SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MENTOR ON CALL, INC.
(Exact name of registrant as specified in its charter)
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Commission File Number: 0-27739
Nevada, U.S.A. 77-0517966
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 King Street West, Suite 4900, Toronto,
Ontario, Canada M5H 4A2
(Address of principal executive offices)
(416) 777-6714
(Issuer's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
MENTOR ON CALL, INC.
c/o Corporate Legal Advisors, Ltd.
2320 Paseo Del Prado
Suite B205
Las Vegas, Nevada 89109
(702) -
(Address, including zip code, and telephone
number, including area code, of agent for service)
COPY TO:
Christopher H. Dieterich, Esq.
DIETERICH & ASSOCIATES
11300 W. Olympic Boulevard, Suite 800
Los Angeles, California 90064
(310) 312-6888
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration
Statement.
If any of the securities being registered on this form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box: |X|
If the registrant elects to deliver its latest annual report
to security holders, or a complete and legible facsimile thereof,
pursuant to Item 11(a)(1)of this form, check the following box.
|_|
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. |_|
If this form is filed to register additional securities for
an offering pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
effective registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box: |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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TITLE OF EACH AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SHARES REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION
TO BE REGISTERED PER SHARE FEE(1)
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Common Stock, Underlying
Investment Agreement......19,200,000 $0.17 3,264,000 862
Common Stock Underlying
Swartz Warrant(1)......... 800,000 $1.75 1,400,000 370
Total Registration
and Fee...........20,000,000 $4,664,000 1,232
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</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, such additional number of
shares of common stock subject to the Warrants and Options are also being
registered to cover any adjustment resulting from the operation of the
anti-dilution provisions relating to the Warrants. The indeterminate number
of additional shares shall be issuable pursuant to Rule 416 to prevent
dilution resulting from stock splits, stock dividends or similar
transactions.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Prospectus
UP TO 20,000,000 SHARES
[MENTOR ON CALL's Logo]
MENTOR ON CALL, INC.
Common Stock
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The selling shareholders listed below may use this
prospectus in connection with the following resales of our common
stock:
Swartz Private Equity, LLC may offer up to 20,000,000
shares that we may issue to it when we exercise our right to
"Put" shares to Swartz under our equity line agreement with
Swartz or upon the exercise of warrants.
The selling shareholders may sell the common stock at prices
and on terms determined by the market, in negotiated transactions
or through underwriters. Swartz is an "underwriter" within the
meaning of Section 2(11) the Securities Act in connection with
its sales of our common stock.
We will not receive any proceeds from the sale of shares by
the selling shareholders. However, we will receive proceeds from
the sale of shares to Swartz and upon the cash exercise of
warrants held by Swartz.
INVESTING IN THE SHARES INVOLVES A HIGH DEGREE OF RISK.
"RISK FACTORS" BEGIN ON PAGE _.
Our common stock is presently listed and traded on the
National Association of Securities Dealers' Over-The-Counter
Bulletin Board exchange under the symbol "MNOC." The last
reported sales price of our common stock on January 11, 2001 was
$0.20 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SUBJECT TO COMPLETION, DATED JANUARY 11, 2001
The date of this prospectus is __________, 2001
TABLE OF CONTENTS
Page
----
Prospectus Summary..............................................
Risk Factors....................................................
Special Note Regarding Forward-Looking Statements..............
Use of Proceeds................................................
Determination of Offering Price................................
Dilution.......................................................
The Investment Agreement.......................................
Selling Security Holders.......................................
Plan Of Distribution...........................................
Legal Proceedings..............................................
Directors, Executive Officers, Promoters and
Control Persons...
Security Ownership of Certain Beneficial Owners
and Management.
Description of Securities......................................
Interest of Named Experts and Counsel..........................
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...............................
Organization Within Last Five Years............................
Description of Business........................................
Management's Discussion and Analysis or Plan
of Operation.................................................
Description of Property........................................
Certain Relationships and Related Transactions.................
Market for Common Equity and Related Stockholder
Matters......................................................
Executive Compensation.........................................
Financial Statements...........................................
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..........................
Information Incorporated by Reference..........................
Where You Can Find More Information............................
Indemnification of Directors and Officers......................
Other Expenses of Issuance and Distribution....................
Recent Sales of Unregistered Securities........................
Exhibits.......................................................
Undertakings...................................................
Signatures.....................................................
You should only rely on the information contained in this
prospectus or any supplement. We have not authorized anyone to
provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely
on it. We are not making an offer of these securities in any
jurisdiction where the offer or sale is not permitted. You
should not assume that the information in this prospectus is
accurate as of any date other than the date on the front cover of
this prospectus or any supplement.
<PAGE> 1
PROSPECTUS SUMMARY
Description of Business.
Mentor On Call, Inc. will provide a proprietary, web
enabled, computer based managed E-learning system along with
streaming videos and other proprietary technologies to
educational institutions and corporations to enhance learning and
corporate training.
Mentor 7/24/365 call center technology will provide realtime
assistance and service to learners and educators.
Secondary operations will enhance the current "infomercial"
marketplace through the detailed, on demand, visual and audio
display and digital delivery of products currently marketed
through radio and television commercial spots.
Distribution of interactive video call center services and
distance learning will be facilitated by Mentor through broadband
connectivity devices aimed at providing residential and small
business users with high speed access.
Our executive offices are located at 40 King Street West,
Suite 4900, Toronto, Ontario, Canada M5H 4A2 and our telephone
number is (416) 777-6714.
Mentor On Call Products and Services.
The business of the management of education and training as
well as electronic information systems relies on computerized
delivery systems more than ever before and the nature of training
management and delivery systems has been rapidly changing.
From early text-only delivery to current combinations of
rich text, embedded objects, intelligent forms, file storage and
management, increasing demands are being made upon education and
training delivery systems. Businesses need a comprehensive
training delivery platform that includes the tools necessary to
create rich collaboration content and definitive curriculum
detail.
RECENT DEVELOPMENTS
THE SWARTZ TRANSACTION
On September 8, 2000, we entered into an investment
agreement with Swartz Private Equity, LLC (the "Investment
Agreement"). Under the Investment Agreement, also referred to as
an equity line, we have the option to sell, or "Put," up to $35
million of our common stock to Swartz, subject to a formula based
on stock price and trading volume, over a three year period
beginning on the effective date of the registration statement, of
which this prospectus is a part. In addition, we issued to
Swartz a warrant to purchase 800,000 shares of our common stock
at a price of $1.75 per share, subject to adjustment, and agreed
to provide additional warrants, on an ongoing basis, equal to 10%
of each Put amount at a price of 110% of the market price for the
applicable Put, subject to adjustment. We may also issue
additional warrants to Swartz under the terms of the Investment
Agreement. We describe this transaction in more detail under the
caption "The Investment Agreement."
THE OFFERING
By means of this prospectus, the selling shareholders are
offering for sale up to 20,000,000 shares of our common stock.
We are required under our contract with Swartz to register
20,000,000 shares plus an indeterminate number of shares above
20,000,000. We have elected to register 20,000,000 shares. The
selling shareholders may sell the common stock at prices and on
terms determined by the market, in negotiated transactions and
through underwriters.
RISK FACTORS
The securities offered for sale hereunder by the Company are
highly speculative in nature, involve a high degree of risk and
should be purchased only by persons who can afford to lose the
entire sum invested in the common shares. You should carefully
consider the following risk factors, as well as the other
information contained in this prospectus, before purchasing
shares of our common stock.
NO SIGNIFICANT OPERATING HISTORY
We do not have any significant operating history upon which
to evaluate our future performance. The Company commenced its
current operations on January 18, 2000, and its activities have
been primarily directed to research and development of its
technologies and administrative and marketing activities.
ABSENCE OF SIGNIFICANT REVENUES
The Company has had limited revenues and financial results
upon which prospective investors may base an assessment of its
potential. There is no assurance that the company will become
profitable. The Company has experienced in the past and may
experience in the future many of the problems, delays and
expenses encountered by any early stage business, some of which
are beyond the Company's control. These include, but are not
limited to substantial delays and expenses related to testing and
development of new ASP business model products, production and
marketing problems in connection with new products and
technologies, unexpectedly high manufacturing costs, competition
from larger and more established companies, lack of market
acceptance of such products and technologies and other unforeseen
difficulties.
ACCUMULATED DEFICIT; WORKING CAPITAL DEFICIT; HISTORY OF LOSSES;
UNCERTAIN PROFITABILITY
To date, we have incurred significant losses. As of the
nine months ended September 30, 2000, our net loss was
$4,489,496. Such losses have resulted primarily from significant
costs associated with the development and marketing of our
products. We expect to incur additional operating losses in the
future unless and until we are able to generate operating
revenues sufficient to support expenditures. There is no
assurance that sales of our products will ever generate
sufficient revenues to fund our continuing operations, the we
will generate positive cash flow from operations or that we will
attain and thereafter sustain profitability in any future period.
NEED FOR ADDITIONAL FINANCING; INSUFFICIENT FUNDS FOR THE NEXT
TWELVE MONTHS
Based on the potential rate of cash operating expenditures
and current plans, management anticipates that our cash
requirements for the next twelve months may be satisfied from the
proceeds of the Investment Agreement with Swartz, subject to
certain conditions, including but not limited to, the
effectiveness of this registrations statement covering the shares
of the common stock, the price of our common stock and volume
limitations related to our common stock. We also anticipate that
our future cash requirements may be satisfied by improved product
sales, the sale of additional Company equity securities, debt
financing and/or the sale or licensing of certain of our
technologies. However, we do not have any binding commitment
with regard to additional funds, and there can be no assurance
that any future funds required would be generated from operations
or from the aforementioned or other potential sources. The lack
of additional capital could force us to substantially curtail or
cease operations and would therefore have a material adverse
effect on our business. Further, there can be no assurance that
any such required funds, if available, will be available on
attractive terms or that they will not have a significantly
dilutive effect on our existing shareholders.
TECHNOLOGIES IN VARIOUS STAGES OF DEVELOPMENT; NO ASSURANCE OF
COMPLETION; MAY BE SUBJECT TO ADDITIONAL DELAYS
Our technologies and products are in various stages of
development. There can be no assurance that additional products
can be introduced or technologies completed to production or
marketability due to the inherent risks of new product and
technology development, limitations on financing, competition,
obsolescence, loss of key personnel and other factors. Although
certain technology of the Company may be licensable at the
current stage of development, there can be no assurance thereof.
The Company has generated limited revenues from its various
technologies to date and has no agreements or arrangements
providing any assurance of revenues in the future. The Company's
development projects are high risk in nature, where unanticipated
technical obstacles can arise at any time and result in lengthy
and costly delays or in a determination that further development
is not feasible.
