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SCHEDULE 13D
(RULE 13d-101)
Information to be Included in Statements Filed Pursuant to Rule 13d-1(a) and
Amendments Thereto Filed Pursuant to Rule 13d-2(a)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Advanced Systems International, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
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(CUSIP Number)
David D. Warner, Esq.
Jaffe, Raitt, Heuer & Weiss, P.C., One Woodward Ave., Suite 2400, Detroit, MI
48226
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 3, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule
13d-7(b) for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP NO. 13D PAGE OF PAGES
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1 NAMES OF REPORTING PERSONS/I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
(ENTITIES ONLY)
Princeton Capital Fund, L.C.C. 38-3391509
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See Instructions)
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions)
BK
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Michigan
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7 SOLE VOTING POWER
NUMBER OF
SHARES -----------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
1,411,111
OWNED BY EACH -----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
PERSON -----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,411,111
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (See Instructions) [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.6%
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14 TYPE OF REPORTING PERSON (See Instructions)
PN
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INSTRUCTIONS FOR COVER PAGE
(1) Names and I.R.S. Identification Numbers of Reporting Persons --
Furnish the full legal name of each person for whom the report is
filed - i.e., each person required to sign the schedule itself -
including each member of a group. Do not include the name of a
person required to be identified in the report but who is not a
reporting person. Reporting persons that are entities are also
requested to furnish their I.R.S. identification numbers, although
disclosure of such numbers is voluntary, not mandatory (see "SPECIAL
INSTRUCTIONS FOR COMPLYING WITH SCHEDULE 13D" below).
(2) If any of the shares beneficially owned by a reporting person
are held as a member of a group and the membership is expressly
affirmed, please check row 2(a). If the reporting person disclaims
membership in a group or describes a relationship with other persons
but does not affirm the existence of a group, please check row 2(b)
[unless it is a joint filing pursuant to Rule 13d-1(k)(l) in which
case it may not be necessary to check row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
(4) Classify the source of funds or other consideration used or to
be used in making purchases as required to be disclosed pursuant to
Item 3 of Schedule 13D and insert the appropriate symbol (or symbols
if more than one is necessary) in row (4):
Category of Source Symbol
Subject Company (Company whose securities are being acquired) SC
Bank BK
Affiliate (of reporting person) AF
Working Capital (of reporting person) WC
Personal Funds (of reporting person) PF
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STATEMENT ON SCHEDULE 13D
This Statement on Schedule 13D relates to the beneficial ownership of
the voting common stock, without par value, (the "Common Stock") of Advanced
Systems International, Inc., a Nevada corporation (the "Company"). This
Statement is being filed on behalf of the reporting person (the "Reporting
Person") identified on the cover pages of this Statement. Information in respect
of the Reporting Person is given solely by such Reporting Person.
Item 1. Security and Issuer.
The class of equity securities to which this statement relates is the
voting Common Stock issued by the Company. The Company has its principal
executive office at 25300 Telegraph Road, Suite 455, Southfield, Michigan 48034.
Item 2. Identity and Background.
(a) The name of the Reporting Person is Princeton Capital Fund,
L.L.C. ("Princeton")
The following persons are the Managers of Princeton:
D.J. Dorman & Company, Inc.
Grenard Court, L.L.C.
(b) The business address for each of the persons listed in Item 2 is:
1533 North Woodward Avenue
Suite 175
Bloomfield Hills, Michigan 48304
(c) Princeton is a Michigan limited liability company organized
for the purpose of making investments and is a private investment fund.
The business address for the principal office is:
1533 North Woodward Avenue
Suite 175
Bloomfield Hills, Michigan 48304
(d) and (e) None of the persons or entities with respect to whom
information is required by this Item 2 has been, during the last five years,
either (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state
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securities laws or finding any violation of such laws.
(f) All natural persons listed in this Item 2 are citizens of the
United States. Princeton is organized under the laws of Michigan.
Item 3. Source and Amount of Funds or Other Consideration.
The aggregate purchase price for the shares of Common Stock and the
warrants to acquire additional Common Stock was Two Million and 00/100
($2,000,000) Dollars. Princeton obtained such funds from Michigan National Bank.
Item 4. Purpose of Transaction.
Princeton is a private investment fund that invests in equity and
equity-related securities. The Common Stock has been acquired by the Reporting
Person for investment purposes. Subject to certain restrictions set forth in the
Stock Purchase Agreement and the Registration Rights Agreement, the Reporting
Person may sell some or all of the Common Stock upon registration, either in the
open market or in private transactions depending on their evaluation of the
Company's business, prospects and financial condition, the market for the Common
Stock, other opportunities available to the Reporting Person, prospects for the
Reporting Person's own businesses, general economic conditions, stock market
conditions and further developments.
On May 3, 2000, the Company executed a Stock Purchase Agreement (the
"Stock Purchase Agreement") between the Company and Princeton, under which
Princeton will acquire the following equity securities:
(a) One million one hundred eleven thousand one hundred eleven
(1,111,111) shares of Common Stock; and
(b) Three (3) warrants (the "Warrants") that permit Princeton to buy
up to three hundred thousand 300,000 additional shares of Common Stock at an
exercise price of $2.25, $2.50 and $2.75 per share for each one hundred thousand
100,000 shares over a two-year period commencing May 3, 2000.
The acquisition contemplated by the Stock Purchase Agreement of the
Common Stock, and Warrants was consummated at closing, which occurred on May 3,
2000 (the "Closing"). At the Closing, Princeton acquired one million one hundred
eleven thousand one hundred eleven (1,111,111) shares of Common Stock and three
(3) Warrants to purchase an additional three hundred thousand 300,000 shares of
Common Stock, together representing approximately 9.6% of the Common Stock
outstanding as of May 2, 2000 and approximately 7.2% of the outstanding Common
Stock on a fully exercised and diluted basis.
Certain other arrangements with respect to corporate governance are set
forth in the Stock Purchase Agreement and the Voting Agreement, which are
attached hereto
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as Exhibit 1 and 2 to this Schedule 13D and are incorporated herein by
reference. All descriptions of the Stock Purchase Agreement contained in this
Schedule 13D are qualified in their entirety by reference to the text of the
Stock Purchase Agreement.
Other than as described above or set forth in the Stock Purchase
Agreement, the Reporting Person has no present plans or proposals that related
to or would result in any of the actions described in Item 4(a) through (j) of
Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) (i) Princeton is the direct beneficial owners of 1,111,111 shares
of Common Stock and three (3) Warrants to purchase an additional 300,000 shares
of common stock, together, representing approximately 9.6% of the outstanding
shares of Common Stock (based on the number of shares of Common Stock
outstanding as of May 2, 2000).
(ii) Except as described in this section of this Item 5, no person
listed in Item 2 of this Schedule 13D is a beneficial owner of the Common Stock
in which Princeton has direct beneficial ownership.
(b) The persons listed in section (a)(i) of this Item 5, may be
deemed to share the power to vote or to direct the vote of and
to dispose or direct the disposition of one million four
hundred eleven thousand one hundred eleven (1,411,111) shares
of Common Stock.
(c) Pursuant to the Stock Purchase Agreement at the Closing,
Princeton acquired from the Company one million one hundred
eleven thousand one hundred eleven (1,111,111) shares of
Common Stock, and three (3) Warrants to acquire an additional
three hundred thousand (300,000) shares of Common Stock, for
an aggregate consideration of two million and 00/100
($2,000,000) Dollars.
Item 6. Contracts, Arrangements, Understandings or Relationships with respect to
Securities of the Issuer.
As of May 3, 2000, Princeton entered into a Voting Agreement (the
"Voting Agreement") with the Company, the Directors, and selected Shareholders.
A copy of the Voting Agreement is attached as Exhibit 2 to this Schedule 13D.
At the Closing, Princeton and the Company entered into a registration
rights agreement, dated as of May 3, 2000 (the "Registration Rights Agreement"),
granting the Purchasers certain demand registration rights with respect to the
Common Stock issued and the exercise of the three (3) Warrants. A copy of the
Registration Rights Agreement is attached as Exhibit 3 to this Schedule 13D.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 - Stock Purchase Agreement, dated as of May 3, 2000, between the
Company
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and Princeton.
Exhibit 2 - Voting Agreement, dated as of May 3, 2000, between the Company and
Princeton.
Exhibit 3 - Registration Rights Agreement, dated as of May 3, 2000 between the
Company and Princeton.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 10, 2000 Princeton Capital Fund, L.L.C.
By:/s/ Daniel J. Dorman
---------------------------
Daniel J. Dorman
Title: President
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STOCK PURCHASE AND SUBSCRIPTION AGREEMENT
THIS STOCK PURCHASE AND SUBSCRIPTION AGREEMENT ("Agreement") is made as
of the 3rd day of May, 2000, by and between Advanced Systems International,
Inc., a Nevada corporation (hereinafter "ASI" or "Company"), and Princeton
Capital Fund, L.L.C., a Michigan limited liability company (hereinafter "PCF" or
"Subscriber").
The following is a recital of the facts upon which this Agreement is
based:
A. ASI, through its wholly-owned subsidiary, Automatic Time Systems
Corp. ("ATS"), is engaged in the business of, among other things, the
development and distribution of time, attendance and data integration software
applications (the "Business");
B. Company desires to sell certain of its newly issued, unregistered,
common capital stock to Subscriber upon the terms and conditions set forth in
this Agreement and issue warrants to Subscriber as set forth in the attached
Warrants To Purchase Common Shares (as hereinafter defined); and
C. Subscriber desires to acquire certain of the Company's newly issued,
unregistered, common capital stock upon the terms and conditions set forth in
this Agreement and acquire Warrants to purchase common shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby mutually
acknowledged, the parties hereto agree as follows:
1. SALE AND SUBSCRIPTION OBLIGATIONS.
1.1 SALE AND SUBSCRIPTION OF SHARES OF STOCK. On the Closing
Date (as defined in Section 1.3), Company shall issue, sell, assign and transfer
to Subscriber, and Subscriber shall subscribe for and purchase from Company one
million one hundred eleven thousand one hundred and eleven (1,111,111) shares of
the common capital stock of Company which is currently authorized but unissued
by Company (each share of stock whether being purchased contemporaneously
herewith or whether being purchased pursuant to the Warrants to be sometimes
individually referred to as "Share" and all of the shares of stock together to
be referred to as "Shares"), free and clear of all liabilities, claims, liens,
encumbrances, charges and restrictions.
1.1.1 Warrants. On the Closing Date, Company shall issue,
sell, assign and transfer to Subscriber, and Subscriber shall subscribe for and
purchase from Company warrants (the "Warrants") to purchase three hundred
thousand (300,000) Shares at the exercise price of Two and 25/100 ($2.25)
Dollars, Two and 50/100 ($2.50) Dollars and Two and 75/00 ($2.75) Dollars per
one
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hundred thousand (100,000) Shares for a period of two (2) years from the date
hereof.
1.2 CONSIDERATION FOR PURCHASE. The aggregate consideration
for each Share being purchased contemporaneously herewith shall be One and
80/100 ($1.80) Dollars and the aggregate consideration for all of the Shares
being purchased contemporaneously herewith and the Warrants shall be Two Million
and 00/100 ($2,000,000.00) Dollars (the "Purchase Price"). The Purchase Price
will be paid by Subscriber to Company by wire transfer or in certified funds at
the Closing (as defined in Section 1.3) on the Closing Date.
1.3 THE CLOSING. The subscription and sale provided for herein
shall be consummated and closed (the "Closing") at the offices of Hyman Lippitt,
P.C., on or before May 3, 2000, or at such other place or at such other day or
time as Company and Subscriber shall mutually agree upon in writing (the date on
which the consummation of the transactions contemplated by this Agreement is to
occur is sometimes referred to as the "Closing Date").
1.4 INSPECTION. From the date of this Agreement and continuing
until the Closing Date (the "Inspection Period"), Subscriber may conduct such
reasonable inspections and investigations, and perform such reasonable due
diligence reviews, of Company and the Business as Subscriber may deem prudent in
its discretion, and Company shall fully and timely cooperate with Subscriber in
such inspections, investigations and reviews. If, at any time prior to the
termination of the Inspection Period, Subscriber, in its sole and absolute
discretion, determines that it is unwilling to proceed with this transaction for
any reason whatsoever, then Subscriber may terminate this Agreement by so
notifying Company in writing on or before the termination of the Inspection
Period, at which time this Agreement shall become null and void. If Subscriber
fails to notify Company of its termination of this Agreement as set forth above,
then Subscriber shall have been deemed to have waived its right of termination
under this Section 1.4 and Subscriber and Company shall proceed in accordance
with the terms of this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
2.1 REPRESENTATIONS OF COMPANY. Company hereby represents and
warrants to Subscriber as of the date of this Agreement, and shall reaffirm to
Subscriber as of the Closing Date, the following:
2.1.1 CORPORATE EXISTENCE AND QUALIFICATION.
(a) Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada;
(b) Company has all requisite corporate power and
authority to own, lease and operate its assets, properties and business and to
carry on the Business as now being conducted;
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(c) Company is not required to be qualified or
otherwise authorized to conduct business in any jurisdiction other than those
specified in Exhibit 2.1.1; and
(d) Exhibit 2.1.1 is a complete and accurate list
of the registered offices and resident agents of Company in each jurisdiction in
which the Company conducts business.
