of the Warrants, provided the
Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, on the written request of
the Purchaser, who shall have previously instructed the Purchaser's prime broker
to confirm such request to the Company's transfer agent, the Company shall cause
its transfer agent to electronically transmit such Common Stock to the Purchaser
by crediting the account of the Purchaser's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system no later than the applicable
Delivery Date.
d. The Company understands that a delay in the issuance of
Common Stock beyond the applicable Delivery Date could result in an economic
loss to the Purchaser. As compensation to the Purchaser for such loss, the
Company agrees to pay to the Purchaser for late issuance of Common Stock upon
exercise of the Warrants the sum of $2,500 per day for any or all shares of
Common Stock purchased upon the exercise of the Warrants. The Company shall pay
any payments that are payable to the Purchaser pursuant to this Section 5 in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to pursue actual damages for the Company's failure to so issue
and deliver Common Stock to the Purchaser. Furthermore, in addition to any other
remedies which may be available to the Purchaser, in the event that the Company
fails for any reason to effect delivery of such Common Stock within five (5)
business days after the relevant Delivery Date, the Purchaser will be entitled
to revoke the relevant Form of Election to Purchase by delivering a notice to
such effect to the Company, whereupon the Company and the Purchaser shall each
be restored to their respective positions immediately prior to delivery of such
Form of Election to Purchase. For purposes of this Section 5, "business day"
shall mean any day in which the financial markets of New York are officially
open for the conduct of business therein.
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6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SECURITIES.
Purchaser understands that the Company's obligation to issue the
Securities on the Closing Date to Purchaser pursuant to this Agreement is
conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of Purchaser contained in this Agreement as if made on the Closing
Date and the performance by Purchaser on or before the Closing Date of all
covenants and agreements of Purchaser required to be performed on or before the
Closing Date;
b. The absence or inapplicability of any and all laws, rules
or regulations prohibiting or restricting the transactions contemplated hereby,
or requiring any consent or approval which shall not have been obtained.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SECURITIES.
The Company understands that Purchaser's obligation to purchase the
Securities on the Closing Date is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date, and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date;
b. On the Closing Date, the Purchaser shall have received (i)
the shares of Common Stock purchasable hereunder, and (ii) the Warrants, in
substantially the form of Exhibit A hereto.
c. On the Closing Date, the Purchaser shall have received an
opinion of counsel for the Company, dated the Closing Date, in form, scope and
substance reasonably satisfactory to Purchaser, to the effect set forth in
Exhibit C attached hereto;
d. On the Closing Date the Company shall have executed and
delivered a signed counterpart to the Registration Rights Agreement, in form,
scope and substance reasonably satisfactory to Purchaser, to the effect set
forth in Exhibit B attached hereto;
e. On the Closing Date, the Purchaser shall have received a
certificate executed by (i) the President or the Chairman of the Company and
(ii) the Chief Financial Officer of the Company, stating that all of the
representations and warranties of the Company set forth in this Agreement are
accurate as of the Closing Date and that the Company has performed all of its
covenants and agreements required to be performed under this Agreement on or
before the Closing Date;
13
<PAGE>
f. On the Closing Date, the Purchaser shall have received from
the Company such other certificates and documents as it or its representatives,
if applicable, shall reasonably request, and all proceedings taken by the
Company in connection with the Primary Documents contemplated by this Agreement
and the other Primary Documents and all documents and papers relating to such
Primary Documents shall be satisfactory to the Purchaser;
g. On or prior to the Closing Date, there shall not have
occurred any of the following: (i) a suspension or material limitation in the
trading of securities generally on the New York Stock Exchange, NASDAQ National
Market, NASDAQ SmallCap or OTC Bulletin Board; (ii) a general moratorium on
commercial banking activities in New York declared by the applicable banking
authorities; (iii) the outbreak or escalation of hostilities involving the
United States, or the declaration by the United States of a national emergency
or war; or (iv) a change in international, political, financial or economic
conditions, if the effect of any such event, in the reasonable judgment of the
Purchaser, makes it impracticable or inadvisable to proceed with the purchase of
the Securities on the terms and in the manner contemplated in this Agreement and
in the other Primary Documents.
h. The Company shall have delivered to the Purchaser
reimbursement of the Purchaser's out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this Agreement (including fees
and disbursements of the Purchaser's legal counsel in the amount of $16,800.00).
8. EXPENSES.
The Company covenants and agrees with the Purchaser that the
Company will pay or cause to be paid the following: (a) the fees, disbursements
and expenses of the Purchaser and Purchaser's counsel in connection with the
issuance of the Securities payable on the Closing Date, (b) all expenses in
connection with registration or qualification of the Securities for offering and
sale under state securities laws as provided in Section 4(f) hereof, and (c) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section,
including the fees and disbursements of the Company's counsel, accountants and
other professional advisors, if any. If the Company fails to satisfy its
obligations or to satisfy any condition set forth in this Agreement, as a result
of which the Securities are not delivered to the Purchaser on the terms and
conditions set forth herein, the Company shall reimburse the Purchaser for any
out-of-pocket expenses reasonably incurred in making preparations for the
purchase, sale and delivery of the Securities not so delivered.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company and the Purchaser
shall survive the execution and delivery of this Agreement and the delivery of
the Common Stock and the Warrants for a period of. eighteen (18 ) months.
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<PAGE>
10. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to principles
of conflict of laws. Each of the parties consents to the exclusive jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of this
Agreement. This Agreement and each of the Primary Documents have been entered
into freely by each of the parties, following consultation with their respective
counsel, and shall be interpreted fairly in accordance with its respective
terms, without any construction in favor of or against either party. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
unenforceability of this Agreement in any other jurisdiction. This Agreement
shall inure to the benefit of, and be binding upon the successors and assigns of
each of the parties hereto, including any transferees of the Securities. This
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES.
Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
If to the Company to:
MAX Internet Communications, Inc.
8115 Preston Road
Dallas, Texas 75225
Att.: Lawrence R. Biggs, Jr.
Tel.: (214) 691-0055
Fax: (214) 691-0887
With a copy to:
Glast, Phillips & Murray
2200 One Galleria Tower
13355 Noel Road, L.B. 48
Dallas, Texas 75240-6657
Att.: Ronald L. Brown, Esq.
Tel.: (972) 419-9300
Fax: (972) 419-8329
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<PAGE>
If to the Purchaser to:
Boxer Partners LLC
c\o WEC Asset Management LLC
One World Trade Center, Suite #4563
New York, New York 10048
Attention: Ethan Benovitz
Tel: (212) 775-9299
Fax: (212) 775-9311
With a copy to:
Cohen Tauber Spievak & Wagner LLP
1350 Avenue of the Americas
26th Floor
New York, New York 10019
Att.: Jay Spievak, Esq.
Tel.: (212) 519-5195
Fax: (212) 262-1766
12. INDEMNIFICATION.
The Company agrees to indemnify the Purchaser and each
officer, director, employee, agent, partner, stockholder, member and affiliate
of the Purchaser (collectively, the "Indemnified Parties") for, and hold each
Indemnified Party harmless from and against: (i) any and all damages, losses,
claims and other liabilities of any and every kind, including, without
limitation, judgments and costs of settlement, and (ii) any and all reasonable
out-of-pocket costs and expenses of any and every kind, including, without
limitation, reasonable fees and disbursements of counsel for such Indemnified
Parties (all of which expenses periodically shall be reimbursed as incurred), in
each case, arising out of or suffered or incurred in connection with any of the
following: (a) any misrepresentation or any breach of any warranty made by the
Company herein or in any of the other Primary Documents, (b) any breach or
non-fulfillment of any covenant or agreement made by the Company herein or in
any of the other Primary Documents and (c) any claim relating to or arising out
of a violation of applicable federal or state securities laws by the Company in
connection with the sale or issuance of the Securities, by the Company to the
Purchaser (collectively, the "Indemnified Liabilities"). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
Max Internet Communications, Inc.
By:____________________________________
Name:
Title:
BOXER PARTNERS LLC
By: WEC Asset Management LLC,
Manager
By:____________________________________
Name: Ethan Benovitz
Title: Managing Director
17
<PAGE>
EXHIBIT INDEX
EXHIBIT A FORM OF WARRANT
EXHIBIT B FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT C FORM OF OPINION OF COUNSEL TO COMPANY
<PAGE>
SCHEDULE INDEX
SCHEDULE 3(a) LIST OF SUBSIDIARIES
SCHEDULE 3(b) CAPITALIZATION, DERIVATIVE
SECURITIES AND
REGISTRATION RIGHTS
SCHEDULE 3(h) NON-CONTRAVENTION
SCHEDULE 3(y) FEES
EXHIBIT 10.9.2
EXHIBIT A
---------
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF THIS
WARRANT.
Number of Shares of Common Stock: 400,000
WARRANT
To Purchase Common Stock of
Max Internet Communications, INC.
THIS IS TO CERTIFY THAT Boxer Partners, LLC, a Delaware limited liability
company, or its registered assigns, is entitled, at any time from the Warrant
Issuance Date (as hereinafter defined) to the Expiration Date (as hereinafter
defined), to purchase from, Max Internet Communications, Inc., a Nevada
corporation (the "Company"), four hundred thousand (400,000) shares of Common
Stock (as hereinafter defined and subject to adjustment as provided herein), in
whole or in part, including fractional parts, at a purchase price per share
equal to ten dollars ($10.00) (subject to any adjustments made to such amount
pursuant to Section 4 hereto) on the terms and conditions and pursuant to the
provisions hereinafter set forth.
1. DEFINITIONS
-----------
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Initial Closing Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
(assuming the payment of the exercise prices for such shares) by a firm of
independent certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Closing Date" shall have the meaning set forth in the Securities Purchase
Agreement.
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, par value $.0001 per share, of the Company as constituted on
the Initial Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" shall mean, ten dollars ($10.00) subject to any
adjustments to such amount made in accordance with Section 4 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean January 25, 2005.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant, outstanding on such date, and other
options or warrants to purchase, or securities convertible into, including
without limitation the shares of Common Stock outstanding on such date which
would be deemed outstanding in accordance with GAAP for purposes of determining
book value or net income per share.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or Warrant Stock
set forth herein is registered on the books of the Company maintained for such
purpose.
"Market Price" per Common Share means the average of the closing bid prices
of the Common Shares as reported on the National Association of Securities
Dealers Automated Quotation System for the National Market, ("NASDAQ") or, if
such security is not listed or admitted to trading on the NASDAQ, on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing bid price of such security on the over-the-counter market on the day in
question as reported by the National Association of Security Dealers, Inc., or a
similar generally accepted reporting service, as the case may be, for the five
(5) trading days immediately preceding the date of determination.