FUTURE DEPENDANT ON MARKET ACCEPTANCE OF THE COMPANY'S
TECHNOLOGIES AND PRODUCTS
The future of the Company is dependent upon the success of
the current and future generations of one or more of the
Company's technologies and the success of its E-Learning software
platform. There can be no assurance the Company can introduce
any of its technologies or new products or that, if introduced,
they will achieve market acceptance such that in combination with
existing products they will sustain the Company or allow it to
achieve profitable operations.
INTERNET AND TELECOMMUNICATIONS INFRASTRUCTURE DISRUPTIONS COULD
ADVERSELY AFFECT OUR BUSINESS
Internet infrastructure failures or disruptions caused by
increased traffic on the Web, technical difficulties, vandalism
or acts of God, among other factors, may impede our ability to
transmit streaming video content to viewers. Repeated failures
or disruptions may result in viewer dissatisfaction with the
Internet as a viewing medium, which may lead to a diminution of
our viewer base and a resultant impairment of our ability to
generate advertising and e-commerce transaction revenues.
We will have to rely on local and long-distance
telecommunications companies to provide data communications
capacity. These providers may experience service disruptions or
have limited capacity, which could disrupt the provision of
streaming video content to viewers. We may not be able to
replace or supplement these services on a timely basis, if at
all. In addition, because we must rely on third-party
telecommunications services providers for connection to the
Internet, we may not be able to control decisions regarding the
availability of, or our access to, services at any given time.
WE RELY ON OUR MANAGEMENT TEAM AND EMPLOYEES
Our success will depend to a large degree upon the efforts
of our management, technical and marketing personnel. Our
success will also depend on our ability to attract and retain
additional qualified management, technical and marketing
personnel. Hiring employees with the combination of skills and
attributes required to carry out the strategy is extremely
competitive. We do not have "key person" life insurance policies
upon any of our of our officers or other personnel. The loss of
the services of key personnel together with an inability to
attract qualified replacements could adversely affect prospective
growth.
SIGNIFICANT COMPETITION AND POSSIBLE OBSOLESCENCE
Technological competition from other and longer established
companies is significant and is expected to increase. Most of
the companies with which the Company competes and expects to
compete have far greater capital resources and more significant
research and development staff. The Company's ability to compete
effectively may be adversely affected by the ability of these
competitors to devote greater resources to the sale and marketing
of their products than are available to the Company. In
addition, one or more of the Company's competitors may succeed or
may have already succeeded in developing technologies and
products that are more effective than any of those offered or
being developed by the Company, rendering the Company's
technology and products obsolete or noncompetitive.
UNCERTAINTIES REGARDING INTERNATIONAL EXPANSION MAY ADVERSELY
AFFECT OUR GROWTH
Our intended establishment of operations in foreign
countries will entail significant expenditures and some knowledge
of each country's national and local laws, including tax and
labor laws. Furthermore, there are certain risks inherent in
conducting business internationally, including regulatory
requirements, legal uncertainty regarding liability, difficulties
in staffing and managing foreign operations, longer payment
cycles, different accounting practices, currency exchange rate
fluctuations, tariffs and other trade barriers, political
instability and potentially adverse tax consequences, any of
which could adversely affect growth opportunities.
WE RELY ON COPYRIGHTS, TRADE SECRETS AND INTELLECTUAL PROPERTY
Copyrights, trade secrets and similar intellectual property
are significant to our growth and success. We rely upon a
combination of patents, trademarks, copyright and trade secret
laws, licensing arrangements, confidentiality and non-disclosure
agreements and contractual provisions with our employees and with
third parties to establish and protect our proprietary rights.
We currently have one patent pending with a priority date in 104
countries including the U.S.A. with a priority date of December
9, 1999. There can be no assurances that the patent pending held
by the Company will not be challenged and invalidated, that
patents will issue from any of our pending applications or that
any claims allowed from existing or pending patents will be
sufficient in scope or strength or be issued in all countries
where our products can be sold so as to provide meaningful
protection or any commercial advantage to the Company. Our
competitors may also be able to design around our patents.
NO DIVIDENDS WILL BE PAID IN FORESEEABLE FUTURE
The Company does not contemplate paying cash dividends in
the foreseeable future. Future dividends will depend on the
Company's earnings, if any, and its financial requirements.
WE ARE SUBJECT TO LAWS AND REGULATIONS REGARDING THE INTERNET
Although there are currently few laws and regulations
directly applicable to the Internet it is likely that new laws
and regulations will be adopted in the United States and
elsewhere covering issues such as music licensing, copyrights,
privacy, pricing, sales taxes and characteristics and quality of
Internet services. The adoption of restrictive laws and
regulations could slow Internet growth or its use as a commercial
or advertising medium.
TRADING RISK OF LOW-PRICED STOCKS
The Company's common shares are currently defined as "penny
stocks" under the Exchange Act and rules of the Securities and
Exchange Commission adopted thereunder. The Exchange Act and
such penny stock rules generally impose additional sales practice
and disclosure requirements upon broker-dealers who sell the
Company's securities to persons other than certain "accredited
investors" (generally institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000
or annual income exceeding $200,000 or $300,000 jointly with
spouse) or in transactions not recommended by the broker-dealer.
For transactions covered by the penny stock rules, the broker-
dealer must make a suitability determination for each purchaser
and receive the purchaser's written agreement prior to the sale.
In addition, the broker-dealer must make certain mandated
disclosures in penny stock transactions, including the actual
sale or purchase price and actual bid and offer quotations, and
the compensation to be received by the broker-dealer and certain
associated persons, and deliver certain disclosures required by
the Securities and Exchange Commission. Consequently, the penny
stock rules may affect the ability of broker-dealers to make a
market in or trade the Company's shares and thus may also affect
the ability of purchasers of shares to resell those shares in the
public markets.
WE MAY NOT BE ABLE TO DRAW FUNDS FROM THE EQUITY LINE
We cannot be assured that we will obtain sufficient funds
from the equity line agreement with Swartz to continue
operations. The future market price and volume of trading of our
common stock limits the rate at which we can obtain money under
the equity line agreement with Swartz. Further, we may be unable
to satisfy the conditions contained in the equity line agreement,
which would result in our inability to draw down money on a
timely basis, or at all. If the price of our common stock
declines, or trading volume in our common stock is low, we will
be unable to obtain sufficient funds to meet our liquidity needs.
EQUITY LINE DRAWS MAY RESULT IN SUBSTANTIAL DILUTION
We will issue shares to Swartz upon exercise of our Put
rights at a price equal to the lesser of:
the market price for each share of our common stock minus
$.15; or
91% of the market price for each share of our common
stock.
Accordingly, the exercise of our Put rights may result in
substantial dilution to the interests of the other holders of our
common stock. Depending on the price per share of our common
stock during the three-year period of the Investment Agreement,
we may need to register additional shares for resale or seek an
amendment to our articles of incorporation, to access the full
amount of financing available. Registering additional shares
could have a further dilutive effect on the value of our common
stock. If we are unable to register the additional shares of
common stock, we may experience delays in, or be unable to,
access some of the $35 million available under our Put rights.
OUR STOCK PRICE MAY DECREASE DUE TO ADDITIONAL SHARES IN THE
MARKET
If and when we exercise our Put rights and sell shares of
our common stock to Swartz, and if and to the extent that Swartz
sells the common stock, our common stock price may decrease due
to the additional shares in the market. If the price of our
common stock decreases, and if we decide to exercise our right
to Put additional shares to Swartz, we must issue more shares of
our common stock for any given dollar amount invested by Swartz,
subject to a designated minimum Put price that we specify. This
may encourage short sales, which could place further downward
pressure on the price of our common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Statements
of our intentions, beliefs, expectations or predictions for the
future, denoted by the words "believes," "expects," "may,"
"will," "should," "seeks," "pro forma," "anticipates," "intends"
and similar expressions are forward-looking statements that
reflect our current views about future events and are subject to
risks, uncertainties and assumptions.
We wish to caution readers that these forward-looking
statements are not guarantees of future performance and involve
risks and uncertainties. Actual events or results may differ
materially from those discussed in the forward-looking statements
as a result of various factors, including, without limitation,
the risk factors and other matters contained in this prospectus
generally. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the cautionary
statements included in this document. We undertake no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
USE OF PROCEEDS
We intend to use the proceeds from the sale of common stock
to Swartz and from the exercise of warrants for working capital,
strategic alliances (including potential joint ventures,
acquisitions and mergers) and general corporate purposes. We
will not receive any proceeds from the sale of the shares of
common stock by the selling shareholders; rather, the selling
shareholders will receive those proceeds directly. However, we
will receive cash infusions of capital if and when Swartz
purchases our common stock in accordance with the Investment
Agreement and upon the exercise of warrants held by Swartz, as
described below.
THE INVESTMENT AGREEMENT
OVERVIEW
On September 8, 2000, we entered into an investment
agreement with Swartz Private Equity, LLC. The Investment
Agreement entitles us to issue and sell up to $35 million of our
common stock to Swartz, subject to a formula based upon average
stock price and average trading volume, from time to time over a
three year period following the effective date of this
registration statement. We refer to each election by us to sell
stock to Swartz as a "Put."
In addition, on July 5, 2000, we issued to Swartz a warrant
to purchase 800,000 shares of our common stock, exercisable for a
period of five years from July 5, 2000, with an initial exercise
price equal to $1.75 which was the closing bid price for the day
before the execution of the agreement. We will adjust the
exercise price of these warrants semi-annually on January 5 and
July 5 to equal the lesser of:
the initial exercise price; or
100% of the lowest closing bid price of our common stock
for the five trading days ending on any six-month
anniversary date of the date of issuance.
We may issue additional warrants under the terms of the
Investment Agreement, as described below.
PUT RIGHTS
We may begin exercising Puts on the date of this prospectus
and continue for a three-year period. To exercise a Put, we must
have an effective registration statement on file with the
Securities and Exchange Commission covering the resale to the
public by Swartz of any shares that it acquires under the
Investment Agreement. Also, we must give Swartz at least 10, but
not more than 20, business days' advance notice of the date on
which we intend to exercise a particular Put right. The notice
must indicate the date we intend to exercise the Put and the
maximum number of shares of common stock we intend to sell to
Swartz. At our option, we may also specify a maximum dollar
amount (not to exceed $2 million) of common stock that we will
sell under the Put. We may also specify a minimum purchase price
per share at which we will sell shares to Swartz. The minimum
purchase price, if one is designated, cannot exceed the lesser of
(i) 80% of the closing bid price of our common stock on the
business day immediately preceding the date we give Swartz
advance notice of the Put, or (ii) the closing bid price of our
common stock on the business day immediately preceding the date
we give Swartz advance notice of the Put minus $.15.