2.1.2 CONTROL. Except for those persons and entities listed on
Exhibit 2.1.2, there are no persons, corporations, partnerships, trusts, estates
or other entities controlling, operating under the control of (including
subsidiaries) or operating under common control with Company, any key employee
of Company, or any director, officer or shareholder of Company in the operation
of the Business of Company, including, without limitation, any such relationship
with suppliers or customers of Company. For purposes of this Section 2.1.2,
control shall mean ownership of five (5%) percent or more of the equity
interests in an entity or effective control of the management or policies of an
entity. There are currently eight (8) seats on the Board Of Directors (the
"Board") of Company and each director may be removed from office by a vote of
the holders of a majority of the Shares of the outstanding common stock of
Company at any time with or without cause. As of the date hereof and continuing
until the Closing Date, there are three (3) seats vacant and unfilled on the
Board.
2.1.3 AUTHORIZATION AND AUTHORITY.
(a) Company has full corporate power and
authority to execute, deliver and perform this Agreement and the other
instruments and documents described herein;
(b) The execution and delivery of this Agreement
by Company and the performance of the transactions contemplated hereby have been
duly and validly authorized by Company, and its Board and all corporate action
of Company necessary for such execution, delivery and performance has been duly
taken;
(c) No other action on the part of Company,
shareholders or any other individual, person or entity is necessary to authorize
the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement;
(d) This Agreement constitutes a valid and
binding agreement of Company, enforceable against Company in accordance with its
terms, subject to the effect of bankruptcy, insolvency or similar proceedings
affecting the rights of creditors generally;
(e) Except as set forth in Exhibit 2.1.3, no
consent of, or registration or filing with, any federal, state, municipal or
other governmental authority, and no consent of any party to any contract or
agreement to which Company is a party or by which the assets of Company may be
bound, is required for the execution, delivery and performance of this Agreement
by Company; and
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(f) The execution and delivery of this Agreement
will not (with or without notice or passage of time or both): (i) conflict with
or result in a breach of any provision of the Articles of Incorporation or
Bylaws of Company; (ii) result in a default, give rise to any right of
termination, cancellation or acceleration, or require any consent or approval,
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, loan, factoring arrangement, license, agreement, lease or other
instrument or obligation to which Company is a party or by which it or any of
its securities or assets may be bound; or (iii) violate any law, judgment,
order, writ, injunction, decree, statute, rule or regulation of any court,
administrative agency, bureau, board, commission, office, authority, department
or other governmental entity applicable to Company or any of its securities or
assets.
2.1.4 CAPITALIZATION. The total authorized capital of
Company is thirty million (30,000,000) shares of voting capital stock, which
includes twenty million (20,000,000) shares of common stock and ten million
(10,000,000) shares of preferred stock of which thirteen million two hundred
eighty-seven thousand three hundred fourteen (13,287,314) shares of common stock
have been issued and are currently outstanding (as of May 2, 2000). As of record
date May 2, 2000, a complete list of the issued and outstanding stock of Company
is set forth on Exhibit 2.1.4, including the name of each holder of shares of
capital stock, the amount of shares issued to each such holder and the
certificate numbers representing such shares. The shares listed on Exhibit 2.1.4
constitute one hundred (100%) percent of the issued and outstanding capital
stock of Company, whether common, preferred or otherwise, and have been duly
authorized and validly issued and are fully paid, non-assessable and free of
preemptive rights.
2.1.5 RIGHTS TO ACQUIRE STOCK. Except and to the extent set
forth on Exhibit 2.1.5, as of record date May 2, 2000, there is no oral or
written commitment, understanding, obligation or arrangement (except this
Agreement) relating to the issuance, sale or delivery, purchase or transfer of
the Shares or any other securities or rights to securities of Company, including
subscriptions, options, warrants, puts, calls, preemptive rights, sinking fund
obligations, contracts, agreements (including any shareholders' agreements) or
any rights of conversion or exchange under any outstanding security or any other
instruments (together the "Options").
2.1.6 TITLE TO STOCK. Upon consummation of the Closing on
the Closing Date, Subscriber shall have good and marketable title to the Shares,
free and clear of any and all liens, claims, encumbrances, charges,
restrictions, pledges, warrants, puts, calls, commitments, subscriptions,
agreements, voting trusts, voting agreements, proxies and options of any nature
whatsoever, except for this Agreement, the Voting Agreement (as hereinafter
defined) and any claims relating exclusively to Subscriber's actions. Upon their
issuance at the Closing on the Closing Date, the Shares shall be validly issued,
fully paid and non-assessable and together with the Shares that may be issued
pursuant to the Warrants, shall constitute nine and 60/100 (9.6%) percent of the
undiluted securities of each and every class of the Company and seven and 20/100
(7.2%) percent of the fully diluted securities of each and every class of the
Company after giving affect to all of the Options.
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2.1.7 FINANCIAL STATEMENTS.
(a) Company has delivered to Subscriber, or shall
deliver to Subscriber prior to the Closing Date, the complete and accurate
audited financial statements of Company for the fiscal years of Company ending
December 31, 1997, December 31, 1998, and December 31, 1999, together with all
interim financial statements prepared since the end of the Company's last fiscal
year (together the "Financial Statements");
(b) For the periods shown, the Financial
Statements: (i) have been prepared in a manner consistent with the past
practices of Company and in accordance with generally accepted accounting
principles ("GAAP") consistently applied; (ii) fairly present the financial
condition and the results of the operations of Company; and (iii) disclose all
liabilities and obligations of Company required under GAAP to be so disclosed;
and
(c) Company currently does not have and, at the
Closing Date, Company will not have, any liability or obligation, whether as
primary obligor or guarantor or otherwise, whether accrued, absolute,
contingent, known, unknown or otherwise, other than: (i) those reflected in the
Financial Statements; and (ii) those incurred in the ordinary and usual course
of business since the end of Company's last fiscal year, none of which have been
or are materially adverse to the Business, assets or operations of Company.
2.1.8 MATERIAL CHANGES. Since the end of Company's last fiscal
year, there has not been: (i) any material adverse change in the financial
condition of Company or any other event or condition of any character which has
had or which may have a material adverse effect on the Business, assets or
financial condition of Company; or (ii) any material change in the accounting
methods, principles or practices of Company (other than as required by
concurrent changes in GAAP).
2.1.9 CERTAIN TRANSACTIONS.
(a) Since the end of Company's last fiscal year:
(i) Company has carried on its Business in the same manner as such Business was
conducted prior to such fiscal year end; (ii) Company has not taken or engaged
in any action or transactions other than in the ordinary and usual course of
business; and (iii) Company has not taken or engaged in any action or
transactions which might reasonably be expected to have material adverse affect
on the Business, operations, prospects, properties or financial condition of
Company, or which, by passage of time or otherwise, may reasonably be expected
to result in any such material adverse effect; and
(b) Except as otherwise specifically set forth in
this Agreement, since the end of Company's last fiscal year, Company has not:
(i) sold, leased, transferred, lost or otherwise disposed of any tangible or
intangible assets or properties utilized in its Business, except in the ordinary
course of business; (ii) canceled any debts or claims, except in the ordinary
course
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of business; (iii) entered into any contract not customary to the Business of
Company; or (iv) incurred or paid expenses not in the ordinary course of
business.
2.1.10 REAL PROPERTY.
(a) Company does not own any real property or
improvements;
(b) Use and occupancy of any real property leased
by Company is permitted under valid and binding lease agreements. All rent and
other payment obligations of Company under such leases are current, and neither
Company nor, to the best of Company's knowledge, any landlord is in default
under such leases and no event has occurred which, but for the giving of notice
or the passage of time or both, would be a default under such leases;
(c) Except as described on Exhibit 2.1.10(c), the
use of any leased real property by Company does not currently violate any
applicable deed restrictions, easements, rights-of-way, zoning, building or use
statutes, rules, ordinances or regulation of any federal, state, county or local
entity, authority or agency or any other building or use restrictions applicable
thereto. There is no existing or, to the best of Company's knowledge, threatened
condemnation or other legal action of any kind involving such real property
which may affect the value or use thereof; and
(d) Company's use of any leased real property has
never been and is not currently in violation of, and based upon the present and
contemplated use of such real property, operations of Company are not expected
to violate, any Governmental Regulations (as hereinafter defined) relating to
Hazardous Substances (as hereinafter defined). To the best of Company's
knowledge, the use of any such real property by any prior owner or lessee was
not in violation of any such Governmental Regulations. There are no such
violations claimed or, to the best of Company's knowledge, threatened or alleged
by, and there are not presently discussions with, any governmental authority
concerning any alleged violation. For the purposes of this Agreement: (i) the
term "Governmental Regulation" shall be defined as any law, regulation,
ordinance or similar requirement of the United States, any state or any county,
city or other agency or subdivision thereof; and (ii) the term "Hazardous
Substances" shall be defined as any flammables, explosives, radioactive
materials, hazardous wastes, polychlorinated biphenals, friable asbestos,
regulated emissions or any material containing asbestos, toxic substances or
related materials, including, without limitation, substances now defined as
"Hazardous Substances", "Hazardous Materials" or "Toxic Substances" in the
Comprehensive Environmental Response, Compensation And Liability Act of 1980, as
amended (42 U.S.C. ss. 9601, et seq.).
2.1.11 TANGIBLE AND INTANGIBLE PERSONAL PROPERTY.
(a) Title. Except to set forth on Exhibit
2.1.11(a), Company has good, valid and marketable title in and to all tangible
and intangible personal property used by
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Company in the operation of the Business, free and clear of all liens, claims,
encumbrances, security interests and title retention arrangements;
(b) Intellectual Property Licenses. All
agreements pursuant to which Company has authorized any person or entity to use,
or pursuant to which any person or entity has the right to use, any of the
intangibles owned by the Company and all agreements pursuant to which Company is
authorized by any person or entity to use any of the intangibles not owned by
Company are in full force and effect, are free from default by Company or
licensee and no event has occurred which, but for the lapse of time or the
giving of notice or both, would constitute a default by Company or licensee
thereunder; and
(c) Intellectual Property Infringements. Company
has no knowledge or notice that any product, license, patent, process, method,
substance, part or other material presently being sold or employed or
contemplated to be sold or employed by Company infringes in any material respect
on any rights owned or held by any other person or entity. There is no pending
claim or litigation or, to the best of Company's knowledge, threatened claim or
litigation against Company contesting the right of Company to sell, assign or
use any such product, license, patent, process, method, substance, part or other
such material. No default by Company has occurred under any agreement by which
Company is authorized to use any of the intangibles not owned by Company.
2.1.12 CONTRACTS. Each of the material contracts and
agreements to which Company is a party is valid and enforceable in accordance
with its terms, Company is not in default under any such contract, Company is
not subject to any claim or counter-claim under any such contract, and no event
has occurred which, but for the lapse of time or the giving of notice or both,
would constitute a default by Company thereunder.
2.1.13 COMPLIANCE AND PERMITS.
(a) Company is not in violation of, and the
Business of Company is conducted in compliance with, all federal, state and
local laws, statutes, rules, ordinances, regulations, restrictions, orders,
decrees and judgments applicable in any material respect to Company and the
operation of its Business; and
(b) All material licenses, permits,
registrations, orders, approvals and other authorizations by, and all
applications therefor to, federal, state, county and local governmental,
regulatory and administrative agencies, bodies and authorities (the "Permits")
held by, necessary to, required or used by Company in the conduct of its
Business or otherwise are in full force and effect and there has been no
revocation, termination, limitation or withdrawal of, or refusal to issue, any
of the Permits, and no such action is currently pending or threatened.
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2.1.14 TAX LIABILITIES.