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<PAGE>
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith by and between the Company and Boxer
Partners LLC, as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith by and between the Company and Boxer
Partners LLC, as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Issuance Date" shall mean any date on which Warrants are issued
pursuant to the Securities Purchase Agreement.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
3
<PAGE>
2. EXERCISE OF WARRANT
-------------------
2.1.Manner of Exercise. From and after the Warrant Issuance Date and until
5:00 P.M., New York City time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment by cash, check or bank draft payable to the Company
of the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank or by the Holder's surrender of Warrant Stock (or the right
to receive such number of shares) having an aggregate Market Price equal to the
Warrant Price for all shares then being purchased and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by Holder or its agent or
attorney. Upon receipt of the items referred to in clauses (i), (ii) and (iii)
above, of receipt of such notice the Company shall, as promptly as practicable,
and in any event within three (3) Business Days, execute or cause to be executed
and deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Warrant Price. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
The Holder shall be entitled to exercise the Warrant notwithstanding the
commencement of any case under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy
Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the Holder's exercise right. The
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the exercise of the Warrant. The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
2.2.Payment of Taxes and Charges. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof.
4
<PAGE>
2.3.Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock on the relevant exercise date.
2.4.Continued Validity. A holder of shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part (other than a holder who acquires
such shares after the same have been publicly sold pursuant to a Registration
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as Holder under Sections 9, 10 and 14 of this
Warrant. The Company will, at the time of exercise of this Warrant, in whole or
in part, upon the request of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford Holder all such
rights; provided, however, that if Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to Holder all such rights.
2.5. Right to Convert Warrant. The Holder shall have the right to convert,
in whole or in part, this Warrant (the "Conversion Right") at any time prior to
the expiration of the Exercise Period, into shares of Common Stock in accordance
with this Section 2.5. Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of the Warrant Price) that
number of shares of Common Stock equal to the quotient obtained by dividing (x)
the value of the portion of this Warrant being converted at the time the
Conversion Right is exercised (determined by subtracting the Warrant Price for
the portion of this Warrant being converted (in effect immediately prior to the
exercise of the Conversion Right) from the amount obtained by multiplying the
number of shares of Common Stock issuable upon the whole or partial exercise of
this Warrant, as the case may be, by the Market Price immediately prior to the
exercise of the Conversion Right) by (y) the Market Price of one share of Common
Stock immediately prior to the exercise of the Conversion Right.
The Conversion Right may be exercised by the Holder, at any time or from
time to time, prior to its expiration, on any business day by delivering a
written notice (the "Conversion Notice") to the Company at the offices of the
Company, exercising the Conversion Right and specifying (i) the total number of
shares of Common Stock the Holder will purchase pursuant to the conversion and
(ii) a place and date not less than two (2) nor more than twenty (20) Business
Days from the date of the Conversion Notice for the closing of such purchase.
At any closing under this Section 2.5, (i) the Holder will surrender this
Warrant and (ii) the Company will deliver to the Holder a certificate or
certificates for the number of shares of Common Stock issuable upon such
conversion. If this Warrant shall have been converted only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of such
stock certificates and new Warrants, except that, in case such stock
certificates and/or new Warrants shall be registered in a name or names other
than the name of the Holder, funds sufficient to pay all stock transfer taxes
that are payable upon the issuance of such stock certificates or new Warrants
shall be paid by the Holder at the time of delivering the notice of exercise
mentioned above.
5
<PAGE>
2.6 Call Right. Notwithstanding anything contained herein in the event for
a period of not less than fifteen (15) consecutive trading days (i) the Common
Stock underlying the Warrants have been registered pursuant to an effective
Registration Statement with the Securities & Exchange Commission in accordance
with the terms of the Registration Rights Agreement and (ii) while the Common
Stock underlying the Warrants have been registered pursuant to an effective
Registration Statement as provided in (i), above, the closing bid price for the
Company's Common Stock on NASDAQ (or, if the Common Stock is not listed or
admitted to trading on the NASDAQ, on the principal national security exchange
or quotation system on which the Common Stock is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such security
on the over-the-counter market on the day in question as reported by the
National Association of Security Dealers, Inc., or a similar generally accepted
reporting service) exceeds fifteen dollars ($15.00) for each such day, the
Company shall have the right for a period of thirty (30) days thereafter (the
"Call Period"), by written notice to the Holder (the "Call Notice") to give
notice of its intention to repurchase all or a portion of this Warrant at the
Call Price (as hereafter defined). In the event the Holder does not exercise the
Warrant with respect all of the underlying shares of Common Stock at the Current
Warrant Price prior to the close of business on the fifteen (15th) following the
giving of the Call Notice as provided herein, the Company shall on the sixteenth
(16th) day following the giving of the Call Notice, at the option of the Holder,
wire transfer to an account in a bank located in the United States designated by
the Holder or by official bank check drawn on a United States bank, purchase or
all portion on the unexercised portion of the Warrant at the Call Price to the
extent set forth in the Call Notice. If less than all of the Holder's Warrant is
being repurchased by the Company, the Company shall issue a new certificate to
the Holder representing the right to acquire the aggregate number of underlying
shares of Common Stock not being acquired by the Company. For purposes hereof,
the Call Price shall mean an amount equal to (A) $.10 per share, multiplied by
(C) the number of shares of Common Stock issuable upon exercise of that portion
of this Warrant then being repurchased pursuant to this Section.
3. TRANSFER, DIVISION AND COMBINATION
----------------------------------
3.1.Transfer. Subject to compliance with Sections 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder or its agent or attorney. Upon such
surrender, the Company shall, subject to Section 9, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
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<PAGE>
3.2. Division and Combination. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3.Expenses. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under this Section 3.
3.4.Maintenance of Books. The Company agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.
4. ADJUSTMENTS
-----------
The number of shares of Common Stock for which this Warrant is exercisable,
or the price at which such shares may be purchased upon exercise of this
Warrant, shall be subject to adjustment from time to time as set forth in this
Section 4. The Company shall give Holder notice of any of the following events
which requires an adjustment pursuant to this Section 4 at the time of such
event:
4.1.Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then (i) the number of shares of Common
Stock for which this Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the same number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
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<PAGE>
4.2.Certain Other Distributions.
(a) If at any time prior to the Expiration Date the Company intends to
make a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other
than cash, Convertible Securities or Additional Shares of Common
Stock), or
(iii) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock),
the Company shall send the Holder written notice at least fifteen (15)
days prior to the record date of its intention to make such a record.
(b) In case the Company shall issue any Common Stock or any rights,
options or warrants to all holders of record of its Common Stock entitling
all holders to subscribe for or purchase shares of Common Stock at a price
per share less than the Market Price per share of the Common Stock on the
date fixed for such issue, the Current Warrant Price in effect immediately
prior to the close of business on the date fixed for such determination
shall be reduced to the amount determined by multiplying such Current
Warrant Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the close of
business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase
would purchase at such Market Price and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to the
close of business on the date fixed for such determination plus the number
of shares of Common Stock so offered for subscription or purchase, such
reduced amount to become effective immediately after the close of business
on the date fixed for such determination. For the purposes of this clause
(b), (i) the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company and (ii) in the case
of any rights, options or warrants which expire by their terms not more
than 60 days after the date of issue, sale, grant or assumption thereof, no
adjustment of the Current Warrant Price shall be made until the expiration
or exercise of all rights, options or warrants, whereupon such adjustment
shall be made in the manner provided in this clause (b), but only with
respect to the shares of Common Stock actually issued pursuant thereto.
Such adjustment shall be made successively whenever any event specified
above shall occur. In the event that any or all rights, options or warrants
covered by this clause (b) are not so issued or expire or terminate before
being exercised, the Current Warrant Price then in effect shall be
appropriately readjusted.
8
<PAGE>
4.3.Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business
on the date of its occurrence.
(b) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in
good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Holder, and any
dispute shall be resolved by an investment banking firm of recognized
national standing selected by the Holder and reasonably acceptable to
the Company.
4.4.Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.4, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
9
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4.5.Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action taken in the ordinary course of the Company's business or any
action described in this Section 4, which would have a material adverse effect
upon the rights of the Holder, the number of shares of Common Stock and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances, as determined in good faith by an investment bank selected by
Holder.
4.6.Certain Limitations. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
4.7.No Voting Rights. This Warrant shall not entitle its Holder to any
voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
-----------------
5.1.Notice of Adjustments. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by an executive officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of Common Stock
for which this Warrant is exercisable and (if such adjustment was made pursuant
to Section 4.4 or 4.5) describing the number and kind of any other shares of
stock or Other Property for which this Warrant is exercisable, and any change in
the purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate to be
delivered to the Holder in accordance with Section 14.2. The Company shall keep
at its office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder, its representatives, or any
prospective purchaser of a Warrant designated by the Holder.
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<PAGE>
5.2.Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of
its indebtedness, any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company; then, in any one or more of such cases, the
Company shall give to Holder (i) at least thirty (30) Business Days' prior
written notice of the date on which a record date shall be selected for
such dividend, distribution or right or for determining rights to vote in
respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least thirty (30) Business Days'
prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common
Stock shall be entitled to any such dividend, distribution or right, and
the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of
Common Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with
Section 14.2.
6. NO IMPAIRMENT
-------------
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
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<PAGE>
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
---------------------------------------------
From and after the Initial Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
--------------------------------------------------
In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record as of the close of business on a Business Day. The
Company will not at any time close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
-------------------------------
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
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9.1. Restrictive Legend. The Holder by accepting this Warrant and any
Warrant Stock agrees that this Warrant and the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the
Securities Act or (ii) a registration statement relating to such securities has
been filed by the Company and declared effective by the Commission.
(a) Each certificate for Warrant Stock issuable hereunder shall bear a
legend substantially worded as follows unless such securities have been
sold pursuant to an effective registration statement under the Securities
Act:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended
(the "Act") or any state securities laws. The securities may
not be offered for sale, sold, assigned, offered,
transferred or otherwise distributed for value except (i)
pursuant to an effective registration statement under the
Act or any state securities laws or (ii) pursuant to an
exemption from registration or prospectus delivery
requirements under the Act or any state securities laws in
respect of which the Company has received an opinion of
counsel satisfactory to the Company to such effect. Copies
of the agreement covering both the purchase of the
securities and restricting their transfer may be obtained at
no cost by written request made by the holder of record of
this certificate to the Secretary of the Company at the
principal executive offices of the Company."
(b) Except as otherwise provided in this Section 9, the Warrant shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as
amended, or any state securities laws and may not be
transferred in violation of such Act, the rules and
regulations thereunder or any state securities laws or the
provisions of this Warrant."