The number of common shares we sell to Swartz may not exceed
15% of the aggregate daily reported trading volume of our common
shares during the 20 business days before or after the date we
exercise a Put. Further, we cannot issue additional shares to
Swartz that, when added to the shares Swartz previously acquired
under the Investment Agreement during the 31 days before the date
we exercise the Put, will result in Swartz holding over 9.99% of
our outstanding shares upon completion of the Put.
The number of shares of common stock that we may sell to
Swartz in a Put may not exceed the lesser of (i) 1,500,000
shares; (ii) 15% of the aggregate daily reported trading volume
of our common shares, excluding certain block trades of our
common stock, during the 20 business days after the date of our
Put notice, excluding any trading days in which the common stock
trades below a price based upon a minimum price, if any, that we
specify in our Put notice; (iii) 15% of the aggregate daily
reported trading volume of our common shares, excluding certain
block trades of our common stock, during the 20 business days
before the Put date, or (iv) a number of shares that, when added
to the number of shares acquired by Swartz under the Investment
Agreement during the 31 days preceding the Put date, would exceed
9.99% of our total number of shares of common stock outstanding
(as calculated under Section 13(d) of the Securities Exchange Act
of 1934).
Swartz will pay us a percentage of the market price for each
share of common stock under the Put. The market price of the
shares of common stock during the 20 business days immediately
following the date we exercise a Put is used to determine the
purchase price Swartz will pay and the number of shares we will
issue in return. This 20 day period is the pricing period. For
each share of common stock, Swartz will pay us the lesser of:
the market price for each share, minus $.15; or
91% of the market price for each share.
The Investment Agreement defines market price as the lowest
closing bid price for our common stock during the 20 business day
pricing period. However, Swartz must pay at least the designated
minimum per share price, if any, that we specify in our notice.
If the price of our common stock is below the greater of the
designated minimum per share price plus $.15 or the designated
minimum per share price divided by .91 during any of the 20 days
during the pricing period, that day is excluded from the 15%
volume limitation described above. Therefore, the amount of cash
that we can receive for that Put may be reduced if we elect to
designate a minimum per share price and our stock price declines.
We must wait a minimum of five business days after the end
of the 20 business day pricing period for a prior Put before
exercising a subsequent Put. We may, however, give advance
notice of our subsequent Put during the pricing period for the
prior Put. We can only exercise one Put during each pricing
period.
We cannot assure you what the actual price of the shares
will be at any time we exercise our right to a Put. As of
January 11, 2001, our stock price was $0.20. We are registering
20,000,000 shares of common stock for issuance to Swartz under
the Investment Agreement. We believe, based on the anticipated
market prices of our shares of common stock and volume in our
common stock, that 20,000,000 shares will be sufficient to
satisfy our obligations to issue stock and warrants to Swartz in
order to fully utilize the $35 million available under the
Investment Agreement. If 20,000,000 shares is not sufficient, we
will register additional shares for resale by Swartz.
WARRANTS
Within five business days after the end of each pricing
period, we are required to issue and deliver to Swartz a warrant
to purchase a number of shares of our common stock equal to 10%
of the common shares issued to Swartz in the applicable Put.
Each warrant will be exercisable at a price that will initially
equal 110% of the market price for the applicable Put. The
warrants will have semi-annual reset provisions similar to the
reset provisions for the warrants Swartz currently holds. Each
warrant will be immediately exercisable and have a term beginning
on the date of issuance and ending five years later.
LIMITATIONS AND CONDITIONS TO OUR PUT RIGHTS
Our ability to Put shares of our common stock, and Swartz's
obligation to purchase the shares, is subject to the satisfaction
of certain conditions. These conditions include:
we have satisfied all obligations under the agreements
entered into between us and Swartz in connection with the
Investment Agreement;
our common stock is listed and traded on Nasdaq, the
O.T.C. Bulletin Board, or an exchange;
our representations and warranties in the Investment
Agreement are accurate as of the date of each Put;
we have reserved for issuance a sufficient number of
shares of our common stock to satisfy our obligations to
issue shares under any Put and upon exercise of warrants;
the registration statement for the shares we will be
issuing to Swartz must remain effective as of the Put date
and no stop order with respect to the registration statement
is in effect;
other than continuing losses described in an attachment
to the Investment Agreement, at the time of a Put, there can
be no material adverse change in our business prospects or
financial condition.
Swartz is not required to acquire and pay for any additional
shares of our common stock once it has acquired $35 million worth
of common stock. Additionally, Swartz is not required to acquire
and pay for any shares of common stock with respect to any
particular Put for which, between the date we give advance notice
of an intended Put and the date the particular Put closes:
we announced or implemented a stock split or combination
of our common stock;
we paid a dividend on our common stock;
we made a distribution of all or any portion of our
assets or evidences of indebtedness to the holders of our
common stock; or
we consummated a major transaction, such as a sale of all
or substantially all of our assets or a merger or tender or
exchange offer that results in a change in control.
We may not require Swartz to purchase any subsequent Put
shares if:
we, or any of our directors or executive officers, have
engaged in a transaction or conduct related to us that
resulted in:
a Securities and Exchange Commission enforcement
action, administrative proceeding or civil lawsuit; or
a civil judgment or criminal conviction or for any
other offense that, if prosecuted criminally, would
constitute a felony under applicable law;
the aggregate number of days which this registration
statement is not effective or our common stock is not listed
and traded on Nasdaq, the O.T.C. Bulletin Board, or an
exchange exceeds 120 days;
we file for bankruptcy or any other proceeding for the
relief of debtors; or
we breach covenants contained in the Investment
Agreement.
COMMITMENT AND TERMINATION FEES
If we do not Put at least $1,000,000 worth of common stock
to Swartz during each six-month period following the effective
date of the Investment Agreement, we must pay Swartz a semi-
annual non-usage fee. This fee equals the difference between
$100,000 and 10% of the value of the shares of common stock
we Put to Swartz during the six-month period.
We may terminate our right to initiate further Puts or
terminate the Investment Agreement at any time by providing
Swartz with notice of our intention to terminate. However, any
termination will not affect any other rights or obligations we
have concerning the Investment Agreement or any related
agreement.
If the Investment Agreement is terminated, we must pay
Swartz the greater of (i) the non-usage fee described above, or
(ii) the difference between $200,000 and 10% of the value of the
shares of common stock Put to Swartz during all Puts to date.
SHORT SALES
The Investment Agreement prohibits Swartz and its affiliates
from engaging in short sales of our common stock unless Swartz
has received a Put notice and the amount of shares involved in
the short sale does not exceed the number of shares we specify in
the Put notice.
CANCELLATION OF PUTS
We must cancel a particular Put if:
we discover an undisclosed material fact that would
require the registration statement to be amended in order to
remain current and effective;
the registration statement registering resales of the
common shares becomes ineffective; or
our shares of common stock are delisted from Nasdaq, the
O.T.C. Bulletin Board, or an exchange.
If we cancel a Put, it will continue to be effective, but
the pricing period for the Put will terminate on the date we
notify Swartz that we are canceling the Put. Because the pricing
period will be shortened, the number of shares Swartz will be
required to purchase in the canceled Put may be smaller than it
would have been had we not cancelled the Put.
RESTRICTIVE COVENANTS
During the term of the Investment Agreement and for a period
of one year after termination of the Investment Agreement, we are
prohibited from engaging in certain transactions. These include
the issuance of any of our equity securities, or debt securities
convertible into equity securities, for cash in a private
transaction without obtaining the prior written approval of
Swartz. The Investment Agreement also prohibits us, during this
period, from entering into any private equity line agreements
similar to the Investment Agreement without obtaining Swartz's
prior written approval.
There are important exceptions to this limitation. We can
issue our shares without Swartz's prior approval in the following
transactions:
in connection with a merger, consolidation, acquisition
or sale of assets;
in connection with a strategic partnership or joint
venture, the primary purpose of which is not simply to raise
money;
in connection with our disposition or acquisition of a
business, product or license;
upon exercise of options by employees, consultants or
directors;
in an underwritten offering of our common stock;
upon conversion or exercise of currently outstanding
options, warrants or other convertible securities; or
under any option or restricted stock plan for the benefit
of employees, directors or consultants.
In addition, we may issue debt securities with no equity
feature for working capital purposes.
SWARTZ'S RIGHT OF INDEMNIFICATION
We have agreed to indemnify Swartz, including its
shareholders, officers, directors, employees, investors and
agents, from all liability and losses resulting from any
misrepresentations or breaches we make in connection with the
Investment Agreement, the registration rights agreement, other
related agreements, or the registration statement. We have also
agreed to indemnify these persons for any claims based on
violation of Section 5 of the Securities Act caused by the
integration of the private sale of our common stock to Swartz and
the public offering pursuant to the registration statement.
EFFECT ON OUTSTANDING COMMON STOCK
The issuance of common stock under the Investment Agreement
will not affect the rights or privileges of existing holders of
common stock except that the issuance of shares will dilute the
economic and voting interests of each shareholder. See "Risk
Factors."
As noted above, we cannot determine the exact number of
shares of our common stock issuable under the Investment
Agreement and the resulting dilution to our existing
shareholders, which will vary with the extent to which we utilize
the Investment Agreement, the market price of our common stock,
and exercise of the related warrants. The potential effects of
any dilution on our existing shareholders include the significant
dilution of the current shareholders' economic and voting
interests in us.
SELLING SECURITY HOLDERS
Common stock registered for resale under this prospectus
constitutes approximately 144.4% of our current issued and
outstanding common shares as of the date of this filing, assuming
that all securities registered under this prospectus are sold.
Assuming that we Put the entire 20,000,000 shares to Swartz
pursuant to the Investment Agreement, and assuming that Swartz
does not sell any of the shares, Swartz will then own
approximately 59.1% of our issued and outstanding common stock.
Notwithstanding the foregoing, we anticipate that Swartz will not
own more than 9.99% of our issued and outstanding common stock at
any one time.
SWARTZ
This prospectus covers 20,000,000 shares of common stock
issuable to Swartz under the Investment Agreement and shares
issuable upon exercise of the warrants we previously issued to
Swartz. Swartz is engaged in the business of investing in
publicly-traded equity securities for its own account.
Swartz does not beneficially own any of our common stock or
any other of our securities as of the date of this prospectus
other than 800,000 shares underlying the warrants we issued to
Swartz in connection with the negotiation and closing of the
Investment Agreement. Other than its obligations to purchase
common stock under the Investment Agreement and the warrant, it
has no other commitments or arrangements to purchase or sell any
of our securities.
The table below includes information regarding ownership of
our common stock by the selling shareholders on September 30,
2000 and the number of shares that they may sell under this
prospectus. The actual number of shares of our common stock
issuable upon exercise of warrants to Swartz and our Put rights
is subject to adjustment and could be materially less or more
than the amount contained in the table below, depending on
factors which we cannot predict at this time, including, among
other factors, the future price of our common stock.