(a) Company has properly completed in all
material respects and filed in substantially correct form all federal, state,
county, local and foreign income, excise, property, sales, use, franchise and
other tax returns which are required to be filed by Company up to and including
the Closing Date, all of which have been prepared and filed on a timely basis
and in accordance with applicable law, and Company has paid all taxes (including
real estate and personal property taxes) and assessments which have become due,
whether pursuant to such returns or otherwise, prior to the Closing Date;
(b) Company has delivered to Subscriber true and
complete copies of all tax returns filed by Company for fiscal years 1997
through 1999;
(c) There are no agreements, waivers or other
arrangements with any governmental agency providing for an extension of time for
filing any returns or the assessment or collection of any tax or deficiency in
effect or contemplated, nor are there any actions, suits, proceedings,
investigations, claims or offers in compromise pending by or against Company in
respect of any tax or assessment;
(d) Company is not currently being (and was not
in the current fiscal year) audited by the United States Internal Revenue
Service ("IRS") or the taxing authority of any state in which Company conducts
business, and Company has not been audited by the IRS, or the taxing authority
of any state in which Company conducts business, during the three (3) year
period preceding the end of Company's last fiscal year;
(e) Company has properly withheld from the
salaries, wages or other compensation paid or payable to its officers, employees
and other persons, and has paid the appropriate federal, state and local
authorities, all amounts required to be withheld therefrom under applicable
laws, rules and regulations; and
(f) There are no liens upon any of the properties
or assets of Company for taxes due and payable or interest or penalty thereon,
and there are no pending tax examinations.
2.1.15 SUITS, CLAIMS AND PROCEEDINGS.
(a) Except as set forth on Exhibit 2.1.15(a),
there are no actions, suits, proceedings, claims, arbitrations or governmental
investigations pending or threatened against, brought on behalf of or relating
to the Shares, Company, its securities, its assets or its Business;
(b) There are no outstanding judgments, orders,
writs, injunctions, decrees or awards affecting the Shares, Company, its
securities, its assets or its Business;
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(c) Neither Company nor its officers, directors,
shareholders or employees have engaged in any practices or course of conduct, or
committed any acts, which constitute an unlawful trade practice or which would
constitute a violation of federal or state antitrust laws or related regulations
or which would form the basis for a claim of fraud or misrepresentation;
(d) With respect to any actions, suits,
proceedings, claims, arbitrations or governmental investigations identified on
Exhibit 2.1.15(a), unless otherwise noted, each claim asserted against Company
is covered by insurance and the respective insurance companies have agreed in
writing and without reservation to undertake the defense and provide Company
with coverage; and
(e) There are no circumstances, occurrences or
events which, but for the giving or receiving of notice, passage of time or
otherwise, may give rise to an action, suit, proceeding, claim, arbitration or
investigation against the Shares, Company, its securities, its assets or its
Business.
2.1.16 LABOR MATTERS. Except as set forth on Exhibit
2.1.16:
(a) No employment agreement or collective
bargaining agreement presently covers any employees of Company, nor are any such
agreements currently being negotiated by Company, and no attempt to organize any
group or all of the employees of Company has been made or proposed;
(b) Company is in compliance in all material
respects with all state and federal laws relating to employment and employment
practices, terms and conditions of employment and wages and hours, and Company
has not engaged in any unfair labor practices; and
(c) No executive, key employee or group of
employees has indicated any intention or desire to decline or terminate their
employment subsequent to the Closing Date;
2.1.17 EMPLOYEE BENEFIT PLANS.
(a) Company has no notice or knowledge that any
benefit plan or related trust to which it is a party or by which it is bound,
including, but not limited to, any employee benefit plan within the meanings of
Section 3(2) and Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (including the regulations and published interpretations
thereunder) ("ERISA") (the "Benefit Plans"), is in violation of any of the
provisions of ERISA or that any prohibited transaction within the meaning of
Title I or Title II of ERISA has occurred or is continuing with respect to any
such Benefit Plan;
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(b) With respect to each Benefit Plan described
above: (i) all minimum funding standards required by law with respect to the
funding of benefits payable or to be payable under such Benefit Plans have been
met; (ii) Company has not incurred any liability to the Pension Benefit Guaranty
Corporation (the "PBGC"); and (iii) no reportable event as defined in Title IV
of ERISA (other than a reportable event occurring as a result of the
transactions contemplated herein) has occurred or is continuing;
(c) Except as otherwise noted on Exhibit
2.1.17(c), the Benefit Plans now meet, and since their inception have met, the
requirements for qualification under Sections 401(a) and 401(k) of the Code, the
Benefit Plans are exempt from tax under Section 501(a) of the Code, and the
Internal Revenue Service has issued a currently effective favorable
determination letter with respect to the qualified status of each Benefit Plan;
and
(d) There are no unpaid liabilities whatsoever
with respect to any of the Benefits Plans, including, but not limited to, any
liabilities arising from the termination, partial termination or continuation of
the Benefit Plans, required contributions to the Benefit Plans, required
payments to the trusts or trustees, required payments to the Benefit Plan
participants, costs, expenses, penalties, taxes or liabilities incurred for or
by reason of fiduciary standards applicable to the Benefit Plans or otherwise.
2.1.18 INSURANCE POLICIES.
(a) Company is not in default with respect to any
provision contained in any insurance policy owned, held by or relating to
Company, the Business or Company's real or personal property; nor has Company
failed to pay any premiums thereunder in a timely manner or to give any notice
or present any claim thereunder in a timely manner;
(b) All such insurance policies are valid,
enforceable, in full force and effect, underwritten by unaffiliated, financially
sound and reputable insurers, are sufficient for all requirements of law
applicable to Company and provide insurance in such amounts and against such
risks as is sufficient to protect Company and its properties, assets, businesses
and operations. Under such insurance policies, Company has all of its property
and assets insured against loss or damage by all insurable hazards or risks on a
replacement cost basis; and
(c) No events have occurred which would give rise
to a material claim for which a claim has not been asserted.
2.1.19 WARRANTY AND LIABILITY EXPERIENCE. There are no facts,
conditions or circumstances known to Company which would or may have a material
adverse effect on Company by reason of any matter relating to defective products
designed, manufactured, sold or rented, or services rendered or performed, by
Company under any express or implied warranty with respect to jobs completed,
products or goods delivered to customers of Company or services
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performed by Company. There are no conditions or state of facts known to Company
which would result in a material loss to Company.
2.1.20 BANKRUPTCY. During the five (5) year period prior to
the date hereof, Company has not filed any petition or request for relief under
any provision of the United States Bankruptcy Code or any state insolvency,
dissolution, liquidation or similar law, and no such petition or request has
been filed against Company during such period.
2.1.21 CORPORATE RECORDS. Company has provided Subscriber with
an opportunity to review a complete and accurate set of all the corporate
records books of Company (the "Corporate Record Books"). The Corporate Record
Books of Company contain complete and accurate minutes of all annual and special
meetings of the Board and shareholders of Company and all consents and
resolutions in lieu thereof, and the signatures therein are the true signatures
of the persons purporting to have signed them.
2.1.22 INSIDER TRANSACTIONS. Except as set forth on Exhibit
2.1.22, there are no other contracts or other transactions involving Company
with respect to which any present officer, director, shareholder or employee of
Company, or any person related to the foregoing by blood or marriage, is a
party. None of the officers, directors, shareholders or employees of Company is
indebted to Company, except for ordinary business expense advances, and Company
is not indebted to any of its directors, officers, shareholders or employees,
except for amounts due as normal salary, wages, commissions or reimbursements of
ordinary business expenses in accordance with Company's ordinary practices. No
officer, director, shareholder or employee of Company has any interest in
property, real or personal, tangible or intangible, including any computer
software or other intangibles, used in or pertaining to the Business (except the
equity interest ordinarily incident to the ownership of shares of Company's
common capital stock).
2.1.23 DISCLOSURE OF MATERIAL FACTS. Company has disclosed to
Subscriber all material facts relating to Company and the assets, liabilities,
Business, operations, financial condition, operating results and prospects of
Company. The representations and warranties contained in this Agreement and in
any other instrument or document delivered in connection with this Agreement do
not contain any untrue statements of material fact or omit to state any material
fact necessary to make the statements contained herein or therein not
misleading.
2.1.24 CERTAIN SECURITIES MATTERS.
(a) Company has properly completed and filed in
correct form all documents, forms, registrations, agreements and other papers
which are required to be filed by Company under the Securities Act of 1933, as
amended (the "Federal Act"), the Michigan Uniform Securities Act, as amended
(the "Michigan Act") or any other applicable securities laws, and Company has
complied in all respects with the Federal Act, the Michigan Act and any other
applicable securities laws;
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(b) The information in all of Company's filings
under the Federal Act, the Michigan Act and any other applicable securities laws
is true, accurate and complete in all material respects and the information set
forth in such filings does not contain any untrue statements of material fact or
omit to state any material fact necessary to make the statements contained
therein not misleading;
(c) Since the filing of Company's last Form 10-K,
there has not been any material adverse change in the condition of Company or
any other event or condition of any character which has had or which may have a
material adverse affect on Company;
(d) Neither the Securities and Exchange
Commission ("SEC"), the National Association of Securities Dealers ("NASD") or
any other governmental or quasi-governmental entity, authority or agency having
jurisdiction over Company, its securities or its Business, has undertaken or
issued any action, suit, proceeding, claim, arbitration, investigation or stop
order against Company, its securities or its Business;
(e) Company is not an investment company, unit
investment trust or face amount certificate company that is, or is required to
be, registered under the United States Investment Company Act of 1940, as
amended (the "Investment Company Act"), the Michigan Act or any other applicable
securities laws;
(f) Neither Company, any of its subsidiaries or
affiliates or any other person acting on their behalf has sold, offered for
sale, solicited offers to buy, or otherwise negotiated in respect of any
security (as defined in the Federal Act) which is or will be integrated with the
sale of the Shares in a manner that would require the registration under the
Federal Act, the Michigan Act or any other applicable securities laws; and
(g) The 1997 reverse take-over merger (the
"Merger") in which Company (f/k/a Bennington Corporation) acquired ATS complied
in all respects with all applicable laws, statutes, rules, ordinances,
regulations, restrictions, orders, decrees and judgments, including, without
limitation, the Federal Act, and there are no actions, suits, proceedings,
claims, arbitrations or investigations pending or threatened against Company,
its securities, its shareholders, its assets or its Business arising out of or
as a result of the Merger.
2.2 REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber
hereby represents and warrants to Company as of the date of this Agreement, and
shall reaffirm to Company as of the Closing Date, the following:
2.2.1 COMPANY EXISTENCE. Subscriber is a limited liability
company duly organized and validly existing under the laws of the State of
Michigan.
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2.2.2 VALIDITY OF AGREEMENT. Neither the execution and
delivery of this Agreement by Subscriber, nor the consummation of the
transactions contemplated hereby, will result in a breach or violation of the
Articles of Organization of Subscriber, any agreement, indenture, mortgage,
lease or other obligation or instrument to which Subscriber is a party or by
which Subscriber is bound, or of any applicable law to which Subscriber is
subject or by which it is bound.
2.2.3 AUTHORIZATION. Subscriber has full power and
authority to execute, deliver and perform this Agreement, and all action of
Subscriber necessary for such execution, delivery and performance has been duly
taken. This Agreement constitutes a valid and binding obligation of Subscriber
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency or similar laws affecting the rights and remedies of creditors
generally and equitable or other relief which is at the discretion of the court
before which any proceedings may be brought.
2.2.4 INVESTMENT INTENT. Subscriber is acquiring the
Shares for its own account, for investment purposes only and not with the view
to or for the resale, distribution or fractualization thereof, in whole or in
part, and no other person has a direct or indirect beneficial interest in the
Shares.
2.2.5 ACKNOWLEDGMENT OF NON-REGISTRATION. Subscriber
acknowledges that the offering and sale of the Shares has not, as of the Closing
Date, been registered under the Federal Act, the Michigan Act or any other
applicable securities laws and that the offer and sale of the Shares has been
made in reliance upon exemptions from registration under the Federal Act, the
Michigan Act and the other applicable securities laws, and the rules and
regulations promulgated thereunder. Subscriber will not sell or otherwise
transfer the Shares without registration under the Federal Act and/or the
Michigan Act and/or any other applicable securities laws or exemption therefrom,
and Subscriber understands and agrees that it must bear the economic risk of its
investment for an indefinite period of time because, among other reasons, as of
the Closing Date, the Shares have not been registered under the Federal Act or
under the Michigan Act or under the securities laws of any other jurisdiction
and, therefore, cannot be resold, pledged, assigned, or otherwise disposed of
except in compliance with all applicable laws.
2.2.6 ACCREDITED INVESTOR. Subscriber is an "accredited
investor" as such term is defined under Regulation D of the Federal Act.
Subscriber has such knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of an investment in the
Shares and protecting its own interest in connection with the investment and
Subscriber has determined that the Shares are a suitable investment for it and
at this time Subscriber could bear a complete loss of its investment. Subscriber
is a Michigan limited liability company not formed for the specific purpose of
acquiring the Shares and Subscriber has total assets in excess of Five Million
and 00/100 ($5,000,000.00) Dollars.
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3. COVENANTS.