9.2.Notice of Proposed Transfers. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Restricted Common Stock, the Holder
shall give five (5) days' prior written notice (a "Transfer Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to Holder an
opinion that the proposed Transfer of such Warrants or such Restricted Common
Stock may be effected without registration under the Securities Act or state
securities laws. After the Company's receipt of the Transfer Notice and opinion,
such Holder shall thereupon be entitled to Transfer such Warrants or such
Restricted Common Stock, in accordance with the terms of the Transfer Notice.
Each certificate, if any, evidencing such shares of Restricted Common Stock
issued upon such Transfer and the Warrant issued upon such Transfer shall bear
the restrictive legends set forth in Section 9.1, unless in the opinion of such
counsel such legend is not required in order to ensure compliance with the
Securities Act.
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9.3.Required Registration. Pursuant to the terms and conditions set forth
in the Registration Rights Agreement, the Company shall prepare and file with
the Commission not later than the thirtieth (30th) day after the Initial Closing
Date, a Registration Statement relating to the offer and sale of the Common
Stock issuable upon exercise of the Warrants and shall use its best efforts to
cause the Commission to declare such Registration Statement effective in
accordance with the terms set forth in Section 2(a) of the Registration Rights
Agreement.
9.4.Termination of Restrictions. Notwithstanding the foregoing provisions
of Section 9, the restrictions imposed by this Section upon the transferability
of the Warrants, the Warrant Stock and the Restricted Common Stock (or Common
Stock issuable upon the exercise of the Warrants) and the legend requirements of
Section 9.1 shall terminate as to any particular Warrant or share of Warrant
Stock or Restricted Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been effectively
registered under the Securities Act and applicable state securities laws and
disposed of pursuant thereto or (ii) when the Company shall have received an
opinion of counsel that such shares may be transferred without registration
thereof under the Securities Act and applicable state securities laws. Whenever
the restrictions imposed by Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from the
Company upon written request of the Holder, at the expense of the Company, a new
Warrant bearing the following legend in place of the restrictive legend set
forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON ________, 20__,
AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legends set forth in Section 9.1.
9.5.Listing on Securities Exchange. If the Company shall list any shares of
Common Stock on any securities exchange, it will, at its expense, list thereon,
maintain and, when necessary, increase such listing of, all shares of Common
Stock issued or, to the extent permissible under the applicable securities
exchange rules, issuable upon the exercise of this Warrant so long as any shares
of Common Stock shall be so listed during the Exercise Period.
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10. SUPPLYING INFORMATION
---------------------
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
------------------
Upon receipt by the Company from Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity reasonably satisfactory to it (it being understood that
the written agreement of the Holder shall be sufficient indemnity), and in case
of mutilation upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
---------------------
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant, such office to be
initially located at MAX Internet Communications, Inc., 8115 Preston Road,
Dallas, Texas 75225, Att: Lawrence R. Biggs, Jr., Tel.: (214) 691-0055, Fax:
(214) 691-0887, provided, however, that the Company shall provide prior written
notice to Holder of a change in address no less than thirty (30) days prior to
such change.
13. LIMITATION OF LIABILITY
-----------------------
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
14. MISCELLANEOUS
-------------
14.1. Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Expiration Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any direct and indirect
losses, damages, costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
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14.2. Notice Generally. Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit in the United
States mails, as follows:
(1) if to the Company, to:
MAX Internet Communications, Inc.
8115 Preston Road
Dallas, Texas 75225
Att.: Lawrence R. Biggs, Jr.
Tel.: (214) 691-0055
Fax: (214) 691-0887
with a copy to:
Glast, Phillips & Murray
2200 One Galleria Tower
13355 Noel Road, L.B. 48
Dallas, Texas 75240-6657
Tel.: (972) 419-9300
Fax: (972) 419-8329
(2) if to the Purchaser to:
Boxer Partners LLC
WEC Asset Management LLC
One World Trade Center, Suite 4563
New York, New York 10048
Attention: Ethan Benovitz
Tel: (212) 775-9299
Fax: (212) 775-9311
with a copy to:
Cohen Tauber Spievak & Wagner LLP
1350 Avenue of the Americas
26th Floor
New York, New York 10019
Att.: Jay Spievak, Esq.
Tel.: (212) 519-5195
Fax: (212) 262-1766
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
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<PAGE>
14.3. Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant.
14.4. Remedies. Holder in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
14.5. Successors and Assigns. Subject to the provisions of Sections 3.1 and
9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
14.6. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived only with the prior written consent of
the Company and the Holder.
14.7. Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.8. Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.9. Governing Law. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws. The Company consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Warrant or any of the transactions contemplated hereby, and
hereby waives, to the maximum extent permitted by law, any objection, including
any objections based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE TO FOLLOW.]
17
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: January 26, 2000
Max Internet Communications, Inc.
By:___________________________
Name:
Title:
Attest:
By:______________________
Name:
Title: Secretary
18
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ Shares of Common Stock of Max Internet
Communications, Inc (the "Company")., and herewith makes payment therefor in
cash or by check or bank draft made payable to the Company, all at the price and
on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _____________ whose address is _________________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
19
EXHIBIT 10.9.3
EXHIBIT B
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 26, 2000 (this
"Agreement"), is entered into by and between Max Internet Communications, Inc.
(the "Company"), and Boxer Partners, LLC, a Delaware limited liability company
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of
January 26, 2000, by and between the Purchaser and the Company (the "Securities
Purchase Agreement"), the Company has agreed to issue and sell to the Purchaser
(i) 727,273 shares of the Company's Common Stock par value $.0001 per share (the
"Common Stock") and (ii) warrants (the "Warrants") to purchase four hundred
thousand (400,000) shares of the Company's common stock, for the aggregate
purchase price of four million dollars ($4,000,000) (the "Purchase Price") (the
"Common Stock, the Warrants and any Common Stock underlying the Warrants and
issuable upon exercise thereof are collectively referred to herein as the
"Securities"; and all shares of Common Stock acquired by the Purchaser pursuant
to the Securities Purchase Agreement or exercise of the Warrants, and any
Additional Shares are collectively referred to herein as the "Shares");
WHEREAS, the Purchaser has previously loaned to the Company the sum of
two million dollars ($2,000,000), which loan is represented by a promissory
note, dated January 20, 2000, issued by the Company (the Note"), and the
Purchaser may apply the principal and accrued interest under the Note towards
payment of the Purchase Price under the Securities Purchase Agreement; and
WHEREAS, to induce the Purchaser to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Additional Shares" shall mean any shares of Common Stock
issuable to Purchasers pursuant to a stock split, recapitalization, stock
dividends or similar transactions or additional shares of Common Stock issuable
pursuant to Section 4 of the Warrant.
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(ii) "Minimum Conversion Shares" on any date means a number of
shares equal the number of shares of Common Stock issuable upon exercise of the
Warrants.
(ii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing one or more Registration Statement
or Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering securities
on a continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the Securities and Exchange
Commission (the "Commission").
(iii) "Registrable Securities" means collectively, the Shares,
the Warrants and Additional Shares, if any.
(iv) "Registration Statement" means a registration statement
of the Company under the Securities Act.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Securities Purchase Agreement, or the
Warrants, as the case may be.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and, as soon as
practicable, but in no event later than February 29, 2000 (the "Required Filing
Date"), file with the Commission a Registration Statement on Form SB-2 or S-3
covering resales of (a) the Shares and (b) the Warrants on the filing date. In
the event that Form SB-2 or S-3 is unavailable for such a registration, the
Company shall use such other form as is available for such a registration. Such
Registration Statement or amended Registration Statement, as the case may be,
shall in accordance with Rule 416 under the Securities Act, state that it also
covers such indeterminate number of additional Shares as may become issuable (i)
upon exercise of the Warrants (ii) to prevent dilution resulting from stock
splits, stock dividends or similar transactions and (iii) to the extent
consistent with the interpretations of the Commission of such rule at such time,
resulting from any adjustment in the Current Warrant Price of such Warrants. The
Company shall use its best efforts to cause any such Registration Statement or
amended Registration Statement, as the case may be, to become effective within
the earliest to occur of (i) ninety (90) days following the Closing Date; (ii)
if the Commission elects not to conduct a review of the Registration Statement,
the date which is five (5) business days after the date upon which either the
Company or its counsel is so notified, whether orally or in writing; or (iii) if
the Registration Statement is reviewed by the Commission, the earlier of (x)
ninety (90) days following the Closing Date or (y) the date which is five (5)
business days after the date upon which the Company or its counsel is notified
by the Commission, whether orally or in writing, that the Commission has no
further comments with respect to the Registration Statement, or that the
Registration Statement may be declared effective. The earliest of such dates is
referred to herein as the "Required Effective Date." Notwithstanding the use of
the terms "Required Filing Date" and "Required Effective Date" herein, the
Company shall at all times use its best efforts to file each required
Registration Statement or amendment to a Registration Statement as soon as
possible after the Closing Date or after the date the Company becomes obligated
to file such Registration Statement or amendment, as the case may be, and to
cause each such Registration Statement or amendment to become effective as soon
as possible thereafter. No securities of the Company other than the Registrable
Securities and securities issued to Coleman & Co. in connection with this
transaction shall be included in any such Registration Statement. The Company
shall keep each Registration Statement effective pursuant to Rule 415 at all
times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which the Registrable
Securities (in the opinion of counsel to the Company) may be immediately sold
without restriction (including without limitation as to volume by each holder
thereof) without registration under the Securities Act (the "Registration
Period").
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<PAGE>
(b) Payments by the Company.
(i) (A) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the Commission on or prior to the
Required Filing Date, or (B) if the Registration Statement covering the
Registrable Securities is not effective on or prior to the Required Effective
Date, or (C) if the number of Shares qualified for trading on the OTC Bulletin
Board or the NASDAQ SmallCap Market, if applicable, or reserved by the Company
for issuance shall be insufficient for issuance upon the exercise of the
Warrants, or (D) upon the occurrence of a Blackout Event (as described in
Section 3(f) or Section 3(g) below) (each of the events described in clauses (A)
through (D) of this paragraph are referred to herein as a "Registration
Default"), the Company will make payments to the Purchaser in such amounts and
at such times as shall be determined pursuant to this Section 2(b),.
(ii) The amount (the "Periodic Amount") to be paid by the
Company to the Purchaser as of each thirty (30) day period during which a
Registration Default shall be in effect (each such period, a "Default Period")
shall be equal to (x) with respect to the first Default Period, one percent (1%)
of the Purchase Price paid by the Purchaser and (y) thereafter, two percent (2%)
of the Purchase Price; provided that, with respect to any Default Period during
which the relevant Registration Defaults shall have been cured, the Periodic
Amount shall be pro rated for the number of days during such period during which
the Registration Defaults were pending; and provided, however, that the payment
of such Periodic Amounts shall not relieve the Company from its continuing
obligations to register the Warrants and Shares pursuant to Section 2(a).