Other than as described above, none of the selling
shareholders has had within the past three years any material
relationship with our company or any of our predecessors or
affiliates. None of the selling shareholders is or was
affiliated with registered broker-dealers. The selling
shareholders have advised us that they possess sole voting and
investment power with respect to the shares being offered.
<TABLE>
<S> <C> <C> <C> <C> <C>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Owned After Offering
----------------------- Shares ------------------------
Selling shareholders Number Percent Offered Number Percent
-------------------- ----------------------- ------- ------------------------
Swartz Private
Equity, LLC 800,000(1) 5.8% 19,200,000 20,000,000(2) 59.1%
----------
(1) This number includes 800,000 shares of common stock issuable upon the exercise of
outstanding warrants which are currently exercisable, which represent approximately 5.8%
of our issued and outstanding common stock as of September 30, 2000. Exercise of the
warrants is limited to the extent that such exercise would result in Swartz's beneficial
ownership of more than 4.99% of our issued and outstanding common stock at any time. This
number does not include (solely for purposes of this prospectus) up to an aggregate of
19,200,000 shares of our common stock that we may Put to Swartz under the Investment
Agreement and warrants issuable in connection with the Investment Agreement. These shares
would not be deemed beneficially owned within the meaning of Sections 13(d) and 13(g) of
the Exchange Act before their acquisition by Swartz. We anticipate that Swartz will not
beneficially own more than 9.99% of our outstanding common stock at any time. Eric S.
Swartz holds investment and voting control of the shares held by Swartz.
(2) Assumes that we will Put the entire 19,200,000 shares to Swartz pursuant to the
Investment Agreement, and that the selling shareholders will not sell any of the shares of
common stock offered by this prospectus. We cannot assure you that the selling
shareholders will not sell all or any of these shares.
</TABLE>
PLAN OF DISTRIBUTION
The selling shareholders and their successors, which
includes their transferees, pledgees or donees or their
successors may sell the common stock directly to one or more
purchasers. They may also sell through brokers, dealers or
underwriters who may act solely as agents or may acquire common
stock as principals, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, at
negotiated prices or at fixed prices, which may be changed. The
selling shareholders may effect the distribution of the common
stock by one or more of the following methods:
ordinary broker's transactions, which may include long or
short sales;
transactions involving cross or block trades or otherwise
on the Nasdaq National Market;
purchases by brokers, dealers or underwriters as
principals and resale by these purchasers for their own
accounts under this prospectus;
"at the market" to or through market makers or into an
existing market for the common stock;
in other ways not involving market makers or established
trading markets, including direct sales to purchasers or
sales effected through agents;
through transactions in options, swaps or other
derivatives (whether exchange listed or otherwise); or
any combination of the above, or by any other legally
available means.
In addition, the selling shareholders or successors in
interest may enter into hedging transactions with broker-dealers
who may engage in short sales of common stock in the course of
hedging the positions they assume with the selling shareholders.
The selling shareholders or successors in interest may also enter
into option or other transactions with broker-dealers that
require delivery by these broker-dealers of the common stock,
which may be subsequently resold under this prospectus.
Brokers, dealers, underwriters or agents participating in
the distribution of the common stock may receive compensation in
the form of discounts, concessions or commissions from the
selling shareholders and/or the purchasers of common stock for
whom such broker-dealers may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular
broker-dealer may be in excess of customary commissions).
Swartz is, and each remaining selling shareholder and any
broker-dealers acting in connection with the sale of the common
stock by this prospectus may be deemed to be, an underwriter
within the meaning of Section 2(11) of the Securities Act. Any
commissions received by them and any profit realized by them on
the resale of common stock as principals may be underwriting
compensation under the Securities Act. Neither we nor the
selling shareholders can presently estimate the amount of such
compensation. We do not know of any existing arrangements
between the selling shareholders and any other shareholder,
broker, dealer, underwriter or agent relating to the sale or
distribution of the common stock.
The selling shareholders and any other persons participating
in a distribution of securities will be subject to applicable
provisions of the Securities Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation
M, which may restrict certain activities of, and limit the timing
of purchases and sales of securities by, the selling shareholders
and other persons participating in a distribution of securities.
Furthermore, under Regulation M, persons engaged in a
distribution of securities are prohibited from simultaneously
engaging in market making and certain other activities with
respect to such securities for a specified period of time prior
to the commencement of such distributions subject to specified
exceptions or exemptions. Swartz has, before any sales, agreed
not to effect any offers or sales of the common stock in any
manner other than as specified in this prospectus and not to
purchase or induce others to purchase common stock in violation
of Regulation M under the Exchange Act. All of the foregoing may
affect the marketability of the securities offered by this
prospectus.
Any securities covered by this prospectus that qualify for
sale under Rule 144 under the Securities Act may be sold under
that Rule rather than under this prospectus.
We cannot assure you that the selling shareholders will sell
any or all of the shares of common stock offered by the selling
shareholders.
In order to comply with the securities laws of certain
states, if applicable, the selling shareholders will sell the
common stock in jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states, the selling
shareholders may not sell the common stock unless the shares
of common stock have been registered or qualified for sale in the
applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
LEGAL PROCEEDINGS
We are subject to claims and suits arising in the ordinary
course of business, and as such, it is not possible to estimate
the final outcome of these legal matters or the ultimate loss or
gain, except as otherwise stated. At the time of this filing,
there are no legal proceedings threatened or pending, except such
ordinary routine matters which may be incidental to the business
currently being conducted by the Company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
(a) Directors and Executive Officers:
All directors are elected annually by the shareholders and
hold office until the next annual general meeting of shareholders
or until their successors are duly elected and qualified, unless
they sooner resign or cease to be directors in accordance with
the Articles of Incorporation of the Registrant. Executive
officers are appointed and serve at the pleasure of the Board of
Directors.
The following persons are the current directors and
executive officers of the Company:
JAMES N. RODGERS - Chairman, President and C.E.O
Date Position Commenced: January 18, 2000
Term of Office: Expires January 18, 2005
Address: 40 King St. West, Suite 4900, Toronto, Ontario, Canada
Age: 48
A lawyer by profession, Jim Rodgers has an extensive senior
management background and has undertaken a plethora of
entrepreneurial initiatives during his more than 23-year career.
He has been responsible for publicly listing and financing over
200 companies in Canada, the U.S. and England and has held
management positions ranging from President to CEO of national
and international organizations. More recently he took a smart
card company called Net1 UEPS public and negotiated technology
agreements between the company and Visa wherein Visa acquired
certain rights to Net1's patented technology. Prior to joining
Mentor On Call, Inc. as C.E.O. in January of this year, Mr.
Rodgers took Crystel Telecommunications.com, an Internet
telephone company, public and served as C.E.O. until spring of
1999.
EDWIN W. AUSTIN - Chief Operating Officer, Chief Financial
Officer and Director
Date Position Commenced: January 18, 2000
Term of Office: Expires January 18, 2005
Address: 40 King St. West, Suite 4900, Toronto, Ontario, Canada
Age: 62
A Chartered Accountant by profession and an international
business executive by vocation, Edwin Austin has a 30 year
management career that spans the oil, financial services, steel
and technology industries. He has held management positions
ranging from Chief Financial Officer to President to Chairman of
a variety of companies, both national and international, and has
extensive directorship experience. More recently he served as
Chief Financial Officer for Net1 UEPS Technologies and Crystel
Telecommunications.com, both of which are Nasdaq-listed public
companies.
(b) There are no significant employees who are not described as
executives above, and there are no family relationships among
directors, executive officers or any nominees to these positions.
During the past five years, no present or former director,
executive officer or person nominated to become a director or an
executive officer of the Company:
(1) was a general partner or executive officer of any
business against which any bankruptcy petition was filed, either
at the time of the bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject
to a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) was subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any
type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not
been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) Security ownership of certain beneficial owners. The table
below identifies any individual (including any "group") who is
known to the Company, as of the date of this filing, to be the
beneficial owner of more than five percent of any class of our
voting securities:
<TABLE>
<S> <C> <C> <C>
Title of Name and address Amount and nature Percentage
class of beneficial of beneficial of class
Owner ownership (1)
Common Swartz Private 800,000 (2) 5.6%
Equity, LLC (affiliate)
1080 Holcomb Bridge Road
200 Roswell Summit, Suite 285
Roswell, Georgia 30076
(1) Unless otherwise indicated, the Company believes that
all persons named in the above table have sole voting
and investment power with respect to all shares of
common stock beneficially owned by them.
(2) This number includes 800,000 shares of common stock
issuable upon exercise of outstanding warrants which
are currently exercisable, which represents
approximately 5.8% of our issued and outstanding common
stock as of September 30, 2000. Exercise of these
warrants is limited to the extent that Swartz may not
exercise the warrants if such exercise would result in
Swartz's beneficial ownership of more than 4.99% of our
issued and outstanding common stock at any time.
</TABLE>
(b) Security ownership of management. The table below sets for
the ownership, as of the date of this filing, by all directors
and nominees, and each of the named executive officers of the
Company, and directors and executive officers of the registrant
as a group.
<TABLE>
<S> <C> <C> <C>
Title of Name and address Amount and nature Percentage
class of beneficial of beneficial of class
owner ownership (1)
Common James N. Rodgers (2) 4,675,000 (3) 33.75%
40 King St. West (affiliate)
Suite 4900
Toronto, Ontario
Canada
Common Edwin W. Austin (2) 4,675,000 (3) 33.75%
40 King St. West (affiliate)
Suite 4900
Toronto, Ontario
Canada
Common All Officers and 9,350,000 67.5%
Directors as a
Group
(1) Unless otherwise indicated, the Company believes that
all persons named in the above table have sole voting
and investment power with respect to all shares of
common stock beneficially owned by them.
(2) Rodgers and Austin beneficially own their shares in
Mentor On Call, Inc. through their equity ownership in
Mentor On Call Holdings, Inc., an International
Business Corporation organized pursuant to the laws of
the Country of Barbados, West Indies (hereinafter
referred to as "Holdings"). Holdings owns 9,350,000
shares of Mentor On Call, Inc. which it acquired as
part of the Asset Acquisition Agreement entered into
with the Company in January, 2000.
(3) Pursuant to the terms of the Unanimous Shareholders
Agreement of Mentor On Call Holdings, Inc., John
Pritchard and Jason Figueroa have contingent equity
interests of 2,337,500 shares each in Mentor On Call
Holdings, Inc. Section 2.7 of the Unanimous
Shareholders Agreement states, in pertinent part, that
"the interest of Pritchard and Figueroa in Holdings
shall not vest until all deliverables are presented and
accepted after successful third party adjudication as
follows: Functional Specifications, Functional
Prototype, Proof of Concept, Detailed Design,
Development, User Acceptance, Testing, Implementation
plus full User and Technical Documentation and Source
Code." As of the date of this filing, the interests of
Pritchard and Figueroa have not vested. The Unanimous
Shareholders Agreement is incorporated herein by
reference herein as Exhibit 10.2.