3.1 AFFIRMATIVE COVENANTS OF COMPANY.
3.1.1 CONTINUING ACCESS. Between the date of this
Agreement and the Closing Date, Company shall permit Subscriber and its
officers, agents, attorneys, accountants and auditors reasonable access upon
prior notice and request during normal business hours to all of the facilities,
assets, properties, books, records, agreements, customers and personnel of
Company, and shall furnish to Subscriber and its representatives all such
information concerning Company and its Business as Subscriber may request, so
that Subscriber may conduct and complete its examinations of the books, records
and operations of Company and have ongoing assurance that Company is being
operated in the normal and ordinary course and Company is complying with all of
its covenants, representations and warranties under this Agreement.
3.1.2 OPERATION OF BUSINESS. Between the date of this
Agreement and the Closing Date, except as set forth on Exhibit 3.1.2, except as
specifically authorized by the terms of this Agreement or except as otherwise
expressly consented to in writing by Subscriber:
(a) Company shall conduct and operate the
Business of Company only in the ordinary course of business consistent with the
past practices of Company;
(b) Company shall not solicit a vote in favor
of any amendment or modification to the Articles of Incorporation or Bylaws of
Company or authorize or issue any capital stock or other securities of Company;
(c) Company shall not solicit a vote in favor
of, or cause, make or issue, any dividend, distribution or payment in respect of
any securities;
(d) Company shall not enter into, authorize or
permit any sale, transfer, assignment, lease or other disposition of any assets
of Company, other than in the ordinary course of business;
(e) Company shall use its best efforts to
preserve intact the Business of Company;
(f) Company shall not enter into any
agreements, understandings or discussions with any person or entity concerning
any merger, consolidation, share exchange, acquisition or other business
combination or transaction involving any securities of Company or, except in the
ordinary course of business, the sale or other disposition of all or any portion
of the assets of Company;
(g) Company shall use its best efforts to
maintain the goodwill of
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<PAGE> 22
the suppliers, customers and employees of, and all other persons and entities
having business relationships with, Company;
(h) Company shall not issue any rights or
options to purchase stock or securities (whether or not convertible into stock)
of Company and shall not in any manner reorganize or recapitalize Company;
(i) Company shall not file any petition or
request for relief under any provision of the United States Bankruptcy Code or
any state insolvency, dissolution, liquidation or similar law; and
(j) Company shall not change the accounting
methods or practices followed by Company (other than as required by concurrent
changes in GAAP).
3.1.3 ACCURACY OF REPRESENTATIONS. Company shall do all things
necessary to ensure that the representations and warranties of Company contained
in this Agreement are true in all respects at and as of the Closing Date.
3.1.4 UPDATED EXHIBITS. Between the date of this Agreement and
the Closing Date, Company shall update the Exhibits to this Agreement, if
necessary, to make them true and accurate as of the Closing Date.
3.1.5 USE OF PROCEEDS. The proceeds from the Purchase Price
shall be used by the Company for general working capital purposes, general
corporate expenses and the expense of the transaction contemplated by this
Agreement. No more than Seven Hundred Forty Thousand and 00/100 ($740,000.00)
Dollars of the Purchase Price shall be used to pay down the existing financed
debt of Company and no more than Eighty Thousand and 00/100 ($80,000.00) Dollars
of the Purchase Price shall be used to pay bonuses, benefits, compensation or
other forms of remuneration to directors, officers or shareholders of Company.
3.1.6 FINANCIAL CONSULTING AGREEMENT. On the Closing Date,
Company shall execute and deliver the Financial Consulting Agreement in the form
attached hereto as Exhibit 3.1.6 ("Financial Consulting Agreement").
3.1.7 REGISTRATION RIGHTS AGREEMENT. On the Closing Date,
Company shall execute and deliver the Registration Rights Agreement in the form
attached hereto as Exhibit 3.1.7 ("Registration Agreement"), which Registration
Agreement shall provide, among other things, that within one hundred twenty
(120) days from the Closing Date the Shares and the Shares that may be exercised
pursuant to the Warrants shall be registered under the Securities Act and under
such other securities or Blue Sky laws of such other jurisdictions as the holder
of the Shares shall reasonably request with the expense thereof to be paid by
Company.
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3.1.8 VOTING AGREEMENT. On the Closing Date, Company shall
execute and deliver the Voting Agreement in the form attached hereto as Exhibit
3.1.8 ("Voting Agreement").
3.1.9 DELIVERY OF DOCUMENTS. On or before the Closing Date,
Company shall deliver all of the information, instruments and documents required
to be delivered by Company as set forth in Section 6 hereof, including, but not
limited to, the Voting Agreement, the Financial Consulting Agreement and the
Registration Agreement.
3.1.10 FURTHER ASSURANCES. At any time from the date hereof,
to, through and after the Closing Date, Company shall execute and deliver to
Subscriber such further lists, documents and instruments and take all such
further action as Subscriber may reasonably request in order to carry out the
transactions contemplated hereby.
3.2 AFFIRMATIVE COVENANTS OF SUBSCRIBER.
3.2.1 Accuracy of Representations. Subscriber shall do all
things necessary to ensure that the representations and warranties of Subscriber
contained in this Agreement are true in all respects at and as of the Closing
Date.
3.2.2 DELIVERY OF DOCUMENTS. On or before the Closing Date,
Subscriber shall deliver those documents required to be delivered by Subscriber
as set forth in Section 6 hereof.
3.2.3 COMPLIANCE WITH SECURITIES LAWS. On or before ten (10)
days after the Closing Date, Subscriber shall cause to be filed Form 13D under
the Exchange Act and Subscriber shall cause its nominee to the Board of Company
to timely file his Form 3.
3.2.4 FURTHER ASSURANCES. At any time from the date hereof,
to, through and after the Closing Date, Subscriber shall execute and deliver to
Company such further lists, documents and instruments and take all such further
action as Company may reasonably request in order to carry out the transactions
contemplated hereby.
4. OTHER AGREEMENTS AND COVENANTS.
4.1 DEFAULTS. In the event of a default by Company hereunder, then,
notwithstanding any other provisions of this Agreement or any other agreement or
law to the contrary, Subscriber may, at its option, enforce the terms hereof by
specific performance or otherwise, or Subscriber may exercise any other right or
remedy, all of which rights and remedies shall be cumulative. In the event of a
default by Subscriber hereunder, then, notwithstanding any other provisions of
this Agreement or any other agreement or law to the contrary, Company may, at
its option, enforce the terms hereof by specific performance or otherwise, or
Company may exercise any other right or remedy, all of which rights and remedies
shall be cumulative.
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4.2 BREAK UP FEE. In the event that Subscriber is ready, willing
and able to close on its purchase of the Shares and Company defaults on its
obligations under this Agreement or in the event that Company fails to close
with Subscriber and subsequently closes any other debt or equity financing with
any other party for a period of one hundred eighty (180) days from May 3, 2000,
then in such event, in addition to all of the other rights and remedies which
may be available to Subscriber, Company shall pay to Subscriber a break-up fee
in the amount of One Hundred Thirty-Five Thousand and 00/100 ($135,000.00)
Dollars if Subscriber was investing between One Million Five Hundred Thousand
and 00/100 ($1,500,000.00) Dollars and One Million Seven Hundred Fifty Thousand
and 00/100 ($1,750,000.00) Dollars and One Hundred Fifty Thousand and 00/100
($150,000.00) Dollars if Subscriber was investing between One Million Seven
Hundred Fifty Thousand One and 00/100 ($1,750,001.00) Dollars and Two Million
and 00/100 ($2,000,000.00) Dollars.
4.3 EXPENSES. Except as otherwise expressly provided herein,
each party to this Agreement shall pay his or its own expenses incident to this
Agreement and the transactions contemplated in this Agreement, including,
without limitation, counsel fees, brokerage or financial advisor fees and
accounting fees. Notwithstanding the foregoing, at the Closing on the Closing
Date, Company shall pay: (i) Subscriber's legal fees in an amount not to exceed
Fifteen Thousand and 00/100 ($15,000.00) Dollars; and (ii) a closing fee (the
"Closing Fee") to Senderra Corporation ("Senderra") in an amount equal to One
Hundred Fifty Thousand and 00/100 ($150,000.00) Dollars.
4.4 NO DISCLOSURES. None of the parties to this Agreement shall
make any public disclosure or publicity release pertaining to the existence or
the subject matter of this Agreement without the prior consent of the other
parties; provided, however, that the parties shall be permitted to make such
disclosures to the public or to governmental agencies as is deemed necessary or
appropriate to comply with applicable laws.
4.5 CONFIDENTIALITY. Except as is otherwise required by law or as
permitted herein, each party agrees not to disclose, divulge, provide or make
accessible to any other person or entity the non-public, confidential
information of the other parties obtained during the term of this Agreement
("Confidential Information"). Notwithstanding the foregoing, each party may
disclose such Confidential Information to its professional advisors, financiers,
officers, directors, members, managers, advisory board members, and employees,
and each party shall use its best efforts to cause all such persons (including
any affiliates of the parties) to whom any such information is disclosed not to
disclose any of such information to others in violation of the foregoing
restrictions. It is hereby understood and agreed that information shall not be
considered Confidential Information: (i) if the information was at the time of
disclosure known to the general public or subsequently, through no act or
omission of the party, became known to the public; (ii) if the information was,
subsequent to the time of disclosure, lawfully and independently received from a
third party, provided that, at the time of the disclosure, such third party was
not then bound by a confidentiality agreement with Company; or (iii) if the
information was independently developed by the party without violation of this
Section 4.5.
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4.6 REPORTING. Each of the parties hereto shall cooperate with each
of the other parties hereto in preparing and filing any reports, applications,
disclosures and other documents with any governmental agencies or third parties
necessary or appropriate to consummate the transaction provided for in this
Agreement.
4.7 TAXES. Company shall pay all governmental assessments, charges
or taxes (except income or similar taxes imposed on Subscriber), including any
interest or penalties thereon, at any time payable or ruled to be payable in
respect of the existence, execution, delivery or performance of this Agreement
and the related agreements or the issuance or existence of the Shares, by reason
of an existing or hereafter enacted federal, state or local statue, and Company
shall indemnify and hold harmless Subscriber against any liability in connection
with such assessments, charges or taxes.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO SUBSCRIBER'S OBLIGATIONS. Without limiting
any other rights or remedies which Subscriber may have at law or in equity, the
obligations of Subscriber under this Agreement are subject to the satisfaction
of the following conditions at or prior to the Closing, any or all of which may
be waived by Subscriber in writing in its sole discretion:
5.1.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by Company in this Agreement, or in any
written statement which shall be delivered to Subscriber pursuant to this
Agreement, shall be true, accurate and correct in all material respects, at and
as of the Closing Date, with the same force and effect as though such
representations and warranties had been made at and as of the Closing Date.
5.1.2 COMPLIANCE WITH COVENANTS. All actions, undertakings,
covenants, or agreements required to be performed by Company prior to the
Closing shall have been performed or complied with, in all material respects, on
or prior to the Closing Date, and Company shall have delivered evidence of such
compliance to Subscriber on the Closing Date.
5.1.3 CERTIFICATE OF COMPANY. Company shall have delivered to
Subscriber a Certificate, dated as of the Closing Date, signed by an authorized
officer of Company, certifying as to the fulfillment of the conditions specified
in Sections 5.1.1 and 5.1.2.
5.1.4 CONSENTS. Company shall have obtained and delivered to
Subscriber the approvals and consents to the transaction contemplated by this
Agreement as set forth on Exhibit 2.1.3.
5.1.5 DELIVERY OF DOCUMENTS. Company shall have delivered to
Subscriber the information, instruments and documents required to be delivered
by it pursuant to the terms of this Agreement.
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5.1.6 NO MATERIAL CHANGE IN EXHIBITS. There shall have been no
material adverse change in the information required to be contained in the
Exhibits to this Agreement.