(iii) Each Periodic Amount shall be payable by the Company,
in cash or other immediately available funds, to the Purchaser on the last day
of each month during which a Registration Default occurred or was continuing,
without demand therefor by the Purchaser. If the Company shall not remit the
Periodic Amounts payable to the Purchaser as set forth in paragraph (ii) above,
the Company will pay the Purchaser reasonable costs of collection, including
attorneys' fees, in addition to the Periodic Amounts.
(iv) The parties acknowledge that the damages which may be
incurred by the Purchaser if the Registration Statement is not filed by the
Required Filing Date, if the Registration Statement has not been declared
effective by the Required Effective Date, if an insufficient number of shares of
Common Stock shall be qualified for trading or reserved for issuance, or if the
provisions of Section 3(f) or 3(g) become applicable, may be difficult to
ascertain. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of such damages.
3
<PAGE>
(c) Piggyback Registration. (i) If at any time or from time to time,
the Company shall determine to register any of its securities, for its own
account or the account of any of its shareholders, other than a Registration
Statement relating solely to employee share option plans or pursuant to an
acquisition transaction on Form S-4, the Company will:
(A) provide to the Purchaser written notice thereof as soon as
practicable prior to filing the Registration Statement; and
(B) include in such Registration Statement and in any
underwriting involved therein, all of the Registrable
Securities specified in a written request by the Purchaser
made within fifteen (15) days after receipt of such written
notice from the Company.
(ii) If the Registration is for a registered public offering
involving an underwriting, the Company shall so advise the Purchaser as a part
of the written notice given pursuant to this Section. In such event, the rights
of the Purchaser hereunder shall include participation in such underwriting and
the inclusion of the Registrable Securities in the underwriting to the extent
provided herein. To the extent that the Purchaser proposes to distribute its
securities through such underwriting, the Purchaser shall (together with the
Company and any other securityholders of the Company distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section, if the managing underwriter of such underwriting determines that
marketing factors require a limitation of the number of shares to be offered in
connection with such underwriting, the managing underwriter may limit the number
of Registrable Securities to be included in the Registration and underwriting
(provided, however, that (a) the Registrable Securities shall not be excluded
from such underwritten offering prior to the exclusion of any securities held by
officers and directors of the Company or their affiliates, (b) the Registrable
Securities shall be entitled to at least the same priority in an underwritten
offering as any securities included in such offering by any of the Company's
other existing securityholders, and (c) the Company shall not enter into any
agreement that would provide any securityholder with priority in connection with
an underwritten offering greater than the priority granted to the Purchaser
hereunder). The Company shall so advise any of its other securityholders who are
distributing their securities through such underwriting pursuant to their
respective piggyback registration rights, and the number of shares of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among the Purchaser and all
other securityholders of the Company in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by the Purchaser and such
other securityholders at the time of the filing of the registration statement.
If the Purchaser disapproves of the terms of any such underwriting, it may elect
to withdraw therefrom by written notice to the Company. Any Registrable
Securities so excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.
(d) Eligibility for Form SB-2. The Company represents and warrants that
it meets all of the requirements for the use of Form SB-2 for the Registration
of the sale by the Purchaser and any transferee who purchases the Registrable
Securities, and the Company shall file all reports required to be filed by the
Company with the Commission in a timely manner, and shall take such other
actions as may be necessary to maintain such eligibility for the use of Form
SB-2.
4
<PAGE>
(e) Priority in Filing. The Company covenants that beginning on the
Closing Date and ending on the date that is one hundred and twenty (120) days
after the Registration Statement filed pursuant to Section 2(a) of this
Agreement becomes effective (provided that if, after the effective date of such
Registration Statement, the Purchaser shall be unable to sell Registrable
Securities pursuant to such Registration Statement for any number of days, the
provisions of this Section 2(e) shall apply for an additional number of days
equal to the number of days during which any Purchaser is unable to sell
Registrable Securities pursuant to such Registration Statement), the Company
will not file any Registration Statement, other than a Registration Statement
required by Section 2(a) hereof, without the written consent of the Purchaser.
3. Obligations of the Company.
In connection with the registration of the Registrable Securities, the
Company shall do each of the following:
(a) Prepare and file with the Commission the Registration
Statements required by Section 2 of this Agreement and such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectuses used in connection with such Registration
Statements, each in such form as to which the Purchaser and its counsel shall
not have objected, as may be necessary to keep the Registration Statements
effective at all times during the Registration Period, and, during the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities of the Company
covered by the Registration Statements until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements;
(b) Furnish to the Purchaser and its legal counsel identified
to the Company, promptly after the same is prepared and publicly distributed,
filed with the Commission, or received by the Company, a copy of the
Registration Statement, each preliminary prospectus, each final prospectus, and
all amendments and supplements thereto and such other documents, as the
Purchaser may reasonably request in order to facilitate the disposition of its
Registrable Securities;
(c) Furnish to the Purchaser and its counsel copies of any
correspondence between the Company and the Commission with respect to any
Registration Statement or amendment or supplement thereto filed pursuant to this
Agreement;
(d) Use all reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements under such other
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions, provided that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction;
5
<PAGE>
(e) Qualify such securities for trading on the Nasdaq OTC
Bulletin Board and list such securities on all the other national securities
exchanges on which any securities of the Company are then listed, and file any
filings required by NASDAQ and/or such other exchanges;
(f) As promptly as practicable after becoming aware thereof,
notify the Purchaser of any need to suspend use of the prospectus included in
the Registration Statement, including as a result of the occurrence of any
event, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and to use its best efforts to promptly prepare a
supplement or amendment to such Registration Statement or other appropriate
filing with the Commission to allow the resumption of the use of such prospectus
and to deliver a number of copies of such supplement or amendment to the
Purchaser as the Purchaser may reasonably request;
(g) As promptly as practicable after becoming aware of such
event, notify the Purchaser (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the Commission or any stop order or
other suspension of the effectiveness of any Registration Statement at the
earliest possible time, and to use its best efforts to promptly obtain the
withdrawal of such stop order or other suspension of effectiveness (the
occurrence of any of the events described in paragraphs (f) and (g) of this
Section 3 is referred to herein as a "Blackout Event");
(h) During the period commencing upon (i) the Purchaser's
receipt of a notification pursuant to Section 3(f) above or (ii) the entry of a
stop order or other suspension of the effectiveness of the Registration
Statement described in Section 3(g) above, and ending at such time as (x) the
Company shall have completed the applicable filings (and if applicable, such
filings shall have been declared effective) and shall have delivered to the
Purchaser the documents required pursuant to Section 3(f) above or (y) such stop
order or other suspension of the effectiveness of the Registration Statement
shall have been removed, the Company shall be liable to remit the payments
required to be paid to the Purchaser pursuant to Section 2(b) above;
(i) Suspend the use of any prospectus used in connection with
any Registration Statement only in the event, and for such period of time as,
such a suspension is required by the rules and regulations of the Commission;
(j) Enter into such customary agreements for secondary
offerings (including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other actions reasonably requested by
the Purchaser in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities. Whether or not an underwriting
agreement is entered into and whether or not the Registrable Securities are to
be sold in an underwritten offering the Company shall:
(i) make such representations and warranties to the Purchaser
and the underwriter or underwriters, if any, in form, substance and
scope as are customarily made by issuers to selling stockholders and
underwriters in secondary offerings;
6
<PAGE>
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of
independent counsel to the Company (which counsel and opinions shall be
reasonably satisfactory in form, scope and substance to Purchaser and
the underwriter(s), if any, and their counsel), (A) on and dated as of
the effective day of the applicable Registration Statement (and in the
case of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) stating that (x) such
Registration Statement complies in all material respects with the
requirements of the Securities Act and the rules and regulations of the
Commission thereunder, (y) such Registration Statement does not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (z) the documents incorporated by reference
in the prospectus accompanying such Registration Statement, at the time
they were filed with the Commission or as amended, complied in all
material respects with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder and, when read together with the other information in such
prospectus, do not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) within
fifteen (15) days following the filing of the Company's Annual Report
on Form 10-K for each fiscal year thereafter, an opinion of independent
counsel to the Company, updating the opinion referred to in clause (A)
of this paragraph;
(iii) cause to be delivered, immediately prior to the
effectiveness of the applicable Registration Statement (and, in the
case of an underwritten offering, at the time of delivery of any
Registrable Securities sold pursuant thereto), and at the beginning of
each fiscal year following a year during which the Company's
independent certified public accountants shall have reviewed any of the
Company's books or records, a "comfort" letter from the Company's
independent certified public accountants addressed to the Purchaser and
each underwriter, if any, stating that such accountants are independent
public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder, and otherwise in
customary form and covering such financial and accounting matters as
are customarily covered by letters of the independent certified public
accountants delivered in connection with secondary offerings; such
accountants shall have undertaken in each such letter to update the
same during each such fiscal year in which such books or records are
being reviewed so that each such letter shall remain current, correct
and complete throughout such fiscal year; and each such letter and
update thereof, if any, shall be reasonably satisfactory to the
Purchaser;
(iv) if an underwriting agreement is entered into, the same
shall include customary indemnification and contribution provisions to
and from the underwriters and procedures for secondary underwritten
offerings;
(v) deliver such documents and certificates as may be
reasonably requested by any purchaser of the Registrable Securities
being sold or the managing underwriter or underwriters, if any, to
evidence compliance with clause (i) above and with any customary
conditions contained in the underwriting agreement, if any; and
7
<PAGE>
(vi) deliver to Purchaser on the effective day of the
applicable Registration Statement (and, in the case of an underwritten
offering, on the date of delivery of any Registrable Securities sold
pursuant thereto), and at the beginning of each fiscal quarter
thereafter, a certificate in form and substance as shall be reasonably
satisfactory to Purchaser, executed by an executive officer of the
Company and to the effect that all the representations and warranties
of the Company contained in the Securities Purchase Agreement are still
true and correct except as disclosed in such certificate; the Company
shall, as to each such certificate delivered at the beginning of each
fiscal quarter, update or cause to be updated each such certificate
during such quarter so that it shall remain current, complete and
correct throughout such quarter; and such updates received by Purchaser
during such quarter, if any, shall have been reasonably satisfactory to
Purchaser.