</TABLE>
Except as otherwise set forth herein, there are no
agreements between or among any of the shareholders which would
restrict the issuance of shares in a manner that would cause any
change of control of the registrant. There are no voting trusts,
pooling arrangements or similar agreements in place between or
among any of the shareholders, nor do the shareholders anticipate
the implementation of such an agreement in the near term.
DESCRIPTION OF SECURITIES
Our Articles of Incorporation authorize capital stock
consisting of one class of stock, Common Stock. Each share has
equal and identical rights to every other share for purposes of
dividends, liquidation preferences, voting rights and any other
attributes of a company's common stock. No voting trusts or any
other arrangement for preferential voting exist among any of the
shareholders, and there are no restrictions in the bylaws or
articles of incorporation precluding issuance of further common
stock or requiring any liquidation preferences, voting rights or
dividend priorities with respect to this class of stock. As of
September 30, 2000, there were approximately 13,850,000 shares of
the Company's Common Stock issued and outstanding. Each share of
Common Stock entitles the holder thereof to one vote, either in
person or by proxy, at a meeting of shareholders. The holders
are not entitled to vote their shares cumulatively. Accordingly,
the holders of more than 50% of the issued and outstanding shares
of Common Stock can elect all of the directors of the Company.
All shares of Common Stock are entitled to participate
ratably in dividends when and as declared by our Board of
Directors out of the funds legally available therefor. Any such
dividends may be paid in cash, property or additional shares of
Common Stock.
Holders of Common Stock have no preemptive rights or other
subscription rights, conversion rights, redemption or sinking
fund provisions. If there is a dissolution, whether voluntary or
involuntary, of the Company, each share of Common Stock is
entitled to share ratably in any assets available for
distribution to holders of the equity securities of the Company
after satisfaction of all liabilities.
Dividend Policy
To the best of our knowledge, we have not declared or paid
any dividends on the Company's outstanding Shares since its
inception and do not anticipate that we will do so in the
foreseeable future. The declaration of dividends on the Shares
is within the discretion of our Board of Directors and will
depend upon the assessment of, among other factors, our earnings,
capital requirements and operating and financial condition. At
the present time our anticipated capital requirements are such
that we intend to follow a policy of retaining earnings in order
to finance the further development of our business.
We are further limited in our ability to pay dividends on
the Company's Shares by regulation under Nevada law relating to
the sufficiency of profits from which dividends may be paid.
LEGAL MATTERS
Dieterich & Associates, in Los Angeles, California, will
pass upon the validity of the shares of Common Stock offered by
this prospectus for us.
EXPERTS
Robison, Hill & Co., independent certified public
accountants, have audited our consolidated financial statements
for the year ended December 31, 1999, included in our Annual
Report on Form 10-K for the year ended December 31, 1999, filed
on April 12, 2000, as set forth in their report. Our financial
statements and schedules are included in reliance on Robison,
Hill & Co.'s report, based on their authority as experts in
accounting and auditing.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named in this prospectus owns any of our
securities, nor were they hired on a contingent basis. These
experts will not receive any direct or indirect interest in our
Company and none were promoters, underwriters, voting trustees,
directors, officers, or employees.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Mentor On Call, Inc. has no insurance or other instrument of
indemnity against liability under the Securities Act of 1933. We
have taken the general position that the United States Securities
and Exchange Commission considers such indemnification not to be
in the public interest.
ORGANIZATION WITHIN LAST FIVE YEARS
Mentor On Call, Inc., a Nevada corporation was incorporated
on October 22, 1996 under the name PSM Corp. and was formed
specifically to be a "clean public shell" and for the purpose of
either merging with or acquiring an operating company with
operating history and assets. We had no operations at that time
and as such were considered a development stage company.
The Board of Directors authorized the Asset Acquisition
Agreement with Mentor On Call, Inc., a Barbadian International
Business Corporation, on January 7, 2000. The name of the
Company was changed to Mentor On Call, Inc. to reflect the
Company's new direction, and, effective January 15, 2000, the
Company declared a nine-for-one forward stock split of its common
stock.
DESCRIPTION OF BUSINESS
Mentor On Call, Inc. will provide a proprietary, web
enabled, computer based managed E-learning system along with
streaming videos and other proprietary technologies to
educational institutions and corporations to enhance learning and
corporate training.
Mentor 7/24/365 call center technology will provide realtime
assistance and service to learners and educators.
Secondary operations will enhance the current "infomercial"
marketplace through the detailed, on demand, visual and audio
display and digital delivery of products currently marketed
through radio and television commercial spots.
Distribution of interactive video call center services and
distance learning will be facilitated by Mentor through broadband
connectivity devices aimed at providing residential and small
business users with high speed access.
Our executive offices are located at 40 King Street West,
Suite 4900, Toronto, Ontario, Canada M5H 4A2 and our telephone
number is (416) 777-6714.
Mentor On Call Website.
Our Internet website is located at www.mentoroncall.com.
Bandwidth Growth.
In order to view good quality film and video files over the
Internet, subscribers will require a cable modem, DSL or
comparable high-bandwidth connection. Research indicates that
cable companies will be the leading provider of residential
broadband service. By 2004, the industry expects a total of 31.8
million North American subscribers with high-bandwidth access.
The following table identifies current and expected trends
in the adoption of high bandwidth Internet access. These high-
end bandwidth users represent computer users with the capacity to
use services provided by us (Source: Paul Kagen and Associates)
Year Cable Modem DSL Subscriber Total High
Users Users Bandwidth Users
1999 1,460,000 420,000 1.880,000
2000 3,600,000 2,400,000 6,000,000
2001 7,590,000 4,170,000 11,760,000
2002 12,950,000 7,090,000 20,040,000
2003 15,840,000 10,590,000 26,430,000
2004 18,980,000 12,910,000 31,890,000
A quickening pace of development in both technology and
content available to users of the World Wide Web parallels this
increase in Internet access speed. New technologies such as
video and audio streaming enable the creation of new forms of
content, combining aspects of traditional, narrowband web design
(including text, graphics, and hyper-links) with the video-based
production concepts of television. While this market is growing
rapidly, it presently accounts for a small percentage of the
Internet users online today. Accordingly, most companies
involved in the development of technology and content for the Web
are focusing on solutions that are intended to provide an
acceptable experience for the predominant narrowband customer,
while offering an improved version of the same experience to
broadband users.
Growth of Online Commerce.
The Internet is dramatically affecting the methods by which
consumers and businesses are buying and selling goods and
services. The Web provides the ability to reach a global
audience and to operate with minimal infrastructure, reduced
overhead and greater economies of scale, while providing
consumers with a broad selection, increased pricing power and
unparalleled convenience. As a result, a growing number of
consumers are transacting business on the Web, including buying
consumer goods, trading securities, paying bills and purchasing
airline tickets. International Data Corporation estimates that
approximately 28% of Web users purchased goods or services over
the Web in 1998 and that approximately 40% of Web users will make
online purchases in 2002. Jupiter Communications estimates that
retail consumer purchases of goods and services over the Internet
will increase from $5.0 billion in 1998 to $29.4 billion in 2002.
We believe that as electronic commerce expands, advertisers and
direct marketers will increasingly use the Web to advertise
products, drive traffic to their websites, attract customers and
facilitate transactions.
Growth of Internet Advertising.
The Web is evolving into an important medium for advertisers
due to its interactive nature, global reach, rapidly growing
audience and the expected increase in online commerce. Unlike
more traditional advertising methods, the Web gives advertisers
the potential to target advertisements to broad audiences or to
selected groups of users with specific interests and
characteristics. The Web also allows advertisers and direct
marketers to measure the effectiveness and response rates of
advertisements and to track the demographic characteristics of
Web users. The interactive nature of Web advertising enables
advertisers to better understand potential customers, and to
change messages rapidly and cost effectively in response to
customer behavior and product availability.
We anticipate an increase in online advertising. Forrester
Research estimates that the dollar value of Internet advertising
in the U.S. will increase from $1.3 billion in 1998 to $10.4
billion in 2003, representing a 52% compounded annual growth
rate. International online ad spending is expected to grow from
$0.2 billion in 1998 to $4.7 billion in 2003, representing an 87%
compounded growth rate. By comparison, Broadcasting & Cable
estimates that $130 billion was spent in 1998 on traditional
media advertising in the U.S., including television, radio,
outdoor and print. Until recently, the leading Internet
advertisers have been technology companies, search engines and
Web publishers. However, many of the largest advertisers
utilizing traditional media, including consumer products
companies and automobile manufacturers, are expanding their use
of online advertising. We believe that online advertising will
continue to capture an increasing share of available advertising
dollars and that this trend will drive demand for online ad
inventory and for sophisticated Internet advertising solutions.
Driven by the growing online population, the rise in time
spent online and increasing digital commerce adoption, online
advertising revenues have surpassed outdoor advertising and will
exceed spending for cable advertising. By 2003, roughly three-
quarters of today's radio spending will be converted to Internet
advertising.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
General
We are in the business to provide quality managed distance
learning systems, and we intend to grow and achieve an
above-average financial return by maintaining a significant share
of the international public school distance and e-learning
market, as well as the corporate training, professional
continuing education and infomercial marketplaces.
On January 15, 2000, the Company acquired the Mentor On Call
Managed E-Learning System which is a proprietary and web-enabled
managed distance and e-learning system with patents pending and
priority dates set in 105 countries. The assets also include the
"Mentor On Call" Trademark and Internet domain name
www.MentorOnCall.com. The Mentor On Call system operates on
Windows 95, 98 and NT platforms, on Novell and Intranet and will
support industry standard web servers and browsers. The system
is SQL compliant.
Under the terms of the asset acquisition agreement, we issued
9,350,000 restricted shares as consideration for the acquired
assets. We may also incur significant post-acquisition
registration costs in the event management wishes to register a
portion of these shares for subsequent sale.
We presently do not have sufficient funds (unless we are able to
raise funds in a private placement) to undertake any significant
development, marketing and manufacturing of the products
acquired. Accordingly, we will, in all likelihood, be required
to either seek debt or equity financing or obtain funding from
third parties, in exchange for which we may be required to give
up a substantial portion of our interest in the acquired product.
There is no assurance that we will be able either to obtain
additional financing or interest third parties in providing
funding for the further development, marketing and manufacturing
of any products acquired.
Plan of Operation
We have executed an Investment Agreement for a Private Equity
Line of Common Stock pursuant to Regulation D and in the amount
of $35 million. The Investment Agreement and related documents
were executed on September 8, 2000, and will remain in place for
a period of 36 months.
Our Plan of Operation calls for us to follow up on Drake
International testing of the Mentor On Call proprietary
E-Learning System.