5.1.7 LEGAL OPINION. Subscriber shall have received an opinion
of counsel from counsel to Company, dated as of the Closing Date, substantially
to the effect that:
(a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada; Company is
not required to be qualified or otherwise authorized to conduct business in any
jurisdiction, or if the Company is required to be so qualified, the Company is
duly qualified and in good standing in each jurisdiction in which the Company
conducts business; and Company has full corporate power and authority to carry
on the Business as presently conducted and to own and operate its assets,
properties and business;
(b) The authorized, issued and outstanding capital stock
of Company is as specified on Exhibit 2.1.4 to this Agreement, and Shares of the
capital stock of Company to be issued to Subscriber pursuant to the terms of
this Agreement are duly authorized, legally and validly issued, fully paid,
non-assessable and subject to no preemptive rights;
(c) Except and to the extent set forth on Exhibit 2.1.5
of this Agreement, to counsel's knowledge, there are no outstanding options,
warrants, convertible securities, subscriptions, puts, calls, agreements or
other commitments or rights of any nature whatsoever to acquire any securities
of Company;
(d) Upon consummation of the transactions contemplated
in this Agreement, Subscriber will have good, valid and marketable title to the
Shares, free and clear of all security interests, liens, encumbrances and
restrictions, except for restrictions provided for by the Federal Act or the
Michigan Act;
(e) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
breach of any of the currently effective terms or conditions of, or constitute
(or with notice or lapse of time, or both, would constitute) a default under or
violation of, the current Articles of Incorporation or Bylaws of Company nor, to
counsel's knowledge, will such execution or delivery result in the termination
or acceleration of any right or obligation under, or constitute a breach or
default under, any term, covenant, condition or provision of any material
mortgage, lease, agreement, instrument, document, order, award, judgment or
decree to which Company is a party, or by which Company or any of its assets may
be bound;
(f) This Agreement and the other instruments and
documents executed by Company in connection with the transactions contemplated
by this Agreement have been duly authorized and properly and validly executed
and delivered by Company, and the documents constitute valid and binding
obligations of Company enforceable against it in accordance with their terms,
subject to the qualifications that: (i) the rights and remedies contained in the
19
<PAGE> 27
documents are subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforceability of creditor's rights generally; and (ii) the
enforceability of the documents is subject to general principles of equity;
(g) There are no consents, approvals, authorizations or
orders of, or registrations or filings with, any governmental agencies or bodies
required for the consummation of the transactions contemplated by this Agreement
other than those expressly provided for on Exhibit 2.1.3 to this Agreement; and
(h) The Shares and the transactions contemplated hereby
are exempt from the registration and prospectus delivery requirements under the
Federal Act, the Michigan Act and the securities laws of the states in which
Company is incorporated or is doing business, and the rules and regulations
promulgated thereunder.
In rendering its opinion, counsel to Company may
rely on facts represented to it by Company and on a certificate of such facts
executed by a duly authorize officer of Company and counsel to Company may
otherwise qualify its opinion in such manner as is customary for transactions of
this nature.
5.1.8 INSPECTION. subscriber shall be satisfied, in its sole
and absolute discretion, with the results of its inspection and examinations
described in Section 1.4 and Section 3.1.1 hereof.
5.1.9 OTHER REQUIREMENTS. The sale and purchase contemplated
herein shall comply with all other applicable government laws, rules and
regulations.
5.2 CONDITIONS TO COMPANY'S OBLIGATIONS. Without limiting any
other rights or remedies which Company may have at law or in equity, the
obligations of Company under this Agreement are subject to the satisfaction of
the following conditions at or prior to Closing, any or all of which may be
waived by Company in its sole discretion:
5.2.1 ACCURACY OF SUBSCRIBER'S REPRESENTATIONS AND
WARRANTIES. All representations and warranties made by Subscriber in this
Agreement or in any written statement which shall be delivered to Company
pursuant to this Agreement shall be true, accurate and correct in all material
respects, at and as of the Closing Date, with the same force and effect as
though such representations and warranties had been made at and as of the
Closing Date;
5.2.2 COMPLIANCE WITH COVENANTS. All actions, undertakings,
covenants or agreements required to be performed by Subscriber prior to the
Closing shall have been performed or complied with, in all material respects, on
or prior to the Closing Date;
5.2.3 CERTIFICATE OF SUBSCRIBER'S OFFICER. Subscriber shall
have delivered to Company a Certificate, dated as of the Closing Date, signed by
an authorized representative of
20
<PAGE> 28
Subscriber, certifying as to the fulfillment of the conditions specified in
Section 5.2.1 and Section 5.2.2;
5.2.4 DELIVERY OF DOCUMENTS. Subscriber shall have delivered
the other documents required to be delivered by Subscriber pursuant to this
Agreement;
5.2.5 LEGAL OPINION. Company shall have received an opinion
of counsel from counsel to Subscriber, dated as of the Closing Date,
substantially to the effect that:
(a) Subscriber is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Michigan, and Subscriber has duly authorized and ratified the execution and
delivery of this Agreement;
(b) The execution and delivery of this Agreement by
Subscriber, and the consummation of the transactions contemplated hereby, will
not result in a breach or violation of the Articles of Organization of
Subscriber, nor, to counsel's knowledge, will such execution and delivery result
in a breach or default under any agreement, indenture, mortgage, lease or other
obligation or instrument to which Subscriber is a party or by which Subscriber
is bound, or a violation of any applicable law to which Subscriber is subject or
by which it is bound;
(c) Subscriber has full power and authority to
execute, deliver and perform this Agreement, and all action of Subscriber
necessary for such execution, delivery and performance has been taken. This
Agreement constitutes a valid and binding obligation of Subscriber enforceable
in accordance with its terms, subject to the effect of bankruptcy, insolvency or
similar laws effecting the rights and remedies of creditors generally and
equitable or other relief which is at the discretion of the court before which
any proceedings may be brought; and
(d) Subscriber is an "accredited investor" as such
term is defined under Regulation D of the Federal Act.
In rendering its opinion, counsel to Subscriber
may rely on facts represented to it by Subscriber and on a certificate of such
facts executed by a duly authorized officer of Subscriber and counsel to
Subscriber may otherwise qualify its opinion in such manner as is customary for
transactions of this nature.
6. CLOSING DOCUMENTS. At the Closing, on the Closing Date, the parties
shall cause to be delivered to each other the following:
6.1 Instruments of Conveyance. Company shall deliver to
Subscriber all of the stock certificates evidencing the Shares and Warrant
Agreements evidencing the Warrants, in a form and substance satisfactory to
Subscriber and its counsel, necessary to assign, transfer and vest in
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<PAGE> 29
Subscriber good and marketable title to the Shares, free and clear of all
liabilities, liens, claims and encumbrances.
6.2 CONSENTS. Company shall deliver to Subscriber all of the third
party consents which are necessary or appropriate to consummate the transactions
contemplated by this Agreement;
6.3 COMPANY'S CERTIFICATE. Company shall deliver to Subscriber a
certificate reaffirming the representations and warranties and covenants set
forth in Section 2.1 hereof;
6.4 SUBSCRIBER'S CERTIFICATE. Subscriber shall deliver to Company a
certificate reaffirming the representations and warranties set forth in Section
2.2 hereof;
6.5 COMPANY'S RESOLUTIONS. Company shall deliver to Subscriber
resolutions of the Board of Company authorizing Company to undertake and
complete such actions as are necessary or appropriate to consummate the
transactions contemplated in this Agreement;
6.6 SUBSCRIBER'S RESOLUTIONS. Subscriber shall execute and deliver
to Company resolutions of the managers of Subscriber authorizing Subscriber to
undertake and complete such actions as are necessary or appropriate to
consummate the transactions contemplated in this Agreement;
6.7 OPINIONS OF COUNSEL. Company shall deliver to Subscriber the
opinion of counsel contemplated by Section 5.1.7 hereof, and Subscriber shall
deliver to Company the opinion of counsel contemplated by Section 5.2.5 hereof;
6.8 OTHER AGREEMENTS. The parties shall execute and deliver to one
another all other instruments and documents which are necessary or appropriate
to consummate the transactions contemplated in this Agreement.
7. MISCELLANEOUS.
7.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given on the
day thereof if delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or three (3) days after
mailed by certified or registered mail with postage prepaid, return receipt
requested, or one (1) day after depositing such notice or other communication
for overnight delivery in the hands of a nationally-recognized overnight
delivery service, and addressed to the applicable party at its address set forth
below or at such other address as the applicable party may designate by written
notice to the other parties:
22
<PAGE> 30
A. If to Company: B. If to Subscriber:
Mr. Gerald A. Pesut Mr. Daniel J. Dorman
President & CEO President
Advanced Systems International, Inc. Princeton Capital Fund, L.L.C.
25300 Telegraph Road 1533 North Woodward
Suite 455 Suite 175
Southfield, MI 48034 Bloomfield Hills, MI 48304
with a copy to: with a copy to:
David D. Warner, Esq. Brian D. O'Keefe, Esq.
Jaffe, Raitt, Heuer & Weiss, P.C. Hyman Lippitt, P.C.
One Woodward Avenue 185 Oakland Avenue
Suite 2400 Suite 300
Detroit, MI 48226 Birmingham, MI 48009
7.2 ENTIRE AGREEMENT AND CONSTRUCTION. This Agreement,
together with the Exhibits attached hereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior arrangements, understandings, negotiations and discussions, whether oral
or written, of the parties. No amendment, supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party against whom enforcement is sought. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided. The unenforceability or
invalidity, if any, of any provision of this Agreement shall not render any
other provision or provisions unenforceable, and each provision hereof shall be
enforced to the fullest extent permitted by applicable law. The Exhibits to this
Agreement are part of this Agreement as if set forth in full in this Agreement.
7.3 BENEFIT. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, personal representatives, successors and
permitted assigns. The rights and obligations of Subscriber under this Agreement
may be assigned and delegated at any time prior to the Closing upon written
notice to Company. The rights and obligations of Company under this Agreement
shall not be assigned or delegated, as the case may be, without the prior
written consent of Subscriber. Except as expressly provided herein, nothing
herein is intended to confer upon any person, other than the parties and their
respective heirs, executors, personal representatives, successors and permitted
assigns as provided herein, any rights or remedies whatsoever.
23
<PAGE> 31
7.4 COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Any facsimile
signature hereon shall be given the same force and effect as an original
signature.
7.5 CAPTIONS AND USE OF PRONOUNS. The captions inserted herein are
inserted only as a matter of convenience and in no way define, limit, construe,
affect or describe the scope or intent of this Agreement. Whenever herein the
singular is used, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders and vice versa, whenever the
context so requires.
7.6 TIME IS OF THE ESSENCE. Time shall be deemed to be of the very
essence of this Agreement.
7.7 GOVERNING LAW. This Agreement shall be construed, interpreted,
and the rights of the parties hereunder determined, in accordance with the laws
of the State of Michigan.
7.8 JOINT DRAFTING. The parties hereto, together with their
respective attorneys, have participated in the drafting, preparation and
negotiation of this Agreement. Each of the parties hereto acknowledges such
participation and negotiation in order to avoid the application of any rule
construing contractual language against the drafter thereof and agrees that the
provisions contained in this Agreement shall be construed without prejudice to
the party who actually memorialized this Agreement in final form.
7.9. SURVIVAL. All representations, warranties, covenants and
agreements of Company and Subscriber contained in this Agreement and this
Agreement itself shall survive the execution and delivery of this Agreement and
the Closing Date, notwithstanding any investigation or examination made by or on
behalf of any party and notwithstanding any rule, law or course of dealing to
the contrary. No inspections or examination by Subscriber of the books, records,
operations, personnel or any other matter relating to the Company shall in any
way be deemed to be a waiver or modification of any representation, warranty or
covenant by Company herein or in any other document executed in connection
herewith, it being expressly understood that Subscriber is relying upon such
representations, warranties and covenants in its decision to purchase the
Shares.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WITNESSES: COMPANY:
Advanced Systems International, Inc.
- ----------------------------- By:/s/ Gerald A. Pesut
--------------------------------
- ----------------------------- Its: President
Dated: May 3, 2000
SUBSCRIBER:
Princeton Capital Fund, L.L.C.
- ----------------------------- By: /s/ Daniel J. Dorman
---------------------------------
- ----------------------------- Its: President
Dated: May 3, 2000
25
<PAGE> 33
VOTING AGREEMENT
THIS VOTING AGREEMENT ("Agreement") is made and entered into as of the
3rd day of May, 2000, by and among Advanced Systems International, Inc., a
Nevada Company ("Company"), Princeton Capital Fund, L.L.C., a Michigan limited
liability company ("PCF"), each of the members of the Board of Directors set
forth on Schedule 1 attached hereto (each a "Director" and all together the
"Directors"), and each of the shareholders set forth on Schedule 2 attached
hereto (each a "Shareholder" and all together the "Shareholders").
The following is a recital of the facts underlying this Agreement:
A. PCF has agreed to purchase one million one hundred eleven thousand
one hundred and eleven (1,111,111) shares of the common capital stock of Company
which are currently authorized but unissued by Company and Three Hundred
Thousand (300,000) warrants to purchase common shares ("Warrants") pursuant to
that certain Stock Purchase And Subscription Agreement dated of even date
herewith ("Stock Purchase Agreement") provided that the parties hereto enter
into this Agreement; and
B. Company, Directors and Shareholders deem it desirable and in the
best interests of Company and all of its stockholders to enter into this
Agreement in order to induce PCF to purchase the Shares (as hereinafter defined)
and the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby mutually
acknowledged, the parties hereto agree as follows:
1. Ownership By Shareholders. As of the date hereof, each Shareholder
listed below has subscribed to the number of shares of the common capital stock
of Company set forth opposite his name below:
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
Gerald Pesut 883,000
Alexander D. Henry 770,900
Mark O'Donoghue 133,000
John Williams 233,000
Carlos Bravo 145,838
Temple Securities Ltd. 813,520
Robert C. DeMerell 150,000
Timothy Selner 100,000
William Mottram 200,000
----------
Total: 3,429,258
</TABLE>
The shares owned by the Shareholders are validly issued, fully paid and
non-assessable and constitute twenty-three (23%) percent of the undiluted
securities of each and every class of Company and eighteen (18%) percent of the
fully diluted securities of each and every class of Company after giving effect
to all outstanding subscriptions, options, warrants, puts, calls, pre-emptive
rights, sinking fund obligations, contracts, agreements (including this
Agreement) or any other rights of conversion or exchange under any outstanding
security or other instrument (together the "Options").