(k) Make available for inspection by Purchaser, its
representative(s), any underwriter participating in any disposition pursuant to
a Registration Statement, and any attorney or accountant retained by the
Purchaser or underwriter, all financial and other records customary for purposes
of Purchaser's and underwriters' due diligence examination of the Company and
review of any Registration Statement, all filings made with the Commission
subsequent to the Closing, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement, provided
that such parties agree to keep such information confidential;
(l) Cooperate with the Purchaser to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to any Registration Statement and to enable such certificates
for the Registrable Securities to be in such denominations or amounts, as the
case may be, as the Purchaser may reasonably request, and registered in such
names as the Purchaser may request; and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Purchaser) an appropriate instruction
and opinion of such counsel; and
(m) Permit counsel to Purchaser to review the Registration
Statement and all amendments and supplements thereto within a reasonable period
of time (but not less than five (5) business days) prior to each filing, and to
incorporate those changes, if provided to the Company or its counsel within such
five (5) business day period, suggested by such counsel.
8
<PAGE>
4. Obligations of the Purchaser.
In connection with the registration of the Registrable Securities, the
Purchaser shall have the following obligations:
(a) Furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
the Registrable Securities held by it, as shall be reasonably required to effect
the registration of such Registrable Securities. The intended method or methods
of disposition and/or sale (Plan of Distribution) of the Registrable Securities
as so provided by the participating Purchaser shall be included without
alteration in any Registration Statement covering the Registrable Securities and
shall not be changed without written consent of the Purchaser. At least five (5)
business days prior to the first anticipated filing date of any Registration
Statement, the Company shall notify the Purchaser of the information the Company
requires from the Purchaser if the Purchaser elects to have any of its
Registrable Securities included in such Registration Statement; and
(b) The Purchaser agrees that, upon receipt of any notice from
the Company of the happening of any Blackout Event of the kind described in
Section 3(f) or 3(g) above, it will immediately discontinue disposition of its
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) shall be furnished to the
Purchaser.
(c) The Purchaser agrees that, for a period of that is thirty
(30) days from the date the Registration Statement filed pursuant to Section
2(a) of this Agreement becomes effective, it will not sell, pursuant to such
Registration Statement, in excess of one-half of the Registrable Securities
registered pursuant to such Registration Statement; provided, however, that such
limitation shall not apply (i) in the event and to the extent such thirty (30)
day period is more than one hundred twenty (120) days after the Closing Date or
(ii) to any shares of Common Stock acquired by the Purchaser upon exercise of
the Warrant after a Call Notice (as that term is defined in the Warrant), has
been sent by the Company to the Purchaser.
5. Expenses of Registration.
Other than underwriting discounts and commissions, all expenses
incurred in connection with registrations, filings or qualifications pursuant to
this Agreement, including, without limitation, all registration, listing, and
qualification fees, printing and accounting fees, and the fees and disbursements
of counsel for the Company, and the fees of one counsel to the Purchaser with
respect to each Registration Statement filed pursuant hereto, shall be borne by
the Company.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) The Company will indemnify and hold harmless the
Purchaser, each of its officers, shareholders, members, directors and partners,
and each person, if any, who controls the Purchaser within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
9
<PAGE>
arise out of or are based upon: (i) any untrue or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, (ii) any untrue or alleged statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the Commission) or the omission or alleged omission to state therein any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state or foreign securities law or any rule or regulation
under the Securities Act, the Exchange Act or any state or foreign securities
law (the matters in foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall, subject to the provisions of Section 6(b)
below, reimburse each Purchaser, promptly as such expenses are incurred and are
due and payable, for any legal and other costs, expenses and disbursements in
giving testimony or furnishing documents in response to a subpoena or otherwise,
including without limitation, the costs, expenses and disbursements, as and when
incurred, of investigating, preparing or defending any such action, suit,
proceeding or investigation (whether or not in connection with litigation in
which the Purchaser is a party), incurred by it in connection with the
investigation or defense of any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (i) apply to any Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof supplement thereto; (ii) with respect to
any preliminary prospectus, inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the final prospectus, as then amended or
supplemented, if such final prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (iii) be available to the extent that such
Claim is based upon a failure of the Purchaser to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; or (iv)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Purchaser
pursuant to Section 9. The Purchaser will indemnify the Company and its officers
and directors against any Claims arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company, by or on behalf of the Purchaser, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company in this Section 6.
10
<PAGE>
(b) Promptly after receipt by an Indemnified Person under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and to the
extent that the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person; provided, however, that an Indemnified Person shall have the right to
retain its own counsel with the reasonable fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person and any other party
represented by such counsel in such proceeding. In such event, the Company shall
pay for only one separate legal counsel for the Purchaser, and such legal
counsel shall be selected by the Purchaser. The failure to deliver written
notice to an indemnifying party within a reasonable time after the commencement
of any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person under this Section 6, except to the extent that the
indemnifying party is materially prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(c) No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of an unconditional and irrevocable release from all
liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that any
provisions relating to indemnification or contribution contained in the
underwriting agreements entered into among the Company, the underwriters and the
Purchaser in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in such underwriting agreements
shall be controlling as to the Registrable Securities included in the public
offering; provided, however, that if, as a result of this Section 6(d), any
Purchaser, its officers, shareholders, members, directors, partners or any
person controlling such Purchaser is or are held liable with respect to any
Claim for which they would be entitled to indemnification hereunder but for this
Section 6(d) in an amount which exceeds the aggregate proceeds received by such
Purchaser from the sale of Registrable Securities included in a registration
pursuant to such underwriting agreement (the "Excess Liability"), the Company
shall reimburse such Purchaser for such Excess Liability.
11
<PAGE>
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited under applicable law, the indemnifying party agrees to
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and the Indemnified Person shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on which such Claim is based relates to information supplied by
the indemnifying party or by the Indemnified Person, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the forgoing, (a) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation and (b) contribution by any seller of
Registrable Securities shall be limited in amount to the net proceeds received
by such seller from the sale of such Registrable Securities. The Company and the
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation (even if the Purchaser
and any other party were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section.
8. Reports Under Exchange Act.
With a view to making available to the Purchaser the benefits of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Purchaser to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to the Purchaser, so long as Purchaser owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, (ii) a copy of the most recent annual or periodic
report of the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably requested to
permit such Purchaser to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of the Registration Rights.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by any Purchaser to any
transferee of all or any portion of the Securities or Shares held by such
Purchaser if: (a) such Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
12
<PAGE>
written notice of (i) the name and address of such transferee or assignee and
(ii) the Securities or Shares with respect to which such registration rights are
being transferred or assigned; (c) at or before the time the Company receives
the written notice contemplated by clause (b) of this sentence, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (d) the transferee of the relevant Securities
or Shares complies with the restrictions on the Purchaser set forth in Section 4
of the Securities Purchase Agreement.
10. Amendment of Registration Rights.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and holders of 75% of the Registrable Securities from time to time. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon the Purchaser and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be effective upon
personal delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
If to the Company to: MAX Internet Communications, Inc.
8115 Preston Road
Dallas, Texas 75225
Att.: Lawrence R. Biggs, Jr.
Tel.: (214) 691-0055
Fax: (214) 691-0887
with a copy to: Glast, Phillips & Murray
2200 One Galleria Tower
13355 Noel Road, L.B. 48
Dallas, Texas 75240-6657
Att.: Ronald L. Brown, Esq.
Tel.: (972) 419-8300
Fax: (972) 419-8329
13
<PAGE>
If to the Purchaser to: Boxer Partners LLC
c\o WEC Asset Management LLC
One World Trade Center, Suite #4563
New York, New York 10048
Attention: Ethan Benovitz
Tel: (212) 775-9299
Fax: (212) 775-9311
with a copy to: Cohen Tauber Spievak & Wagner LLP
1350 Avenue of the Americas
26th Floor
New York, New York 10019
Att.: Jay Spievak, Esq.
Tel.: (212) 519-5195
Fax: (212) 262-1766
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, except for provisions with
respect to internal corporate matters of the Company which shall be governed by
the corporate laws of the State of Nevada. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. This Agreement has been entered into
freely by each of the parties, following consultation with their respective
counsel, and shall be interpreted fairly in accordance with its terms, without
any construction in favor of or against either party. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such validity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
14
<PAGE>
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth,
or referred to herein and in the other Primary Documents. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The Company acknowledges that any failure by the Company
to perform its obligations under Section 2(a), or any delay in such performance
could result in direct damages to the Purchaser, and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK, SIGNATURE PAGE TO FOLLOW]
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed.
Max Internet Communications, INC.
By:______________________________
Name:
Title:
Boxer Partners, LLC
By: WEC Asset Management LLC, Managing Member
By:______________________________
Name: Ethan Benovitz
Title: Managing Director
16
Exhibit 10.10
SUBSCRIPTION AGREEMENT
The Board of Directors
MAX Internet Communications, Inc.
8115 Preston Road, Eighth Floor East
Dallas, Texas 75225
Gentlemen:
1. Subscription. On the terms set forth below, the undersigned hereby
subscribes for the shares of Common Stock (the "Shares") in MAX Internet
Communications, Inc., a Nevada corporation (the "Company") set forth on the
Signature Page. In connection with such subscription, the undersigned hereby
tenders to the Company two executed counterparts of this Subscription Agreement,
together with a check acceptable to the Company in an amount equal to the full
purchase price of the Shares subscribed for hereunder as set forth on the
Signature Page.
The undersigned understands and agrees that you may decline to accept this
subscription, in which case all instruments tendered herewith will be promptly
returned. If you accept this subscription, such acceptance will be signified by
executing the acknowledgment on the appropriate page of each copy hereof
tendered by the undersigned and causing one such acknowledged copy to be
returned to the undersigned.
2. Delivery of Information. The undersigned acknowledges receipt of the
Company's disclosure materials on file with the Securities and Exchange
Commission. In addition, the undersigned has received all other information
deemed material by the Subscriber to the making of an informed decision whether
to invest in the Company.
3. Representations, Warranties, and Covenants of the Undersigned. The
undersigned hereby represents and warrants to and covenants with the Company as
follows:
(a) The undersigned understands that the following information is being
furnished to determine whether sales of the Shares may be made to the
undersigned pursuant to Section 4(2) of the Securities Act of 1933 (the "1933
Act") and applicable state securities laws. The undersigned understands that the
information contained herein will be relied upon for purposes of such
determination and the Shares will not be registered under the 1933 Act in
reliance upon the exemption from registration provided by Section 4(2) of the
1933 Act. The undersigned represents and warrants to the Company and its
officers, directors, agents and employees that (i) the information contained
herein is complete and accurate and may be relied upon by such parties and (ii)
the undersigned will notify the Company immediately of any change in any of such
information occurring prior to the closing of the purchase of any Shares by the
undersigned. All information furnished herein or hereby is for the sole use of
the Company and the Company's representatives and counsel and will be held in
confidence by such persons, except that this Agreement may be furnished to such
parties as may be deemed desirable to establish compliance with federal, state
or foreign securities laws.