We shall allocate $300,000 to perfection of patent pending
numbers in 105 countries pursuant to the Paris Convention, from
proceeds of Private Placement.
We are continuing the customization of our E-Learning System to
meet the specific needs of subscribers with prime emphasis
targeted to the requirements of Application System Service
Providers. We have allocated $1,300,000 towards this goal
pursuant to our business plan.
In conjunction with the system refinements, we shall migrate the
Mentor On Call E-learning System to industry standard building
tools, a project to which we have allocated $100,000.
We shall allocate the balance of the Private Placement funds, as
they become available, to complete business contemplated
pursuant to executed Letters of Intent and to market the product
worldwide and for general working capital purposes.
Competition
Mentor On Call is an insignificant participant among firms which
engage in managed distance learning systems, corporate training,
professional continuing education and infomercial marketplaces.
There are other established companies in these industries which
have significantly greater financial and personnel resources,
technical expertise and experience than the Company. In view of
the Company's limited financial resources and management
availability, we will continue to be at a significant competitive
disadvantage vis-a-vis our competitors.
Employees
At September 30, 2000, we had 13 full-time employees and
independent contractors.
DESCRIPTION OF PROPERTY
The Company's executive offices are located at 40 King
Street West, Suite 4900, Toronto, Ontario, Canada M5H 4A2, under
a month-to-month lease. The current lease requires rental
payments of approximately $900 ($1,350 Canadian Dollars) per
month.
On April 1, 2000, the Company signed a one year
noncancellable lease on development center offices in Toronto,
Ontario, Canada. This lease expires March 2001. The current
lease requires rental payments of approximately $1,076 ($1,560
Canadian Dollars) per month.
On July 10, 2000, the Company signed a lease on additional
development office space in Toronto, Ontario, Canada. This lease
expires March 31, 2001. The lease requires rental payments of
approximately $914 ($1,325 Canadian Dollars) per month.
It is expected that in the normal course of business,
leases that expire will be renewed or replaced by leases on other
properties.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2000, and as of September 30, 2000, shareholders of
the Company have loaned us $736,505. The loans are payable on
demand and accrue interest at 10% from April 1, 2000.
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
A. Market Information
Our common stock is presently listed and traded on the
NASD's Over-The-Counter Bulletin Board exchange under the symbol
"MNOC." However, there is currently no "established trading
market" for the Company's common stock, and no assurance can be
given that any current market for the Company's common stock will
continue to develop or be maintained. For any market that
develops for the Company's common stock, the sale of "restricted
securities" (common stock) pursuant to Rule 144 of the Securities
and Exchange Commission by members of management, or any other
person to whom any such securities may be issued in the future
may have a substantial adverse impact on any such public market.
A minimum holding period of one year is required for resales
under Rule 144, along with other pertinent provisions, including
publicly available information concerning the Company (this
requirement will be satisfied by the filing and effectiveness of
this Registration Statement, the passage of 90 days and the
continued timely filing by the Company of all reports required to
be filed by it with the Securities and Exchange Commission);
limitations on the volume of "restricted securities" which can be
sold in any 90 day period; the requirement of unsolicited
broker's transactions; and the filing of a Notice of Sale of Form
144. There are approximately 9,350,000 restricted shares of the
Company eligible for trading as of the date of this filing.
The following quotations were provided by Standard and
Poor's ComStock and do not represent actual transactions; these
quotations do not reflect dealer markups, markdowns or
commissions.
STOCK QUOTATIONS*
<TABLE>
<S> <C> <C>
CLOSING BID
-----------------------
Quarter ended: High Low
-------------- ---- ---
December 31, 2000 0.80 0.19
September 30, 2000 2.812 0.55
June 30, 2000 5.312 1.77
March 31, 2000 (1) 7.75 3.062
(1) Effective January 15, 2000, the Company declared a 9-
for-1 forward stock split of its Common Stock.
</TABLE>
(i) With the exception of the 800,000 warrants held by
Swartz Private Equity, the Option rights set forth in the
Company's Employee Option Plan and 50,000 options held by David
Smith, a Director, there is currently no Common Stock of the
Company which is subject to outstanding options or warrants to
purchase.
(ii) There are currently approximately 9,350,000 shares of
the Company's Common Stock which are eligible to be sold under
Rule 144 of the Securities Act of 1933 as amended.
(iii) There is currently no common equity that is being or
is proposed to be publicly offered by the Company, the offering
of which could have a material effect on the market price of the
issuer's common equity.
B. Holders
As of September 30, 2000, the Company had approximately 300
shareholders of record.
Applicability of Low-Priced Stock Risk Disclosure
Requirements.
Our securities will be considered low-priced or "designated"
securities under rules promulgated under the Exchange Act. Penny
Stock Regulation Broker-dealer practices in connection with
transactions in "Penny Stocks" are regulated by certain rules
adopted by the Securities and Exchange Commission. Penny stocks
generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system). The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny
stocks and the risk associated with the penny stock market. The
broker-dealer must also provide the customer with current bid and
offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock
held in the customer's account. In addition, the penny stock
rules generally require that prior to a transaction in a penny
stock, the broker-dealer must make a written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. When the
Registration Statement becomes effective and the Company's
securities become registered, the stock will likely have a
trading price of less than $5.00 per share and will not be traded
on any national exchanges. Therefore, the Company's stock will
become subject to the penny stock rules and investors may find it
more difficult to sell their securities, should they desire to do
so.
C. Dividend Policy
We have not paid any dividends to date. In addition, we do
not anticipate paying dividends in the immediately foreseeable
future. The Board of Directors of the Company will review this
dividend policy from time to time to determine the desirability
and feasibility of paying dividends after giving consideration to
the our earnings, financial condition, capital requirements and
such other factors as the board may deem relevant.
D. Reports to Shareholders
The Company intends to furnish its shareholders with annual
reports containing audited financial statements and such other
periodic reports as the Company may determine to be appropriate
or as may be required by law. We are required to comply with
periodic reporting, proxy solicitation and certain other
requirements by the Securities Exchange Act of 1934.
E. Transfer Agent and Registrar
The Transfer Agent and Registrar for our Common Stock is
Alexis Stock Transfer at 42450 Bob Hope Drive, Suite 225, Rancho
Mirage, California 92270.
<PAGE>
EXECUTIVE COMPENSATION
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Name and Year Salary($) Bonus($) Other Restricted Securities All other
Principal annual stock awards underlying compensation
position compensation options/SARs ($)
(#)
----------------------------------------------------------------------------------------------
James N. 2001 250,000(1) 125,000(5) 5,400(6) 0 250,000(7) 0
Rodgers 2000 250,000(1) 0 0 0 0 0
(President,
CEO & Chairman)
Edwin W. 2001 180,000(2) 125,000(5) 4,500(6) 0 250,000(7) 0
Austin 2000 180,000(2) 0 0 0 0 0
(COO & CFO)
John J. 2000 120,000(3) 0 0 0 0 0
Pritchard
(former Senior
Vice President)
Jason 2000 100,000(4) 0 0 0 0 0
Figueroa
(former Vice
President)
(1) $75,000 of Mr. Rodgers' salary is deferred and shall vest
at such time as the Company retains earnings of $750,000
in one quarter, at which point the deferred portion shall
be payable in equal monthly amounts over the ensuing six-
month period.
(2) $60,000 of Mr. Austin's salary is deferred and shall vest
at such time as the Company retains earnings of $750,000
in one quarter, at which point the deferred portion shall
be payable in equal monthly amounts over the ensuing six-
month period.
(3) $25,000 of Mr. Pritchard's salary was deferred and shall
vest at such time as the Company retains earnings of
$750,000 in one quarter, at which point the deferred
portion shall be payable in equal monthly amounts over
the ensuing six-month period.
(4) $15,000 of Mr. Figueroa's salary was deferred and shall
vest at such time as the Company retains earnings of
$750,000 in one quarter, at which point the deferred
portion shall be payable in equal monthly amounts over
the ensuing six-month period.
(5) A Project Completion Bonus of $125,000 for each of
Rodgers and Austin shall be payable upon the completion
and acceptance of the Learning Management System by
outside clients and is conditional upon the receipt of a
minimum of $1,500,000 from licensees.
(6) Automobile allowances shall be payable only when the
Company is earning a minimum profit of $750,000 in any
one quarter.
(7) Rodgers and Austin will each be granted 250,000 stock
options upon payment of the Project Completion Bonus.
The options will be exercisable for a period of five
years at an exercise price of $2.00 per share.
</TABLE>
No cash compensation, deferred compensation or long-term
incentive plan awards were issued or granted to the Company's
management during the period ended December 31, 2000, except as
set forth in the Summary Compensation Table.
Long-Term Compensation
As of December 31, 2000, being a date within 135 days of
this Registration Statement, we have not implemented an Employee
Option Plan for our officers, directors and certain key
consultants.
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from the Company,
with respect to any director or executive officer of the Company
which would in any way result in payments to any such person
because of his or her resignation, retirement or other
termination of employment with the Company or its subsidiaries,
any change in control of the Company, or a change in the person's
responsibilities following a change in control of the Company.
Employment Contracts
We have entered into employment agreements with two of our
key management employees: James Rodgers, Chief Executive Officer
and President and Edwin Austin, Chief Operating Officer and Chief
Financial Officer. The terms of each contract are as follows:
James Rodgers - Term of contract five years. Annual salary
$250,000. Monthly Vehicle allowance of $450. Bonus of $125,000
upon completion and acceptance of the Learning Management System.
Stock options of 250,000 with a strike price of $2.00 per share
exercisable for a period of five years upon payment of the
project completion bonus.
Edwin Austin - Term of contract five years. Annual salary
$180,000. Monthly Vehicle allowance of $375. Bonus of $125,000
upon completion and acceptance of the Learning Management System.
Stock options of 250,000 with a strike price of $2.00 per share
exercisable for a period of five years upon payment of the
project completion bonus.
<PAGE>
FINANCIAL STATEMENTS
C O N T E N T S
INTERIM FINANCIAL STATEMENTS
September 30, 2000
Page
----
Balance Sheets F-2
Statements of Operations F-3
Statements of Cash Flows F-4 - F-5
Notes to Financial Statements F-6 - F-12
ANNUAL FINANCIAL STATEMENTS
December 31, 2000
Page
-----
Independent Auditor's Report F-1
Balance Sheets,
December 31, 1999 and 1998 F-2
Statements of Income,
For the Years Ended December 31, 1999 and 1998 F-3
Statements of Changes in Stockholders' Equity,
For the Years Ended December 31, 1999 and 1998 F-4
Statements of Cash Flows,
For the Years Ended December 31, 1999 and 1998 F-5
Notes to Financial Statements F-6
<PAGE> F-1
INDEPENDENT ACCOUNTANT'S REPORT
Mentor On Call, Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheets of Mentor
On Call, Inc. (a development stage company) as of September 30,
2000 and December 31, 1999, and the related statements of
operations for the three and nine months, and cash flows for the
nine month periods ended September 30, 2000 and 1999. These
financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statement taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements for them to be in conformity with generally accepted
accounting principles.