<PAGE> 34
2. Ownership By PCF. As of the date hereof, PCF has subscribed to
one million one hundred eleven thousand one hundred and eleven (1,111,111)
shares of the common capital stock of Company and the shares that may be
exercised by the Warrants (the "Shares"). The Shares owned by PCF are validly
issued, fully paid and non-assessable and together with the shares that may be
issued pursuant to the Warrants constitute nine and 60/100 (9.6%) percent of the
undiluted securities of each and every class of Company and seven and 20/100
(7.2%) percent of the fully diluted securities of each and every class of
Company after giving effect to all of the Options.
3. The Board Of Directors.
a. Voting. The Shareholders shall vote all of the shares now
or hereafter acquired by them and any other voting securities of Company over
which they have voting control and each of them shall take all other necessary
or desirable actions within his control which are reasonable and which are
related to the voting of such securities, the Directors shall vote all of their
votes as Directors and each of them shall take all other necessary or desirable
actions within his control which are reasonable and which are related to the
voting of such votes, and Company shall use its best efforts, proceed with due
diligence and take all necessary and desirable actions within its control, in
order:
i. to cause Company's Board of Directors (the "Board")
to consist of no less than two (2) members and no more than eight (8) members;
ii. to cause the election to the Board of at least one
(1) member designated by PCF (each, a "PCF Director" and, collectively, the "PCF
Directors"), provided that, if the person designated by PCF is not Daniel J.
Dorman or Lawrence J. DeFiore, that the person selected by PCF shall be
acceptable to Company in its reasonable discretion;
iii. to cause the composition of any committee
established by the Board to be proportionately equivalent to the composition of
the Board;
iv. to cause the removal from the Board of one or more
of the PCF Directors only upon the written request of PCF and under no other
circumstances, except for Just Cause (as hereinafter defined); and
v. to cause any vacancy on the Board or on any committee
thereof to be filled in a manner which is consistent with this Agreement.
b. Indemnification. Company shall afford all of the
members of the Board, including, without limitation, the PCF Directors, the most
extensive rights of indemnification and exculpation as are permitted by a
company under the Nevada Business Corporation Act, the Michigan Business
Corporation Act or any other applicable law.
c. Expenses. Company shall pay the reasonable
out-of-pocket expenses, including, without limitation, travel expenses, incurred
by the members of the Board in connection with attending meetings of the Board
and any committees thereof, and in connection with their performance of the
functions and duties as members of the
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<PAGE> 35
Board. Company shall procure adequate liability insurance for all of the members
of the Board, including, without limitation, the PCF Directors.
4. Certain Voting Requirements.
a. Restrictions. Without ten (10) days notice to and the
consent of the PCF Director, the Shareholders shall vote all of the shares now
or hereafter acquired by them and any other voting securities of Company over
which they have voting control and each of them shall take all other necessary
or desirable actions within his control which are reasonable and which are
related to the voting of such securities, the Directors shall vote all of their
votes as Directors and each of them shall take all other necessary or desirable
actions within his control which are reasonable and which are related to the
voting of such votes, and Company shall use its best efforts, proceed with due
diligence and take all necessary and desirable actions within its control, to
prevent any of the following actions or events:
i. any amendment or repeal of the Articles of
Incorporation or the Bylaws of Company which would violate the terms of this
Agreement or which would disproportionately affect PCF or the Shares;
ii. any issuance, offering, repurchase, redemption
or initial public offering of any securities of Company (other than the
registration contemplated by the Registration Rights Agreement executed
contemporaneously herewith) in a manner which would violate the terms of this
Agreement;
iii. any stock split, combination or
reclassification of any securities of Company in a manner which would violate
the terms of this Agreement;
iv. any declaration of dividends or other
distributions on any securities of Company in a manner which would violate the
terms of this Agreement;
v. the sale, divestiture or other disposition of
all or a substantial portion of the assets of Company, or the sale, merger,
reorganization or consolidation of Company to, with or into any other Person (as
hereinafter defined) which would violate the terms of the Agreement, which would
disproportionately affect PCF or the Shares or for which Company did not first
receive a fairness opinion from a top fifteen (15) nationally ranked investment
banking firm that is unaffiliated with Company or any Related Person (as
hereinafter defined) and which is acceptable to PCF in the reasonable exercise
of its discretion; which fairness opinion provides that the proposed transaction
is fair and reasonable in all financial respects to all of the shareholders,
including PCF;
vi. the acquisition by Company of assets
constituting a business as a going concern or the controlling equity interest of
the equity securities of any Person, or the consummation of any other
transaction by Company involving the purchase of substantial assets outside of
the ordinary course of business, which would violate the terms of the Agreement,
which would disproportionately affect PCF or the Shares or for which Company did
not first receive a fairness opinion from a top fifteen (15) nationally ranked
investment banking firm that is unaffiliated with Company or any Related Person
and which is acceptable to PCF in the reasonable exercise of its
3
<PAGE> 36
discretion; which fairness opinion provides that the proposed transaction is
fair and reasonable in all financial respects to all of the shareholders,
including PCF;
vii. any material change in the nature or manner
of the business of Company or the liquidation, dissolution or winding up of
Company or the filing of a petition for Company under any chapter of the Federal
Bankruptcy Reform Act of 1978 (11 U.S.C. ss. 101, et seq.), as amended, and the
regulations issued from time to time thereunder, or under any similar provision
of any state law which would violate the terms of the Agreement, which would
disproportionately affect PCF or the Shares or for which Company did not first
receive a fairness opinion from a top fifteen (15) nationally ranked investment
banking firm that is unaffiliated with Company or any Related Person and which
is acceptable to PCF in the reasonable exercise of its discretion; which
fairness opinion provides that the proposed transaction is fair and reasonable
in all financial respects to all of the shareholders, including PCF;
viii. the entering into of any material
transaction or arrangement with, or for the benefit of, any Person who is a
director, officer or 3% or greater shareholder of Company (a "Related Person")
or an Affiliate (as hereinafter defined) of any such Related Person or any
material amendment or modification to any such transaction or arrangement that
exists as of the date hereof with any such Related Person, and which results in
terms that are not fair and reasonable to Company and which are materially less
favorable in any material respect than those terms that would be available from
any other Person; and
ix. the authorization of the payment of any
bonuses to any Related Person or the making of any discretionary contributions
to any profit sharing or similar plan or program of Company on behalf of any
Related Person, except as is reasonably consistent with the past practices of
Company or which is usual and customary in the industry in which Company is
engaged and which is in the ordinary course of business.
5. Antidilution And Purchase Rights. Company shall do the following:
a. Purchase Rights. If at any time Company grants, issues or
sells any securities or rights to purchase stock, warrants, options, securities
or other property to the holders of any securities of Company or to any other
Person ("Purchase Rights"), then in such event PCF shall be entitled to such
Purchase Rights, ratably in the proportion that the Shares held by PCF bears to
all of the outstanding shares of common stock of Company on the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, then the date on which such grant, issuance or sale is
to become effective;
b. Distribution Rights. If at any time Company authorizes any
stock split, a combination or reclassification of any securities of Company, the
issuance of any new class of securities, or the declaration of any dividends or
other distributions on any securities of Company ("Distribution Rights"), then
in such event PCF shall be entitled to such Distribution Rights, ratably in the
proportion that the Shares held by PCF bears to all of the outstanding shares of
common stock of Company on the date on which a record is taken for the grant,
issuance or sale of such Distribution Rights, or, if no such record is taken,
then the date on which such grant, issuance or sale is to become effective;
4
<PAGE> 37
c. Right Of First Refusal. Prior to making any offer to sell
any securities or rights to purchase stock, warrants, options, securities or
other property, Company shall deliver a written notice to PCF, disclosing in
reasonable detail the identity of the prospective purchaser(s), the securities
or rights to purchase stock, warrants, options, securities or other property
proposed to be offered (the "Offered Shares") and the terms and conditions of
the proposed offer. PCF may elect to purchase an amount, not less than PCF's
pro-rata share, of any Offered Shares under the same terms and conditions as
offered to the prospective purchasers or third parties. PCF may elect to
purchase, not less than its pro-rata share, of the Offered Shares by delivering
a written notice of such election to Company within fifteen (15) days after
receipt of the notice provided by Company; and
d. Exclusions. Notwithstanding the foregoing Sections 4(a),
4(b) and 4(c), PCF shall not have Purchase Rights, Distribution Rights or Rights
Of First Refusal on any of the following:
i. grants of stock, options or warrants to any employees under
any existing profit sharing or similar plan or program of Company and which do
not result in any such employee owning more than an additional three (3%)
percent of the fully diluted securities of each and every class of Company than
owned as of the date hereof; or
ii. grants of stock, options or warrants to any consultants,
advisors, independent contractors or professionals of Company provided that such
grants, options or warrants are at market price, are usual and customary in the
industry in which Company is engaged, are reasonable in comparison to the
services rendered, and which do not result in any such third party owning more
than an additional three (3%) percent of the fully diluted securities of each
and every class of Company than owned as of the date hereof.
6. Restrictions On Shares.
a. Continuing Agreement. All shares now owned or hereafter
acquired by the Shareholders shall be subject to this Agreement. In the event
that the shares are split, or a stock dividend is declared by Company, or there
is a re-capitalization, merger, consolidation or reorganization of Company, then
all securities issued to the Shareholders pursuant thereto, or in replacement of
or in addition to the shares, shall likewise be subject to this Agreement.
b. Covenants By Company. Company covenants and agrees for
itself and its successors and assigns that it will not authorize, issue,
transfer or reissue any of the shares of Shareholders in violation of this
Agreement or without requiring proof of compliance with this Agreement.
7. Representations and Warranties.
a. Representations Of Company. All corporate action on the
part of Company necessary for the authorization, execution, delivery and
performance by Company of this Agreement has been taken. This Agreement is a
legal, valid and binding obligation of Company enforceable against Company in
accordance with its
5
<PAGE> 38
terms. The execution and delivery of this Agreement by Company will not (with or
without notice or passage of time or both): (i) conflict with or result in a
breach of any of the provisions of the Articles of Incorporation or Bylaws of
Company; (ii) result in a default, give rise to any right of termination,
cancellation or acceleration, or require any consent or approval, under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
loan, factoring arrangement, license agreement, lease or other instrument or
obligation to which Company is a party or by which it or any of its securities
or assets may be bound; or (iii) violate any law, judgment, order, writ,
injunction, decree, statute, rule or regulation of any court, administrative
agency, bureau, board, commission, office, authority, department or any other
governmental or quasi-governmental entity applicable to Company or any of its
securities or assets.
b. Representations Of Shareholders. All action on the part of
the Shareholders necessary for the authorization, execution, delivery and
performance by the Shareholders of this Agreement has been taken. This Agreement
is a legal, valid and binding obligation of the Shareholders enforceable against
the Shareholders in accordance with its terms.
c. Representations Of Directors. All action on the part of the
Directors necessary for the authorization, execution, delivery and performance
by the Directors of this Agreement has been taken.
d. Representations Of PCF. All corporate action on the part of
PCF necessary for the authorization, execution, delivery and performance by PCF
of this Agreement has been taken. This Agreement is a legal, valid and binding
obligation of PCF enforceable against PCF in accordance with its terms. The
execution and delivery of this Agreement by PCF will not (with or without notice
or passage of time or both): (i) conflict with or result in a breach of any of
the provisions of the Articles of Organization or Bylaws of Company; (ii) result
in a default, give rise to any right of termination, cancellation or
acceleration, or require any consent or approval, under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, loan, license
agreement, lease or other instrument or obligation to which PCF is a party or by
which it or any of its assets may be bound; or (iii) violate any law, judgment,
order, writ, injunction, decree, statute, rule or regulation of any court,
administrative agency, bureau, board, commission, office, authority, department
or any other governmental or quasi-governmental entity applicable to PCF or any
of its assets.
8. Termination. This Agreement shall be effective as of the date
hereof and shall terminate only upon the occurrence of any one of the following
events:
a. By joint written agreement of all of the parties hereto;
b. PCF shall cease to hold at least one and one-half (1 1/2%)
percent of the fully diluted securities of each and every class of Company; or
c. The date which is three (3) years from the date of this
Agreement.