SUBSCRIPTION AGREEMENT Page 1
- ----------------------
<PAGE>
(b) The undersigned has adequate net worth and means of providing for
his current needs and possible personal contingencies, and the undersigned has
no need, and anticipates no need in the foreseeable future, to sell the Shares
for which the undersigned hereby subscribes. The undersigned is able to bear the
economic risks of this investment and, consequently, without limiting the
generality of the foregoing, the undersigned is able to hold his Shares for an
indefinite period of time and has a sufficient net worth to sustain a loss of
his entire investment in the Company in the event such loss should occur. The
overall commitment by the undersigned to investments that are not readily
marketable is not disproportionate to his net worth, and his acquisition of
Shares will not cause such overall commitment to become excessive. The
undersigned is an "Accredited Investor" as defined by SEC Regulation D.
(c) The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of an investment in the Shares.
(d) The undersigned has received and read and is familiar with the
materials described above, and the undersigned confirms that all documents,
records, and books pertaining to the undersigned's proposed investment in the
Company have been made available to the undersigned.
(e) The undersigned has had an opportunity to ask questions of and
receive satisfactory answers from the Company, or any person or persons acting
on the Company's behalf, concerning the terms and conditions of this investment,
and all such questions have been answered to the full satisfaction of the
undersigned.
(f) The Shares for which the undersigned hereby subscribes will be acquired
for the undersigned's own account for investment and not with the view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and the undersigned does not now have any reason to anticipate any
change in the undersigned's circumstances or other particular occasion or event
which would cause the undersigned to sell his Shares.
(g) The undersigned represents that it has been called to his attention,
that an investment in the Shares involves a high degree of risk which may result
in the loss of the total amount of the undersigned's investment.
(h) The undersigned is now a bona fide individual resident of the state set
forth herein and the address and social security number or federal tax
identification number set forth herein is the true and correct residence and
social security number or federal tax identification number of the undersigned.
The undersigned has no present intention of becoming a resident of any other
state or jurisdiction.
SUBSCRIPTION AGREEMENT Page 2
- ----------------------
<PAGE>
(i) The undersigned acknowledges that the Company has made available to the
undersigned or the undersigned's personal advisors the opportunity to obtain
additional information to verify the accuracy of the information contained in
the disclosure materials and to evaluate the merits and risks of this
investment, including, but not limited to, the income tax consequences of the
investment. The undersigned represents that, by reason of his business and
financial experience, the undersigned has acquired the capacity to protect his
own interest in investments of this nature. In reaching the conclusion that the
undersigned desires to acquire the Shares, the undersigned has carefully
evaluated his financial resources and investment position and the risks
associated with this investment and acknowledges that he is able to bear the
economic risks of this investment.
(j) The Shares has been offered to the undersigned without any form of
general solicitation or advertising of any type by or on behalf of the Company
or any of its officers, directors, employees or agents, or any other person.
(k) The undersigned understands that neither the Securities Exchange
Commission nor any securities administrator of any state has made any finding or
determination relating to the fairness of an investment in the Shares and that
neither the Securities Exchange Commission nor any securities administrator of
any state has or will recommend or endorse any offering of the Shares.
4. Limitation on Transfer of Shares. The undersigned acknowledges that he
is aware that there are substantial restrictions on the transferability of the
Shares. The Shares will not be registered under the 1933 Act or of applicable
state securities laws, and the Shares may not be, and the undersigned agrees
that it shall not be, sold unless such sale is registered or exempt from such
registration under the 1933 Act or state securities laws or regulations. The
undersigned further acknowledges that the Company is under no obligation to aid
him in obtaining any exemption from the registration requirements. The
undersigned also acknowledges that he shall be responsible for compliance with
all conditions on transfer imposed by any securities administrator of any state
and for any expenses incurred by the Company for legal or accounting services in
connection with reviewing such a proposed transfer and/or issuing an opinion in
connection therewith. The Company agrees that, within nine months from the date
hereof, it will file a registration statement covering open market resales of
the Shares.
5. Compliance with Securities Laws. The undersigned understands and
agrees that the following restrictions and limitations are applicable to the
undersigned's purchase and resales or other transfers of the Shares pursuant to
the 1933 Act.
SUBSCRIPTION AGREEMENT Page 3
- ----------------------
<PAGE>
(a) The undersigned agrees that the Shares shall not be sold or otherwise
transferred unless the Shares are registered under the 1933 Act and state
securities laws or are exempt therefrom.
(b) A legend in substantially the following form has been or will be placed
on the certificate(s) or other document(s), if any, evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER OF THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY
BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
(c) Stop transfer instructions have been or will be imposed with respect to
the Shares so as to restrict resale or other transfer thereof, subject to the
further items hereof, including the provisions of the legend set forth in
subparagraph (b) above.
SUBSCRIPTION AGREEMENT Page 4
- ----------------------
<PAGE>
IN WITNESS WHEREOF, subject to acceptance by the Company, the undersigned has
completed this Subscription Agreement to evidence his subscription for the
Shares set forth below:
Total subscription amount: $1,000,000
Number of Shares: 125,000
Shares To Be Registered as follows:
NEXUS CO., LTD.
- ----------------------- -----------------------------
Address Signature
- ----------------------- -----------------------------
Name(s) typed or printed
- -----------------------
Tax I.D. Number
................................................................................
Subscription Accepted:
MAX Internet Communications, Inc.
By: _____________________________________
Name: ___________________________________
Title: ____________________________________
SUBSCRIPTION AGREEMENT Page 5
- ----------------------
Exhibit 10.11
SUBSCRIPTION AGREEMENT
The Board of Directors
MAX Internet Communications, Inc.
8115 Preston Road, Eighth Floor East
Dallas, Texas 75225
Gentlemen:
1. Subscription. On the terms set forth below, the undersigned hereby
subscribes for the shares of Common Stock (the "Shares") in MAX Internet
Communications, Inc., a Nevada corporation (the "Company") set forth on the
Signature Page. In connection with such subscription, the undersigned hereby
tenders to the Company two executed counterparts of this Subscription Agreement,
together with a check acceptable to the Company in an amount equal to the full
purchase price of the Shares subscribed for hereunder as set forth on the
Signature Page.
The undersigned understands and agrees that you may decline to accept this
subscription, in which case all instruments tendered herewith will be promptly
returned. If you accept this subscription, such acceptance will be signified by
executing the acknowledgment on the appropriate page of each copy hereof
tendered by the undersigned and causing one such acknowledged copy to be
returned to the undersigned.
2. Delivery of Information. The undersigned acknowledges receipt of the
Company's disclosure materials on file with the Securities and Exchange
Commission. In addition, the undersigned has received all other information
deemed material by the Subscriber to the making of an informed decision whether
to invest in the Company.
3. Representations, Warranties, and Covenants of the Undersigned. The
undersigned hereby represents and warrants to and covenants with the Company as
follows:
(a) The undersigned understands that the following information is being
furnished to determine whether sales of the Shares may be made to the
undersigned pursuant to Section 4(2) of the Securities Act of 1933 (the "1933
Act") and applicable state securities laws. The undersigned understands that the
information contained herein will be relied upon for purposes of such
determination and the Shares will not be registered under the 1933 Act in
reliance upon the exemption from registration provided by Section 4(2) of the
1933 Act. The undersigned represents and warrants to the Company and its
officers, directors, agents and employees that (i) the information contained
herein is complete and accurate and may be relied upon by such parties and (ii)
the undersigned will notify the Company immediately of any change in any of such
information occurring prior to the closing of the purchase of any Shares by the
undersigned. All information furnished herein or hereby is for the sole use of
the Company and the Company's representatives and counsel and will be held in
confidence by such persons, except that this Agreement may be furnished to such
parties as may be deemed desirable to establish compliance with federal, state
or foreign securities laws.
SUBSCRIPTION AGREEMENT Page 1
- ----------------------
<PAGE>
(b) The undersigned has adequate net worth and means of providing for
his current needs and possible personal contingencies, and the undersigned has
no need, and anticipates no need in the foreseeable future, to sell the Shares
for which the undersigned hereby subscribes. The undersigned is able to bear the
economic risks of this investment and, consequently, without limiting the
generality of the foregoing, the undersigned is able to hold his Shares for an
indefinite period of time and has a sufficient net worth to sustain a loss of
his entire investment in the Company in the event such loss should occur. The
overall commitment by the undersigned to investments that are not readily
marketable is not disproportionate to his net worth, and his acquisition of
Shares will not cause such overall commitment to become excessive. The
undersigned is an "Accredited Investor" as defined by SEC Regulation D.
(c) The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of an investment in the Shares.
(d) The undersigned has received and read and is familiar with the
materials described above, and the undersigned confirms that all documents,
records, and books pertaining to the undersigned's proposed investment in the
Company have been made available to the undersigned.
(e) The undersigned has had an opportunity to ask questions of and
receive satisfactory answers from the Company, or any person or persons acting
on the Company's behalf, concerning the terms and conditions of this investment,
and all such questions have been answered to the full satisfaction of the
undersigned.
(f) The Shares for which the undersigned hereby subscribes will be acquired
for the undersigned's own account for investment and not with the view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and the undersigned does not now have any reason to anticipate any
change in the undersigned's circumstances or other particular occasion or event
which would cause the undersigned to sell his Shares.
(g) The undersigned represents that it has been called to his attention,
that an investment in the Shares involves a high degree of risk which may result
in the loss of the total amount of the undersigned's investment.
(h) The undersigned is now a bona fide individual resident of the state set
forth herein and the address and social security number or federal tax
identification number set forth herein is the true and correct residence and
social security number or federal tax identification number of the undersigned.
The undersigned has no present intention of becoming a resident of any other
state or jurisdiction.
SUBSCRIPTION AGREEMENT Page 2
- ----------------------
<PAGE>
(i) The undersigned acknowledges that the Company has made available to the
undersigned or the undersigned's personal advisors the opportunity to obtain
additional information to verify the accuracy of the information contained in
the disclosure materials and to evaluate the merits and risks of this
investment, including, but not limited to, the income tax consequences of the
investment. The undersigned represents that, by reason of his business and
financial experience, the undersigned has acquired the capacity to protect his
own interest in investments of this nature. In reaching the conclusion that the
undersigned desires to acquire the Shares, the undersigned has carefully
evaluated his financial resources and investment position and the risks
associated with this investment and acknowledges that he is able to bear the
economic risks of this investment.
(j) The Shares has been offered to the undersigned without any form of
general solicitation or advertising of any type by or on behalf of the Company
or any of its officers, directors, employees or agents, or any other person.