Respectfully submitted
/s/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
November 8, 2000
<PAGE>
<TABLE>
MENTOR ON CALL, INC.
(A Development Stage Company)
BALANCE SHEETS
<S> <C> <C>
September 30, December 31,
ASSETS ............................... 2000 1999
---------- ----------
Current Assets:
Cash & Cash Equivalents .............. $ -- $ --
---------- ----------
Total Current Assets ............ -- --
Fixed Assets:
Equipment ................ ........... 123,464 --
Less Accumulated Depreciation ........ (8,907) --
---------- ----------
Total Fixed Assets .............. 114,557 --
Other Assets:
Intangible Assets .................... 5,000 --
Less Accumulated Amortization ........ (209) --
---------- ----------
Total Other Assets .............. 4,791 --
---------- ----------
Total Assets .................... $ 119,348 $ --
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable & Accrued Expenses .. $ 678,454 $ 4,813
Bank Overdraft ....................... 6,519 --
Shareholder Loans .................... 766,072 --
---------- ----------
Total Liabilities ............... 1,451,045 4,813
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 13,850,000 and 4,500,000
Shares at September 30, 2000
and December 31, 1999 13,850 4,500
Paid-In Capital .................... 3,163,635 --
Currency Translation Adjustments ... (12,389) --
Retained Deficit ................... (1,200) (3,215)
Deficit Accumulated During the
Development Stage ................ (4,495,593) (6,098)
---------- ----------
Total Stockholders' Equity ...... (1,331,697) (4,813)
---------- ----------
Total Liabilities and
Stockholders' Equity ........... $ 119,348 $ --
========== ==========
See accompanying notes and accountants' report.
<PAGE> F-2
</TABLE>
<TABLE>
MENTOR ON CALL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Cumulative
since
inception
For the three months ended For the nine months ended of
September 30, September 30, development
------------------- ---------------------- -------------
2000 1999 2000 1999 stage
---------- ------- ----------- --------- -----------
Revenues: .................... $ -- $ -- $ -- $ -- $ --
Expenses:
Research & Development ..... 260,533 -- 3,432,365 -- 3,432,365
General & Administrative ... 312,515 -- 1,027,968 -- 1,034,066
--------- ------- ----------- --------- -----------
Net Operating Loss ...... (573,048) -- (4,460,333) -- (4,466,431)
Other Income (Expense)
Interest, Net .............. (16,952) -- (29,163) -- (29,163)
Net Loss ................ $(590,000) $ -- $(4,489,496) $ -- $(4,495,594)
========= ======= =========== ========= ===========
Basic & Diluted loss per share $ (0.04) $ -- $ (0.32) $ --
========= ======= ============ =========
See accompanying notes and accountants' report.
<PAGE> F-3
</TABLE>
<TABLE>
MENTOR ON CALL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Cumulative
Since
Inception
For the nine months ended of
September 30, Development
------------------------- ------------
2000 1999 Stage
------------- ---------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss ............... $ (4,489,496) $ -- $(4,495,594)
Adjustments to reconcile
net loss to net cash
Provided by operating activities
Depreciation &
Amortization ........ 9,116 -- 9,116
Accrued Interest on
Shareholder Loans ... 29,567 29,567
Currency Translation
Adjustment .......... (12,389) -- (12,389)
Stock issued for Research
& Development ....... 2,995,000 -- 2,995,000
Compensation Expense
on Stock Options ... 175,000 -- 175,000
Increase (Decrease) in:
Accounts Payable &
Accrued Expenses .... 673,940 -- 678,553
------------- -------- -----------
Net Cash Used in operating
activities .......... (619,262) -- (620,747)
------------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of
Fixed Assets .......... (123,464) -- (123,464)
------------- -------- -----------
Net cash provided by
investing activities .. (123,464) -- (123,464)
------------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Capital contributed by
shareholder ........... -- -- 1,485
Bank Overdraft ......... 6,221 -- 6,221
Proceeds from Shareholder
Loans ................. 736,505 -- 736,505
------------- -------- -----------
Net Cash Provided by
Financing Activities .. 742,726 -- 744,211
------------- -------- -----------
Net (Decrease) Increase in
Cash and Cash
Equivalents .......... -- -- --
Cash and Cash
Equivalents at Beginning
of Period ............. -- -- --
------------- -------- -----------
Cash and Cash Equivalents
at End of Period ..... $ -- $ -- $ --
============= ======== ===========
See accompanying notes and accountants' report.
<PAGE> F-4
</TABLE>
<TABLE>
MENTOR ON CALL, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued)
<S> <C> <C> <C>
Cumulative
Since
Inception
For the nine months ended of
September 30, Development
-------------------------
2000 1999 Stage
------------ ----------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ........... $ -- $ -- $ --
Franchise and
income taxes ...... $ -- $ -- $ 250
SUPPLEMENTAL DISCLOSURE
OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common Stock exchanged
for Intangible
Assets .............. $ 5,000 $ -- $ 5,000
See accompanying notes and accountants' report.
<PAGE> F-5
</TABLE>
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This summary of accounting policies for Mentor On Call,
Inc. is presented to assist in understanding the Company's
financial statements. The accounting policies conform to
generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
The unaudited financial statements as of September 30, 2000
and for the nine months then ended reflect, in the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to fairly state the financial position and
results of operations for the nine months. Operating results
for interim periods are not necessarily indicative of the results
which can be expected for full years.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of
Nevada on October 22, 1996 under the name PSM Corp. The Company
ceased all operating activities during the period from October
22, 1996 to July 9, 1999 and was considered dormant. On July 9,
1999, the Company obtained a Certificate of renewal from the
State of Nevada. On January 11, 2000, the company changed its
name to Mentor On Call, Inc. Since July 9, 1999, the Company is
in the development stage, and has not commenced planned principal
operations.
Nature of Business
The company has no products or services as of December 31,
1999. The Company was organized as a vehicle to seek merger or
acquisition candidates. On January 15, 2000, the Board of
Directors approved the proposed Asset Acquisition Agreement (the
"Agreement") with Mentor On Call Holdings, Inc., a Barbadian
International Business Corporation.
The Company is in business to provide managed distance
learning systems, corporate training, professional continuing
education and infomercial marketplaces.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents to the
extent the funds are not being held for investment purposes.
<PAGE> F-6
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
Depreciation
Equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated economic useful lives
of the related assets as follows:
Equipment 5 - 7 years
Maintenance and repairs are charged to operations;
betterments are capitalized. The cost of property sold or
otherwise disposed of and the accumulated depreciation thereon
are eliminated from the property and related accumulated
depreciation accounts, and any resulting gain or loss is credited
or charged to income.
Amortization
Intangible assets consist of patents and trademarks.
Amortization is computed using straight- line method over the
estimated useful lives of the related assets as follows:
Patents and Trademarks 17 years
Pervasiveness of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles required management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Concentrations of Credit Risk
The Company has no significant off-balance-sheet
concentrations of credit risk such as foreign exchange contracts,
options contracts or other foreign hedging arrangements.
<PAGE> F-7
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of
the basic loss per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the three months ended September 30, 2000
Basic Loss per Share
Loss to common
shareholders $ (590,000) 13,850,000 $ (0.04)
================ ============= ===========
For the nine months ended September 30, 2000
Basic Loss per Share
Loss to common
shareholders $ (4,489,496) 13,850,000 $ (0.32)
================ ============= ===========
For the three months ended September 30, 1999
Basic Loss per Share
Loss to common
shareholders $ -- 9,000,000 $ --
================ ============= ===========
For the nine months ended September 30, 1999
Basic Loss per Share
Loss to common
shareholders $ -- 9,000,000 $ --
================ ============= ===========
The effect of outstanding common stock equivalents are
anti-dilutive for September 30, 2000 and 1999 and are thus not
considered.
NOTE 2 - INCOME TAXES
As of September 30, 2000, the Company had a net operating
loss carryforward for income tax reporting purposes of
approximately $1,034,000 that may be offset against future
taxable income through 2011. Current tax laws limit the amount of
loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount
available to offset future taxable income may be limited. No tax
benefit has been reported in the financial statements,
<PAGE> F-8
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 2 - INCOME TAXES (Continued)
because the Company believes there is a 50% or greater chance the
carry-forwards will expire unused. Accordingly, the potential
tax benefits of the loss carry-forwards are offset by a valuation
allowance of the same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is
common with a development stage company, the Company has had
recurring losses during its development stage.
NOTE 4 - RENT EXPENSE
The Company occupies certain executive offices in Toronto,
Ontario, Canada under a noncancellable leases. This lease is for
office space and expires November 2000. The current lease
requires rental payments of approximately $1,207 ($1,750 Canadian
Dollars) per month.
On April 1, 2000, the Company signed a one year
noncancellable lease on development center offices in Toronto,
Ontario, Canada. This lease expires March 2001. The current
lease requires rental payments of approximately $1,076 ($1,560
Canadian Dollars) per month.
On July 10, 2000, the Company signed a lease on additional
development office space in Toronto, Ontario, Canada. This lease
expires March 31, 2001. The lease requires rental payments of
approximately $914 ($1,325 Canadian Dollars) per month.
It is expected that in the normal course of business,
leases that expire will be renewed or replaced by leases on other
properties.
The minimum future lease payments under these leases for the
next five years are:
Year Ended December 31,
---------------------------------------
2000 $ 5,928
2001 5,970
2002 -
2003 -
2004 -
Thereafter -
----------------
Total minimum future lease payments $ 11,898
================
<PAGE> F-9
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 5 - STOCK SPLIT
On May 6, 1999 the Board of Directors authorized 1,000 to 1
stock split, changed the authorized number of shares to
100,000,000 shares and the par value to $.001 for the Company's
common stock. As a result of the split, 999,000 shares were
issued. All references in the accompanying financial statements
to the number of common shares and per-share amounts for 1999
have been restated to reflect the stock split.
On January 15, 2000, the Board of Directors authorized 9 to
1 stock split. As a result of the split, 4,000,000 shares were
issued. All references in the accompanying financial statements
to the number of common shares and per-share amounts for 1999
have been restated to reflect the stock split.
NOTE 6 - STOCK OPTIONS AND WARRANTS
On March 16, 2000 the Board of Directors authorized and
issued stock options to a Director for purchase 50,000 shares of
the Company's restricted common stock at a price of $2.00 per
share. The options expire March 2002. As of September 30, 2000,
no options have been exercised. Compensation in the amount of
$175,000 has been recorded in the accompanying financial
statements as a result of the issuance of these options.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 2000, shareholders of the Company have loaned
$736,505 to the Company by way of cash advances, provision of
office facilities, and payment of services. The services
provided are subject to further review and may be subject to
reduction during the next quarter. The loans are payable on
demand and accrue interest at 10% beginning April 1, 2000.