9. Remedies. In the event of any default by Company, Directors or
Shareholders, PCF shall be entitled to enforce its rights hereunder by
recovering monetary damages against Company exclusively or by pursuing any other
rights or remedies available against Company, all of which rights and remedies
shall be
6
<PAGE> 39
cumulative and not exclusive. The parties agree and acknowledge that monetary
damages may not be an adequate remedy for any breach of the provisions of this
Agreement by Company, Shareholders or Directors and that PCF may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief, without posting a bond or other
security, in order to enforce, or prevent any violation of, the provisions of
this Agreement. Injunctive relief and/or specific performance shall be the sole
remedy against Shareholders and Directors. In addition, each of the rights of
PCF, and the obligations of Company, Shareholders or Directors, under this
Agreement are material inducements for the investment by PCF in Company, and PCF
would not have made the investment in the absence of any one of such rights or
obligations. Accordingly, in the event of a breach of this Agreement by Company,
Shareholders or Directors, the parties acknowledge and agree that PCF will be
irreparably harmed, money damages alone would not provide an adequate remedy and
the extent of the damages to PCF would be extremely impracticable if not
impossible to determine. After consultation with counsel, the parties hereby
agree that, in addition to the other rights and remedies set forth above, PCF
shall be entitled to the following remedies, which the parties believe are
reasonably likely to compensate PCF for the damages it is likely to suffer upon
such breach:
A. Company shall pay to PCF, upon demand, the amount of Two
Hundred Thousand and 00/100 ($200,000.00) Dollars in
certified funds; and
B. Company hereby grants, and shall issue to PCF upon such
breach, a call option for the purchase by PCF of up to one
million shares of the common capital stock of Company for a
purchase price per Share equal to twenty (20%) percent less
than the mean between the high bid and the low ask price for
a Share of Company's publicly traded common capital stock on
the day of the breach.
Given the uncertainty of the extent to which PCF may suffer harm due to a breach
of this Agreement, the parties believe it is in their respective best interests
to liquidate the damages to which PCF would be entitled in advance of any
breach, and the parties intend that the foregoing remedies provide a level of
certainty to the transaction and shall not be deemed to be a penalty.
10. Inspection Rights And Financial Reporting Requirements. At all
times during the term of this Agreement, PCF shall have reasonable access after
notice during reasonable business hours to Company's personnel, properties,
assets, contracts, books and records, and other documents and data and PCF may,
at its own expense, make copies of all of such contracts, books and records, and
other existing documents and data. Without limitation to the foregoing, PCF
shall have the right to discuss and consult with Company's officers, directors,
employees, customers, lenders and accountants regarding the operations and
financial affairs of Company so long as it does not unreasonably interfere with
the normal operation of Company's business. Further, PCF shall have the right,
at its own expense, to cause an audit of the books and records of Company at any
time so long as it does not unreasonably interfere with the normal operation of
Company's business. Company shall provide to PCF monthly financial statements,
including balance sheets, income statements and cash flow statements prepared in
accordance with generally accepted accounting principals, consistently
7
<PAGE> 40
applied. On a quarterly and annual basis, Company shall provide to PCF audited
financial statements prepared in accordance with generally accepted accounting
principals, consistently applied; which audited financial statements shall be
issued in favor of, among others, PCF so that PCF shall be in privity with
Company's auditors.
11. Miscellaneous Provisions.
a. Entire Agreement And Construction. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior arrangements, understandings,
negotiations and discussions, whether oral or written, of the parties. No waiver
of any of the terms of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver unless expressly provided. The
unenforcability or invalidity, if any, of any provision of this Agreement shall
not render any other provision or provisions unenforceable and each provision
hereof shall be enforced to the fullest extent permitted by applicable law.
b. Benefit. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their successors and permitted assigns. The rights and obligations
provided by this Agreement shall not be assignable by any party hereto except as
specifically provided in this Agreement. Except as specifically provided herein,
nothing herein is intended to confer upon any person, other than the parties and
their successors and permitted assigns, any rights or remedies whatsoever.
c. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Any facsimile signature hereon shall be given the same force and
effect as an original signature.
d. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given on the day thereof if delivered by hand and receipted for by the
party to whom said notice or other communication shall have been directed or one
day after mail by certified or registered mail, postage prepaid, or one day
after depositing such notice in the hands of a nationally recognized overnight
delivery service and addressed to the applicable party at its address set forth
below or to such other address as the applicable party may designate by written
notice to the other parties:
If to any Director: To his address set forth on Schedule 1
If to any Shareholder: To his address set forth on Schedule 2
If to Company: Mr. Gerald A. Pesut
President & CEO
Advanced Systems International, Inc.
25300 Telegraph Road
Suite 455
Southfield, Michigan 48035
8
<PAGE> 41
with a copy to: David D. Warner, Esq.
Jaffe, Raitt, Heuer & Weiss, P.C.
One Woodward Avenue
Suite 2400
Detroit, MI 48226
If to PCF: Mr. Daniel J. Dorman
Princeton Capital Fund, L.L.C.
1533 North Woodward Avenue
Suite 175
Bloomfield Hills, MI 48304
with a copy to: Brian D. O'Keefe, Esq.
Hyman Lippitt, P.C.
185 Oakland Avenue, Suite 300
Birmingham, Michigan 48009
e. Captions And Use Of Pronouns. The captions inserted
herein are inserted only as a matter of convenience and in no way define, limit,
construe, effect or describe the scope or intent of this Agreement. Whenever
herein the singular is used, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders and vice versa.
f. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan and the parties
consent to the jurisdiction of the Courts of the State of Michigan for all
purposes hereunder.
g. Inclusion. All of the various recitals underlying this
Agreement, and the instruments and documents referred to or attached as Exhibits
to this Agreement, shall be deemed to be included herein and made a part hereof
as though specifically set forth herein word for word.
h. Subsequent Documents. The parties hereto agree that they
will, at any time, execute and deliver any additional documents and instruments
that may be necessary or appropriate to effectuate and comply with the terms and
conditions of this Agreement.
i. Definitions. For the purposes of this Agreement,
the following definitions shall apply:
i. "Affiliate" as applied to any Person means any
other Person directly or indirectly Controlling (as hereinafter defined),
Controlled By, or Under Common Control With, that Person. The term "Control"
(including, with correlative meanings, the term "Controlling", "Controlled By"
and "Under Common Control With"), as applied to any Person, means the
possession, directly or indirectly, of the power to vote ten (10%) percent or
more of the outstanding ownership interests, beneficial or otherwise, of such
Person or otherwise to direct or cause the direction of the management and
policies of that Person whether through the ownership of an ownership interest,
by contract or otherwise. All of Company's officers, shareholders, directors,
joint venturers and partners shall be deemed to be Affiliates of Company for the
purposes of this Agreement.
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<PAGE> 42
ii. "Just Cause" shall mean conduct of the PCF
Director amounting to fraud, embezzlement, gross negligence, intentional
misconduct or acts of moral turpitude injurious to Company and its reputation or
the use of alcohol, narcotics or other drugs to an extent that the PCF Director
is unable to fulfill his duties as a member of the Board for a period of more
than thirty (30) consecutive days
iii. "Person" means a natural person, a partnership,
a Company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, a limited liability company, or a governmental
entity or any department, agency or political subdivision thereof.
j. Continuing Agreement. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding on the
parties hereto unless executed in writing by all of the parties hereto.
k. Fiduciary Duties. Despite the voting obligations
described in this Agreement, nothing herein shall be construed to require
Directors to breach their fiduciary duties or other duties under applicable law
as Directors to the Company and the Shareholders.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
[SIGNATURE PAGES FOLLOW]
10
<PAGE> 43
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Company:
Advanced Systems International, Inc.,
a Nevada corporation
By:/s/ Gerald A. Pesut
--------------------------------
Its: President
--------------------------
11
<PAGE> 44
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
PCF:
Princeton Capital Fund, L.L.C.
a Michigan limited liability company
By: /s/ Daniel J. Dorman
--------------------------------
Its: President
----------------------------
12
<PAGE> 45
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ Gerald Pesut
-----------------------------
Gerald Pesut
13
<PAGE> 46
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ Alexander D. Henry
-----------------------------
Alexander D. Henry
14
<PAGE> 47
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ Mark O'Donoghue
-----------------------------
Mark O'Donoghue
15
<PAGE> 48
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ John Williams
-----------------------------
John Williams
16
<PAGE> 49
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ Carlos Bravo
-----------------------------
Carlos Bravo
17
<PAGE> 50
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
Temple Securities Ltd.
By: /s/ Mark O'Donoghue
------------------------------
Its: C.E.O.
----------------------------
18
<PAGE> 51
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ Robert C. DeMerell
-----------------------------
Robert C. DeMerell
19
<PAGE> 52
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ Timothy Selner
-----------------------------
Timothy Selner
20
<PAGE> 53
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Shareholder:
/s/ William Mottram
-----------------------------
William Mottram
21
<PAGE> 54
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Director:
/s/ Gerald Pesut
-----------------------------
Gerald Pesut
22
<PAGE> 55
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Director:
/s/ Alexander Henry
-----------------------------
Alexander Henry
24
<PAGE> 56
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Director:
/s/ John Williams
-----------------------------
John Williams
23
<PAGE> 57
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Director:
/s/ Mark O'Donoghue
-----------------------------
Mark O'Donoghue
25
<PAGE> 58
[SIGNATURE PAGE TO VOTING AGREEMENT DATED MAY 3, 2000]
Director:
/s/ Carlos Bravo
-----------------------------
Carlos Bravo
26
<PAGE> 59
SCHEDULE 1
DIRECTORS
NAME ADDRESS
- ---- -------
Gerald Pesut 25300 Telegraph Rd., Ste. 455
Southfield, MI 48034
John Williams 424 Clayton St.
Denver, CO 80206
Alexander Henry 533 Davenport Rd.
Toronto, ON Canada M5X 3R5
Mark O'Donoghue Tropicana Bldg.
Providenciales, Turks & Caicos Islands
British West Indies
Carlos Bravo 1713 Skyhawk Ct.
Daytona Beach, FL 32124
27
<PAGE> 60
SCHEDULE 2
SHAREHOLDERS
NAME ADDRESS
- ---- -------
Gerald Pesut 25300 Telegraph Rd., Ste. 455
Southfield, MI 48034
Alexander D. Henry 533 Davenport Rd.
Toronto, ON Canada M5X 3RS
Mark O'Donoghue Tropicana Bldg.
Providenciales, Turks & Caicos Islands
British West Indies
John Williams 424 Clayton St.
Denver, CO 80206
Carlos Bravo 1713 Skyhawk Ct.
Daytona Beach, FL 32124
Temple Securities Ltd. Tropicana Bldg.
Providenciales, Turks & Caicos Islands
British West Indies
Robert C. DeMerell 25300 Telegraph Rd., Ste. 455
Southfield, MI 48034
Timothy Selner 25300 Telegraph Rd., Ste. 455
Southfield, MI 48034
William Mottram 25300 Telegraph Rd., Ste. 455
Southfield, MI 48034
28
<PAGE> 61
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of the
3rd day of May, 2000, by and between Advanced Systems International, Inc., a
Nevada corporation (hereinafter "ASI" or "Company"), and Princeton Capital Fund,
L.L.C., a Michigan limited liability company (hereinafter "PCF" or
"Subscriber").
The following is a recital of the facts upon which this Agreement is
based:
A. Subscriber has agreed to purchase shares of Company's newly issued,
unregistered, common capital stock (the "Shares") and has been granted Warrants
(as hereinafter defined) to purchase Shares pursuant to that certain Stock
Purchase And Subscription Agreement of even date herewith (the "Stock Purchase
Agreement") provided that the parties hereto enter into this Agreement;
B. Company deems it desirable to enter into this Agreement in order to
induce Subscriber to purchase the Shares and Warrants pursuant to the Stock
Purchase Agreement; and
C. The subscription to Company's Shares and Warrants by Subscriber in
the Stock Purchase Agreement is conditioned upon the registration rights being
extended to Subscriber in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement the following terms
shall have the following meanings:
"Blue Sky Laws" shall mean individual state securities laws regulating,
among other things, securities offerings, distributions, tender offers and
broker dealer activities.
"Closing Date" shall mean the date of execution of this Agreement and
Stock Purchase Agreement by Company and Subscriber.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the common stock of Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Public Offering" shall mean any offering by Company of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act or any comparable statement under any comparable federal
statute then in effect.
"Register," "Registered" and "Registration" shall refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
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<PAGE> 62
"Registration Expenses" shall mean all expenses incurred by Company in
complying with Section 2, including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for Company, blue sky fees and expenses, the expense of
any special audits incident to or required by any such Registration and the
reasonable fees and disbursements of counsel for Subscriber.
"Registration Statement" shall mean Form S-1, Form SB-1, Form S-2, Form
SB-2 or Form S-3, whichever is applicable.