(k) The undersigned understands that neither the Securities Exchange
Commission nor any securities administrator of any state has made any finding or
determination relating to the fairness of an investment in the Shares and that
neither the Securities Exchange Commission nor any securities administrator of
any state has or will recommend or endorse any offering of the Shares.
4. Limitation on Transfer of Shares. The undersigned acknowledges that he
is aware that there are substantial restrictions on the transferability of the
Shares. The Shares will not be registered under the 1933 Act or of applicable
state securities laws, and the Shares may not be, and the undersigned agrees
that it shall not be, sold unless such sale is registered or exempt from such
registration under the 1933 Act or state securities laws or regulations. The
undersigned further acknowledges that the Company is under no obligation to aid
him in obtaining any exemption from the registration requirements. The
undersigned also acknowledges that he shall be responsible for compliance with
all conditions on transfer imposed by any securities administrator of any state
and for any expenses incurred by the Company for legal or accounting services in
connection with reviewing such a proposed transfer and/or issuing an opinion in
connection therewith. The Company agrees that, within nine months from the date
hereof, it will file a registration statement covering open market resales of
the Shares.
5. Compliance with Securities Laws. The undersigned understands and
agrees that the following restrictions and limitations are applicable to the
undersigned's purchase and resales or other transfers of the Shares pursuant to
the 1933 Act.
SUBSCRIPTION AGREEMENT Page 3
- ----------------------
<PAGE>
(a) The undersigned agrees that the Shares shall not be sold or otherwise
transferred unless the Shares are registered under the 1933 Act and state
securities laws or are exempt therefrom.
(b) A legend in substantially the following form has been or will be placed
on the certificate(s) or other document(s), if any, evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER OF THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY
BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
(c) Stop transfer instructions have been or will be imposed with respect to
the Shares so as to restrict resale or other transfer thereof, subject to the
further items hereof, including the provisions of the legend set forth in
subparagraph (b) above.
SUBSCRIPTION AGREEMENT Page 4
- ----------------------
<PAGE>
IN WITNESS WHEREOF, subject to acceptance by the Company, the undersigned has
completed this Subscription Agreement to evidence his subscription for the
Shares set forth below:
Total subscription amount: $1,000,000
Number of Shares: 125,000
Shares To Be Registered as follows:
OBM CORPORATION
- ----------------------- -----------------------------
Address Signature
- ----------------------- -----------------------------
Name(s) typed or printed
- -----------------------
Tax I.D. Number
................................................................................
Subscription Accepted:
MAX Internet Communications, Inc.
By: _____________________________________
Name: ___________________________________
Title: ____________________________________
SUBSCRIPTION AGREEMENT Page 5
- ----------------------
Exhibit 10.12
SUBSCRIPTION AGREEMENT
The Board of Directors
MAX Internet Communications, Inc.
8115 Preston Road, Eighth Floor East
Dallas, Texas 75225
Gentlemen:
1. Subscription. On the terms set forth below, the undersigned hereby
subscribes for the shares of Common Stock (the "Shares") in MAX Internet
Communications, Inc., a Nevada corporation (the "Company") set forth on the
Signature Page. In connection with such subscription, the undersigned hereby
tenders to the Company two executed counterparts of this Subscription Agreement,
together with a check acceptable to the Company in an amount equal to the full
purchase price of the Shares subscribed for hereunder as set forth on the
Signature Page.
The undersigned understands and agrees that you may decline to accept this
subscription, in which case all instruments tendered herewith will be promptly
returned. If you accept this subscription, such acceptance will be signified by
executing the acknowledgment on the appropriate page of each copy hereof
tendered by the undersigned and causing one such acknowledged copy to be
returned to the undersigned.
2. Delivery of Information. The undersigned acknowledges receipt of the
Company's disclosure materials on file with the Securities and Exchange
Commission. In addition, the undersigned has received all other information
deemed material by the Subscriber to the making of an informed decision whether
to invest in the Company.
3. Representations, Warranties, and Covenants of the Undersigned. The
undersigned hereby represents and warrants to and covenants with the Company as
follows:
(a) The undersigned understands that the following information is being
furnished to determine whether sales of the Shares may be made to the
undersigned pursuant to Section 4(2) of the Securities Act of 1933 (the "1933
Act") and applicable state securities laws. The undersigned understands that the
information contained herein will be relied upon for purposes of such
determination and the Shares will not be registered under the 1933 Act in
reliance upon the exemption from registration provided by Section 4(2) of the
1933 Act. The undersigned represents and warrants to the Company and its
officers, directors, agents and employees that (i) the information contained
herein is complete and accurate and may be relied upon by such parties and (ii)
the undersigned will notify the Company immediately of any change in any of such
information occurring prior to the closing of the purchase of any Shares by the
undersigned. All information furnished herein or hereby is for the sole use of
the Company and the Company's representatives and counsel and will be held in
confidence by such persons, except that this Agreement may be furnished to such
parties as may be deemed desirable to establish compliance with federal, state
or foreign securities laws.
SUBSCRIPTION AGREEMENT Page 1
- ----------------------
<PAGE>
(b) The undersigned has adequate net worth and means of providing for
his current needs and possible personal contingencies, and the undersigned has
no need, and anticipates no need in the foreseeable future, to sell the Shares
for which the undersigned hereby subscribes. The undersigned is able to bear the
economic risks of this investment and, consequently, without limiting the
generality of the foregoing, the undersigned is able to hold his Shares for an
indefinite period of time and has a sufficient net worth to sustain a loss of
his entire investment in the Company in the event such loss should occur. The
overall commitment by the undersigned to investments that are not readily
marketable is not disproportionate to his net worth, and his acquisition of
Shares will not cause such overall commitment to become excessive. The
undersigned is an "Accredited Investor" as defined by SEC Regulation D.
(c) The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of an investment in the Shares.
(d) The undersigned has received and read and is familiar with the
materials described above, and the undersigned confirms that all documents,
records, and books pertaining to the undersigned's proposed investment in the
Company have been made available to the undersigned.
(e) The undersigned has had an opportunity to ask questions of and
receive satisfactory answers from the Company, or any person or persons acting
on the Company's behalf, concerning the terms and conditions of this investment,
and all such questions have been answered to the full satisfaction of the
undersigned.
(f) The Shares for which the undersigned hereby subscribes will be acquired
for the undersigned's own account for investment and not with the view toward
resale or redistribution in a manner which would require registration under the
1933 Act, and the undersigned does not now have any reason to anticipate any
change in the undersigned's circumstances or other particular occasion or event
which would cause the undersigned to sell his Shares.
(g) The undersigned represents that it has been called to his attention,
that an investment in the Shares involves a high degree of risk which may result
in the loss of the total amount of the undersigned's investment.
(h) The undersigned is now a bona fide individual resident of the state set
forth herein and the address and social security number or federal tax
identification number set forth herein is the true and correct residence and
social security number or federal tax identification number of the undersigned.
The undersigned has no present intention of becoming a resident of any other
state or jurisdiction.
SUBSCRIPTION AGREEMENT Page 2
- ----------------------
<PAGE>
(i) The undersigned acknowledges that the Company has made available to the
undersigned or the undersigned's personal advisors the opportunity to obtain
additional information to verify the accuracy of the information contained in
the disclosure materials and to evaluate the merits and risks of this
investment, including, but not limited to, the income tax consequences of the
investment. The undersigned represents that, by reason of his business and
financial experience, the undersigned has acquired the capacity to protect his
own interest in investments of this nature. In reaching the conclusion that the
undersigned desires to acquire the Shares, the undersigned has carefully
evaluated his financial resources and investment position and the risks
associated with this investment and acknowledges that he is able to bear the
economic risks of this investment.
(j) The Shares has been offered to the undersigned without any form of
general solicitation or advertising of any type by or on behalf of the Company
or any of its officers, directors, employees or agents, or any other person.
(k) The undersigned understands that neither the Securities Exchange
Commission nor any securities administrator of any state has made any finding or
determination relating to the fairness of an investment in the Shares and that
neither the Securities Exchange Commission nor any securities administrator of
any state has or will recommend or endorse any offering of the Shares.
4. Limitation on Transfer of Shares. The undersigned acknowledges that he
is aware that there are substantial restrictions on the transferability of the
Shares. The Shares will not be registered under the 1933 Act or of applicable
state securities laws, and the Shares may not be, and the undersigned agrees
that it shall not be, sold unless such sale is registered or exempt from such
registration under the 1933 Act or state securities laws or regulations. The
undersigned further acknowledges that the Company is under no obligation to aid
him in obtaining any exemption from the registration requirements. The
undersigned also acknowledges that he shall be responsible for compliance with
all conditions on transfer imposed by any securities administrator of any state
and for any expenses incurred by the Company for legal or accounting services in
connection with reviewing such a proposed transfer and/or issuing an opinion in
connection therewith. The Company agrees that, within nine months from the date
hereof, it will file a registration statement covering open market resales of
the Shares.
5. Compliance with Securities Laws. The undersigned understands and
agrees that the following restrictions and limitations are applicable to the
undersigned's purchase and resales or other transfers of the Shares pursuant to
the 1933 Act.
SUBSCRIPTION AGREEMENT Page 3
- ----------------------
<PAGE>
(a) The undersigned agrees that the Shares shall not be sold or otherwise
transferred unless the Shares are registered under the 1933 Act and state
securities laws or are exempt therefrom.
(b) A legend in substantially the following form has been or will be placed
on the certificate(s) or other document(s), if any, evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER OF THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY
BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
(c) Stop transfer instructions have been or will be imposed with respect to
the Shares so as to restrict resale or other transfer thereof, subject to the
further items hereof, including the provisions of the legend set forth in
subparagraph (b) above.
SUBSCRIPTION AGREEMENT Page 4
- ----------------------
<PAGE>
IN WITNESS WHEREOF, subject to acceptance by the Company, the undersigned has
completed this Subscription Agreement to evidence his subscription for the
Shares set forth below:
Total subscription amount: $1,000,000
Number of Shares: 125,000
Shares To Be Registered as follows:
PRIVATE EQUITY JAPAN CO., LTD.
- ----------------------- -----------------------------
Address Signature
- ----------------------- -----------------------------
Name(s) typed or printed
- -----------------------
Tax I.D. Number
................................................................................
Subscription Accepted:
MAX Internet Communications, Inc.