"Registrable Shares" or "Shares" shall mean any shares of newly issued
common capital stock of Company issued to Subscriber pursuant to the Stock
Purchase Agreement and the shares to be purchased upon exercise of any of the
Warrants held by Subscriber. For purposes of this Agreement, a Subscriber will
be deemed to be a holder of Registrable Shares whenever such Subscriber has the
then-existing right to acquire such Registrable Shares (by conversion or
otherwise), whether or not such acquisition actually has been effected and
certificates have been issued and delivered.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subscriber" shall mean Subscriber, its assignees and transferees, and
any transferee or assignee of such Subscriber who holds outstanding Registrable
Shares with registration rights conferred by this Agreement.
"Warrants" shall mean the Warrants to purchase Shares of common stock
of the Company issued to Subscriber as of the date hereof pursuant to the Stock
Purchase Agreement.
Capitalized terms used in this Agreement but not defined above or
elsewhere in this Agreement shall have the meanings ascribed to such terms in
the Stock Purchase Agreement.
2. Required Registration.
2.1 Registration Obligation Of Company. Pursuant to the terms
of this Agreement, Company covenants and agrees to register, on one occasion,
the Registrable Shares, under the Securities Act, for resale by Subscriber.
Company will file a Registration Statement covering the Registrable Shares as
soon as practicable after the Closing Date, but not later than one hundred
twenty (120) days from the Closing Date. Company shall promptly give written
notice of such Registration to Subscriber and use its best efforts to have such
Registration Statement declared effective promptly thereafter. Company shall
effect such registration of the Registrable Shares under the Securities Act and
under such other securities laws or Blue Sky Laws of such other jurisdictions as
Subscriber shall reasonably request. Company shall pay all Registration Expenses
in the manner provided in Section 4.
2.1.1 Warrant Shares. Company covenants and agrees
that during the period within which the rights represented by the Warrants may
be exercised, the Company will at all times have authorized, in reserve and
registered pursuant to the terms and conditions set forth herein, a sufficient
number of Shares of its common stock to provide for the exercise of the
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<PAGE> 63
rights represented by the Warrants.
2.2 Selection Of Underwriters. If the registration of the
Registrable Shares is for a registered public offering involving an
underwriting, Company shall so advise Subscriber in writing. Subscriber shall
have the right to select the investment banker(s) and manager(s) to administer
the offering, subject to Company's approval which shall not be unreasonably
withheld.
3. Registration Procedures. Whenever Company registers the
Registrable Shares pursuant to this Agreement, Company shall use its best
efforts and proceed with due diligence to effect the registration and sale of
such Registrable Shares in accordance with the intended method of disposition
thereof and, pursuant thereto, Company shall as expeditiously as possible:
(a) prepare and file with the Commission a
Registration Statement with respect to such Registrable Shares and use its best
efforts and proceed with due diligence to cause such Registration Statement to
become effective as soon as possible (provided that before filing a registration
statement or prospectus, or any amendments or supplements thereto, Company will
furnish copies of all such documents proposed to be filed to counsel for
Subscriber) and to keep Subscriber advised as to the initiation, progress and
completion of the Registration;
(b) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the prospectus(es)
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period of not less than one (1) year and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by Subscriber set forth in
such Registration Statement;
(c) furnish to Subscriber such number of copies of
such Registration Statement, each amendment and supplement thereto, the
prospectus(es) included in such Registration Statement (including each
preliminary prospectus) and such other documents as Subscriber may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Shares;
(d) use its best efforts to register or qualify such
Registrable Shares under such other securities or Blue Sky Laws of such
jurisdictions as Subscriber reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
Subscriber to consummate the disposition in such jurisdictions of the
Registrable Shares;
(e) notify Subscriber at any time when a prospectus
relating to such Registration Statement is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of Subscriber, Company shall prepare a
supplement
3
<PAGE> 64
or amendment to such prospectus so that such prospectus will not
contain any untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(f) cause all such Registrable Shares to be listed
on each securities exchange, electronic bulletin board, over the counter or
other distribution network on which similar securities issued by Company are
then listed;
(g) provide a transfer agent and registrar for all
such Registrable Shares not later than the effective date of Registration
Statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
Subscriber or the underwriters, if any, reasonably request in order to expedite
or facilitate the registration of the Registrable Shares;
(i) upon prior notice and during normal business
hours, make reasonably available for inspection by Subscriber, any underwriter
participating in the registration of such Registrable Shares, and any attorney,
accountant or other agent retained by Subscriber, all financial and other
records, pertinent corporate documents and properties of Company, and cause
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such Subscriber, underwriter,
attorney, accountant or agent in connection with such Registration Statement;
(j) advise Subscriber of such Registrable Shares,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the effectiveness of
such Registration Statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such stop order should be
issued;
(k) at least ten (10) business days prior to the
filing of any Registration Statement or prospectus, or any amendment or
supplement to such Registration Statement or prospectus, furnish a copy thereof
to Subscriber of such Registrable Shares and refrain from filing any such
Registration Statement, prospectus, amendment or supplement to which counsel for
Subscriber shall have reasonably objected on the grounds that such document does
not comply in all material respects with the requirements of the Securities Act
or the rules and regulations thereunder; and
(l) at the request of Subscriber, furnish on the date
or dates provided for in the Registration Statement or provided for in any
underwriting agreement: (i) an opinion of counsel, addressed to the underwriters
and Subscriber and upon which the underwriters and Subscriber may rely, covering
such matters as such underwriters and Subscriber may reasonably request,
including such matters as are customarily furnished in connection with an
underwritten offering; and (ii) a letter or letters from the independent
certified public accountants of Company addressed to the underwriters and
Subscriber and upon which the underwriters and Subscriber may rely, covering
such matters as such underwriters and Subscriber may reasonably request, in
which letter(s) such accountants shall state, without limiting the
4
<PAGE> 65
generality of the foregoing, that they are independent certified public
accountants within the meaning of the Securities Act and that in their opinion
the financial statements and other financial data of Company included in the
Registration Statement, the prospectus(es), or any amendment or supplement
thereto, comply in all material respects with the applicable accounting
requirements of the Securities Act.
4. Registration Expenses. All Registration Expenses incurred in
connection with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or Blue Sky
Laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for Company and Subscriber and all independent
certified public accountants, underwriters and other persons retained by Company
and Subscriber shall be borne by the Company.
5. Indemnification.
5.1 By Company. Company agrees to indemnify Subscriber and its
officers, directors, members and each person who controls Subscriber (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses (including, without limitation, attorneys' fees) caused by any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus or preliminary prospectus, or any amendment
thereof or supplement thereto, or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to Company by Subscriber expressly for use
therein. In connection with an underwritten offering, Company will indemnify
such underwriters, their officers and directors and each person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of Subscriber. The
payments required by this Section 5.1 shall be made periodically during the
course of the investigation or defense, as and when bills are received or
expenses incurred.
5.2 By Subscriber. In connection with any Registration
Statement in which Subscriber is participating, Subscriber will furnish to
Company in writing such information and affidavits as Company reasonably
requests for use in connection with any such Registration Statement or
prospectus and will indemnify Company, its directors and officers and each
person who controls Company (within the meaning of the Securities Act) against
any losses, claims, damages, liabilities and expenses (including, without
limitation, attorneys' fees) resulting from any untrue or alleged untrue
statement of material fact contained in the Registration Statement, prospectus
or preliminary prospectus, or any amendment thereof or supplement thereto, or
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in any
information or affidavit furnished in writing by Subscriber to Company.
5.3 Procedure. Any person entitled to indemnification
hereunder will: (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification; and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
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<PAGE> 66
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
5.4 Survival. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling person of such indemnified party and will survive the transfer and
registration of the Registrable Shares. Company also agrees to make such
provisions as are reasonably requested by any indemnified party for contribution
to such party in the event Company's indemnification is unavailable for any
reason.
6. Compliance With Rule 144. In the event that Company: (a)
registers the Registrable Shares under Section 12 of the Exchange Act; (b)
issues an offering circular meeting the requirements of Regulation A under the
Securities Act; or (c) commences to file reports under Section 13 or 15(d) of
the Exchange Act, then at the request of Subscriber, if Subscriber proposes to
sell securities in compliance with Rule 144 of the Commission, Company shall:
(i) forthwith furnish to Subscriber a written statement of compliance with the
filing requirements of the Commission as set forth in Rule 144, as such rule may
be amended from time to time; and (ii) make available to the public and
Subscriber such information as will enable Subscriber to make sales pursuant to
Rule 144.
7. Transfer Of Registration Rights. The rights to cause Company
to register the Registrable Shares of Subscriber granted to Subscriber by
Company herein may be assigned in conjunction with an assignment of the
Registrable Shares by Subscriber to any member of Subscriber, or to any other
transferee or assignee; provided, that Company is given written notice by
Subscriber at the time or within a reasonable time after said transfer, stating
the name and address of said assignee or transferee and identifying the
Registrable Shares with respect to which such registration rights are being
transferred or assigned.
8. Remedies. In the event of any default by any party hereto, the
non-defaulting parties shall be entitled to enforce their rights hereunder by
recovering monetary damages or by pursuing any other rights or remedies
available to them, all of which rights and remedies shall be cumulative and not
exclusive. The parties agree and acknowledge that monetary damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
non-breaching parties may in their sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance or injunctive relief,
without posting a bond or other security, in order to enforce, or prevent any
violation of, the provisions of this Agreement.
9. Miscellaneous.
9.1 No Inconsistent Agreements. Company shall not hereafter
enter into any agreement with respect to its securities or the Registrable
Shares which is inconsistent in any way with the rights granted to Subscriber in
this Agreement.
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9.2 Adjustments Affecting Registrable Shares. Company will not
take any action, or permit any change to occur, with respect to its securities
or the Registrable Shares which would adversely affect the ability of Subscriber
to include such Registrable Shares in a registration undertaken pursuant to this
Agreement or which would adversely affect the marketability of such Registrable
Shares in any such registration, including, without limitation, effecting a
stock split or combination of shares.
9.3 Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of Subscriber are also
for the benefit of, and enforceable by, any subsequent holders of the
Registrable Shares.
9.4 Entire Agreement And Construction. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior arrangements, understandings,
negotiations and discussions, whether oral or written, of the parties. No waiver
of any of the terms of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver unless expressly provided. The
unenforcability or invalidity, if any, of any provision of this Agreement shall
not render any other provision or provisions unenforceable and each provision
hereof shall be enforced to the fullest extent permitted by applicable law.
9.5 Captions And Use Of Pronouns. The captions inserted herein
are inserted only as a matter of convenience and in no way define, limit,
construe, effect or describe the scope or intent of this Agreement. Whenever
herein the singular is used, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders and vice versa.
9.6 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given on the day thereof if delivered by hand and receipted for by the
party to whom said notice or other communication shall have been directed or one
day after mail by certified or registered mail, postage prepaid, or one day
after depositing such notice in the hands of a nationally recognized overnight
delivery service and addressed to the applicable party at its address set forth
below or to such other address as the applicable party may designate by written
notice to the other parties:
If to Company:
Mr. Gerald A. Pesut
President and CEO
Advanced Systems International, Inc.
25300 Telegraph Road
Suite 455
Southfield, MI 48034
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with a copy to:
David D. Warner, Esq.
Jaffe, Raitt, Heuer & Weiss, P.C.
One Woodward Avenue
Suite 2400
Detroit, MI 48226
If to Subscriber:
Mr. Daniel J. Dorman
President
Princeton Capital Fund, L.L.C.
1533 North Woodward Avenue
Suite 175
Bloomfield Hills, MI 48304
with a copy to:
Brian D. O'Keefe, Esq.
Hyman Lippitt, P.C.
185 Oakland Avenue
Suite 300
Birmingham, Michigan 48009
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan and the parties
consent to the jurisdiction of the Courts of the State of Michigan for all
purposes hereunder.
9.9 Inclusion. All of the various recitals underlying this
Agreement, and the instruments and documents referred to or attached as Exhibits
to this Agreement, shall be deemed to be included herein and made a part hereof
as though specifically set forth herein word for word.
9.10 Subsequent Documents. The parties hereto agree that they
will, at any time, execute and deliver any additional documents and instruments
that may be necessary or appropriate to effectuate and comply with the terms and
conditions of this Agreement.
9.11 Continuing Agreement. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding on the
parties hereto unless executed in writing by all of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
ADVANCED SYSTEMS
INTERNATIONAL, INC.,
a Nevada corporation
By: /s/ Gerald A. Pesut
------------------------------
Its: President
------------------------------
Dated: May 3, 2000
SUBSCRIBER::
PRINCETON CAPITAL FUND, L.L.C.,
a Michigan limited liability company
By: /s/ Daniel J. Dorman
------------------------------
Its: President
------------------------------
Dated: May 3, 2000
9