By: _____________________________________
Name: ___________________________________
Title: ____________________________________
SUBSCRIPTION AGREEMENT Page 5
- ----------------------
Exhibit 10.13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, made and entered into as of December 31,
1999, by and between MAX Internet Communications, Inc., a Nevada corporation and
MAXpc Technologies, Inc., a Texas corporation (together hereinafter referred to
as the "Seller") and Clear Springs Investments Ltd., a British Virgin Islands
corporation (hereinafter referred to as the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller owns all of the outstanding quotas of MAX Internet
Communications do Brasil, LTDA, a private limited liability company,
(hereinafter referred to as the "Quotas"), a corporation formed under the laws
of Brazil (hereinafter referred to as the "Company"); and
WHEREAS, the Seller desires to sell the Quotas to Buyer and Buyer
desires to purchase the Quotas on the terms and subject to the conditions set
forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth below and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and intending to be legally
bound, the parties hereto do hereby agree as follows:
I.
PURCHASE AND SALE OF QUOTAS
SECTION 1.01 Purchase and Sale of Quotas. Subject to the terms and
conditions set forth herein, effective the date on which all transactions
described herein are completed and closed (the "Closing Date") Seller shall sell
to the Buyer, and the Buyer shall purchase from Seller the Quotas. Seller shall
transfer all of its right, title, and interest in and to the Quotas being
conveyed by it to Buyer free and clear of any lien, security interest, or other
encumbrance of any nature and free of any claim by any person or entity to or
against the Quotas.
SECTION 1.02 Purchase Price. The purchase price of the Quotas
(hereinafter referred to as the "Purchase Price") shall be the sum of BRL
600,000 and the other provisions and terms contained herein. The purchase price
shall be payable from Buyer to Seller in three installments by wire transfer,
the first installment of BRL 200,000 within 60 days of the effective date of
this agreement, the second installment of BRL 200,000 within 30 days of the
payment of the first installment, and the third installment of BRL 200,000
within 30 days of payment of the second installment.
-1-
<PAGE>
II.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to, and agrees with, the Buyer as
follows:
SECTION 2.01 Authority. Seller is duly authorized and possesses all
necessary corporate power to effect the sale hereby.
SECTION 2.02 OTHER THAN THE FOREGOING, THE QUOTAS SOLD HEREUNDER BY
SELLER ARE PROVIDED "AS IS" WITH NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING BUT NOT LIMITED TO, ANY WARRANTIES OR
CONDITIONS AS TO THE COMPANY, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OF ANY THIRD PARTY RIGHTS OR
FITNESS FOR A PARTICULAR PURPOSE. EACH PARTY AGREES THAT THIS OWNERSHIP OF THE
QUOTAS SHALL BE ENTIRELY AT BUYER'S OWN RISK. SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES, OR PROVIDES BUYER WITH ANY INDEMNIFICATION, WITH RESPECT TO QUOTAS
OR ANY ASSETS PURCHASED BY BUYER UNDER THIS AGREEMENT.
III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to, and agrees with, the Sellers as
follows:
SECTION 3.01 Investment Representations
(a) The Quotas to be acquired by Buyer will be acquired by Buyer for
investment for Buyer's own account, not as a nominee or agent for any person,
and not with a view to the sale or distribution of all or any part thereof.
(b) The Buyer understands that the Quotas may not be sold or offered for
sale within the United States of America or to any "U.S. persons" as defined by
U.S. federal securities laws.
-2-
<PAGE>
SECTION 3.02 Brokers. Buyer has not made any agreement or arrangement which
would result in any broker, finder, agent or other person or entity having any
claim for any fee, commission, or payment against any Seller in connection with
the negotiation or execution of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 3.03 Authorization, etc. Buyer has the power, authority, and
capacity to enter into this Agreement and to carry out the transactions
contemplated hereby, and this Agreement has been duly executed and delivered by
Buyer.
SECTION 3.04 No Consent Required. No consent, approval, order or
authorization of, or registration, declaration or filing with any governmental
or public body or authority is required for Buyer to execute and deliver this
Agreement and perform its obligations hereunder.
SECTION 3.05 Liabilities. Buyer acknowledges that upon the purchase of the
Quotas, the Company will continue to be liable for all of its obligations,
whether fixed, accrued or contingent, whether existing or arising in the future,
and that Seller will have no further liability for any such obligation of the
Company, except as provided in this Agreement.
IV.
INDEMNIFICATION
SECTION 4.01 Buyer's Claims. The Seller shall indemnify and hold harmless
Buyer, its successors and assigns, and their respective officers, directors,
employees, shareholders, agents, and affiliates against any and all damages,
claims, losses, liabilities, and expenses actually incurred by Buyer, including,
without limitation, legal, accounting, and other expenses, which may arise out
of (i) any breach of any of the representations or warranties made in this
Agreement by the Seller, or (ii) any claims against Buyer from a stockholder of
Seller or other party (other than a creditor of the Company seeking to enforce a
debt owed by the Company) challenging the validity or legality of this
Agreement. Such indemnification obligation shall survive the Closing.
SECTION 4.02 Seller's Claim. Buyer shall indemnify and hold harmless Seller
and its assigns, agents, and affiliates against any and all damages, claims,
losses, liabilities and expenses, including without limitation, legal
accounting, and other expenses actually incurred by Seller, which may arise out
of any breach of any of the representations or warranties made in this Agreement
by Buyer, and for any liabilities or obligations of the Company arising
hereafter.
-3-
<PAGE>
V.
OTHER AGREEMENTS
SECTION 5.01 Future Assistance. Each party hereto shall assist the others
in fulfilling the intent and purposes of this Agreement and shall take all such
further action as shall be reasonably necessary to effectively convey the
business of the Company to Buyer, have access to all books, records and data
regarding the Company, and allow for the timely reporting of the transaction to
all governmental and taxing authorities. Concurrently with the consummation of
the transactions contemplated by this Agreement, Seller shall deliver to Buyer
all books and records, including financial records, related to the Company.
SECTION 5.02 Tax Matters. Seller will file all tax returns required to be
filed by the Company related to periods ending at or prior to the date of
consummation of the transactions contemplated by this Agreement.
SECTION 5.03 Intercompany Payable. All intercompany payables from the
Company to Seller, all of which are set forth on attached Schedule 5.04, shall
be payable from the Company to Seller in the manner described in Section 5.05.
SECTION 5.04 Pending Transactions. As of the Closing, there are two major
transactions and several smaller transactions in progress for the sale of
Seller's products to customers of the Company. These consist of:
1. Sale of 20,000 MAX i.c.Live 3600R cards and Fong Kai Cameras
(together a "Kit") to the Government of Brasil, of which 8,000
Kits are to be delivered by February 18, 2000 and paid for upon
delivery, and 12,000 kits to be delivered by March 31, 2000 and
paid for upon delivery.
2. Sale of approximately 2,500 Kits to other customers.
The first amounts collected on these sales shall be applied to the intercompany
payables described on Schedule 5.03.
In addition, a sale of 6,000 Kits to Igen-Parti Solutions will be paid for
directly to Seller from the customer on or before February 15, 2000. Seller will
pay the Company 10% of the net profit realized by Seller on this sale. In
addition, the Seller will bear up the first USD1,000,000 of tariffs and duties
resulting from such sale.
SECTION 5.05 Future Transactions. From the date of Closing, the Company
shall be appointed a distributor for the Seller pursuant to the terms of the
Distributor Agreement attached as Exhibit A. Prices charged to the Company by
the Seller shall be those in effect for other distributors of the Seller.
SECTION 5.06 Microtec. Sales of products to Microtec shall be described in
the Distributor Agreement.
-4-
<PAGE>
VI.
MISCELLANEOUS
SECTION 6.01 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, and the Seller shall not charge any such
expenses to the Company.
SECTION 6.02 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the sale and delivery of the Quotas pursuant
hereto.
SECTION 6.03 Certain Rules of Interpretation. Any information disclosed in
any schedule attached hereto or any certificate furnished in connection herewith
shall be deemed disclosed wherever otherwise required, and for all purposes,
under this Agreement, whether or not specific reference was made thereto.
Inclusion of any information in a schedule or exhibit shall not be deemed an
admission as to the materiality of such information or otherwise alter or affect
the provisions of the representation or warranty to which the schedule or
exhibit relates.
SECTION 6.04 Parties in Interest. All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
SECTION 6.05 Notices. All notices, requests, consents, or other
communications hereunder shall be in writing and shall be delivered personally
or by courier or mailed by first class registered or certified mail, postage
prepaid, in either case addressed as follows:
(a) if to the Buyer
Clear Springs Investments Ltd.
------------------------------
------------------------------
(b) if to the Seller
MAX Internet Communications, Inc.
8115 Preston Road
Suite 800 - East
Dallas, Texas 75225
Attention: Donald G. McLellan
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. Any such communication shall
be deemed given when actually delivered to the address indicated.
SECTION 6.06 LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF BRAZIL.
SECTION 6.07 Entire Agreement. This Agreement, along with the Schedules and
Exhibits attached hereto, constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified or amended except
in writing.
-5-
<PAGE>
SECTION 6.08 Counterparts. This Agreement, including all agreements
executed and delivered hereunder, may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION 6.09 Time. Time is of the essence of this Agreement.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement or caused
this Agreement to be executed on its behalf by its duly authorized
representative, as of the day and year first above written.
SELLER:
MAX INTERNET COMMUNICATIONS, INC.
By: __________________________________
Donald G. McLellan, President
MAXPC TECHNOLOGIES, INC.
By: __________________________________
Donald G. McLellan, President
BUYER:
CLEAR SPRINGS INVESTMENTS LTD.
By:___________________________________
Name: Carlos Lima-Freitas
Title: by Power of Attorney
From Disney Thompson, Director
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0001061554
<NAME> MAX INTERNET COMMUNICATIONS, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 137,765
<SECURITIES> 0
<RECEIVABLES> 10,917,083
<ALLOWANCES> 50,000
<INVENTORY> 3,096,796
<CURRENT-ASSETS> 14,272,774
<PP&E> 369,678
<DEPRECIATION> 55,525
<TOTAL-ASSETS> 15,391,565
<CURRENT-LIABILITIES> 4,175,399
<BONDS> 0
0
8,000,000
<COMMON> 1,592
<OTHER-SE> 3,214,574
<TOTAL-LIABILITY-AND-EQUITY> 15,391,565
<SALES> 8,133,086
<TOTAL-REVENUES> 8,133,086
<CGS> 3,700,420
<TOTAL-COSTS> 3,700,420
<OTHER-EXPENSES> 3,052,447
<LOSS-PROVISION> 40,000
<INTEREST-EXPENSE> 409
<INCOME-PRETAX> 1,484,788
<INCOME-TAX> 412,000
<INCOME-CONTINUING> 1,072,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,072,788
<EPS-BASIC> .07
<EPS-DILUTED> .06
</TABLE>