<PAGE> F-10
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 8 - EMPLOYMENT CONTRACTS
The Company signed employment contracts with Messrs.
Rodgers, Austin, Pritchard and Figueroa as follows:
Annual Deferred
Name Remuneration Amount
------------------- -------------------- --------------------
Rodgers $ 250,000 $ 75,000
Austin $ 180,000 $ 60,000
Pritchard $ 120,000 $ 25,000
Figueroa $ 100,000 $ 15,000
Deferred Salaries vest when the Company retains earnings of
$750,000 in one quarter and are then payable in equal monthly
amounts over the ensuing six month period.
Benefits are in a packaged value at a minimum of ten percent
of salary and a maximum of fifteen percent of salary. Fully paid
vacation of four weeks per annum each.
Automobile allowance available when the Company is earning a
profit of a minimum of $750,000 in any one quarter as follows:
Rodgers $450 per month, Austin $375 per month, Prichard $300 per
month, and Figueroa $300 per month.
A Project Completion Bonus of $125,000 for each of Rodgers,
Austin, Pritchard and Figueroa is available and payable on the
completion and acceptance of the Learning Management System by
the Chief Executive Officer of the Company and by outside clients
and conditional upon receipt of a minimum of $1,500,000 from
licences.
Each of Rodgers, Austin, Pritchard and Figueroa will be
granted stock options of 250,000 to each with a strike price of
$2.00 per share exercisable for a period of five years upon
payment of the project completion bonus.
<PAGE> F-11
MENTOR ON CALL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Continued)
NOTE 9 - ASSET ACQUISITION
The Board of Directors has approved the proposed Asset
Acquisition Agreement (the "Agreement") with Mentor On Call
Holdings, Inc. (Formerly Mentor On Call, Inc.), a Barbadian
International Business Corporation ("Holdings"). The name of the
Company has been changed to Mentor On Call, Inc. to reflect the
Company's new direction, and, effective January 15, 2000, the
Company declared a nine-for-one forward stock split of its common
stock.
The assets acquired include the Mentor On Call Managed
E-Learning System which is a proprietary and web-enabled managed
distance and e-learning system with patents pending and priority
dates set in eighty-nine countries. The Mentor On Call system
operates on Windows 95, 98 and NT platforms, on Novell and
Intranet and will support industry standard web servers and
browsers. The system is SQL compliant. The assets also include
the Trademark and domain name "Mentor On Call".
The Company hopes to provide the best managed distance
learning system in the world, and intends to grow and achieve an
above-average financial return by maintaining a large share of
the public school distance and e-learning market, as well as the
corporate training, professional continuing education and
infomercial marketplaces.
Under the terms of the Agreement, signed on January 17,
2000, the Company issued 9,350,000 post-split restricted shares
of the Company as consideration for the assets, resulting in a
total of 13,850,000 issued and outstanding shares of the
Company, of which Holdings controls approximately 67.5%.
Holdings management has stepped in and taken over all day-to-day
operations of the Company. James N. Rodgers has agreed to assume
the position of President, Chief Executive Officer and Chairman
of the Board of Directors, and Edwin W. Austin has agreed to step
in as Chief Financial Officer, Chief Operating Officer and
Director.
<PAGE> F-12
INDEPENDENT AUDITOR'S REPORT
Mentor On Call, Inc.
(Formerly PSM Corp.)
(A Development Stage Company)
We have audited the accompanying balance sheets of Mentor On
Call, Inc. (formerly PSM Corp.) (a development stage company) as
of December 31, 1999 and 1998, and the related statements of
operations, stockholders' equity, and cash flows for the two
years ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Mentor On Call, Inc. (formerly PSM Corp.) (a development
stage company) as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the two years ended
December 31, 1999 in conformity with generally accepted
accounting principles.
Respectfully submitted
/S/ ROBISON, HILL & CO
Certified Public Accountants
Salt Lake City, Utah
April 11, 2000
F - 1
<TABLE>
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<S> <C> <C>
December 31,
-------------------------
1999 1998
------------ -----------
Assets: .............................. $ -- $ --
========== ==========
Liabilities - Accounts Payable ....... $ 4,813 $ 200
---------- ----------
Stockholders' Equity:
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 500,000 and 1,000,000 shares
At December 31, 1999 and 1998 .... 500 1,000
Paid-In Capital .................... 1,985 --
Retained Deficit ................... (1,200) (1,200)
Deficit Accumulated During the
Development Stage ................ (6,098) --
----------- ----------
Total Stockholders' Equity ...... (4,813) (200)
----------- ----------
Total Liabilities and
Stockholders' Equity .......... $ -- $ --
=========== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE> F - 2
</TABLE>
<TABLE>
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
Cumulative
since
inception
For the year ended of
December 31, development
------------------------ stage
1999 1998
---------- ---------- ----------
Revenues: ................. $ -- $ -- $ --
Expenses: ................. 6,098 100 6,098
---------- ---------- ----------
Net Loss ............. $ (6,098) $ (100) $ (6,098)
========== ========== ==========
Basic & Diluted Loss
Per Share ....... $ (0.01) $ --
========== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE> F - 3
</TABLE>
<TABLE>
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
During
Common Stock Paid-In Retained Development
Shares Par Value Capital Deficit Stage
---------- ---------- ---------- ---------- ----------
Balance at September 23, 1996
(inception) ........ -- $ -- $ -- $ -- $ --
October 9, 1996 Issuance
of Stock for Services
and payment of Accounts
payable ........... 1,000 1,000 -- -- --
Net Loss ........... -- -- -- (1,000) --
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996
As originally
reported ......... 1,000 1,000 -- (1,000) --
Retroactive adjustment
for 1,000 to 1 stock
split May 6, 1999 ... 999,000 -- -- -- --
---------- ---------- ---------- ---------- ----------
Restated balance
January 1, 1997 . 1,000,000 1,000 -- (1,000) --
Net Loss ........... -- -- -- (100) --
---------- ---------- ---------- ---------- ----------
Balance at
December 31, 1997 .. 1,000,000 1,000 -- (1,100) --
Net Loss ........... -- -- -- (100) --
---------- ---------- ---------- ---------- ----------
Balance at
December 31, 1998 .. 1,000,000 1,000 -- (1,200) --
Shares canceled .... (500,000) (500) 500 -- --
Capital contributed
by shareholder -- -- 1,485 -- --
Net Loss ........... -- -- -- -- (6,098)
---------- ---------- ---------- ---------- ----------
Balance at
December 31, 1999 .. 500,000 $ 500 $ 1,985 $ (1,200) $ (6,098)
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE> F - 4
</TABLE>
<TABLE>
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Cumulative
Since
Inception
For the years ended of
December 31, Development
---------------------- Stage
1999 1998
---------- ---------- ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss ........... $ (6,098) $ (100) $ (6,098)
Increase (Decrease) in
Accounts Payable .... 4,613 100 4,613
---------- ---------- ----------
Net Cash Used
in operating
activities .... (1,485) -- (1,485)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided
by investing
activities ....... -- -- --
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed
by shareholder .... 1,485 -- 1,485
---------- ---------- ----------
Net Cash Provided
by Financing
Activities ........ 1,485 -- 1,485
---------- ---------- ----------
Net (Decrease) Increase in
Cash and Cash
Equivalents ..... -- -- --
Cash and Cash Equivalents
at Beginning of
Period ........... -- -- --
---------- ---------- ----------
Cash and Cash
Equivalents at End
of Period ......... $ -- $ -- $ --
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ........... $ -- $ -- $ --
Franchise and income
taxes ............. $ 250 $ -- $ 250
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
----------------------------------------------------------------
None
The accompanying notes are an integral part of these financial
statements.
<PAGE> F - 5
</TABLE>
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This summary of accounting policies for Mentor On Call,
Inc. (formerly PSM Corp.) is presented to assist in
understanding the Company's financial statements. The accounting
policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the
financial statements.
ORGANIZATION AND BASIS OF PRESENTATION
The Company was incorporated under the laws of the State of
Nevada on October 22, 1996 under the name PSM Corp.. The Company
ceased all operating activities during the period from October
22, 1996 to July 9, 1999 and was considered dormant. On July 9,
1999, the Company obtained a Certificate of renewal from the
State of Nevada. On January 11, 2000, the company changed its
name to Mentor On Call, Inc. Since July 9, 1999, the Company is
in the development stage, and has not commenced planned principal
operations.
NATURE OF BUSINESS
The company has no products or services as of December 31,
1999. The Company was organized as a vehicle to seek merger or
acquisition candidates. On January 15, 2000, the Board of
Directors approved the proposed Asset Acquisition Agreement (the
"Agreement") with Mentor On Call, Inc., a Barbadian International
Business Corporation ("Mentor").
Mentor is in business to provide managed distance learning
systems, corporate training, professional continuing education
and infomercial marketplaces.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents to the
extent the funds are not being held for investment purposes.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles required management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial
<PAGE> F - 6
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(CONTINUED)
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
LOSS PER SHARE
The reconciliations of the numerators and denominators of
the basic loss per share computations are as follows:
PER-SHARE
INCOME SHARES AMOUNT
------ ------ -------
(Numerator) (Denominator)
FOR THE YEAR ENDED DECEMBER 31, 1999
Basic Loss per Share
Loss to common
shareholders .......... $ (6,098) 909,888 $ (0.01)
=========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1998
Basic Loss per Share
Loss to common
shareholders .......... $ (100) 1,000,000 $ --
=========== ========== ==========
The effect of outstanding common stock equivalents would be
anti-dilutive for August 31, 1999 and December 31, 1999 and 1998
and are thus not considered.
NOTE 2 - INCOME TAXES
As of December 31, 1999, the Company had a net operating
loss carryforward for income tax reporting purposes of
approximately $6,000 that may be offset against future taxable
income through 2011. Current tax laws limit the amount of loss
available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount
available to offset future taxable income may be limited. No tax
benefit has been reported in the financial statements, because
the Company believes there is a 50% or greater chance the
carryforwards will expire unused.
Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation allowance of the same
amount.
<PAGE> F - 7
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(CONTINUED)
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is
common with a development stage company, the Company has had
recurring losses during its development stage.
NOTE 4 - COMMITMENTS
As of December 31, 1999 all activities of the Company have
been conducted by corporate officers from either their homes or
business offices. Currently, there are no outstanding debts owed
by the company for the use of these facilities and there are no
commitments for future use of the facilities.
NOTE 5 - STOCK SPLIT
On May 6, 1999 the Board of Directors authorized 1,000 to 1
stock split, changed the authorized number of shares to
100,000,000 shares and the par value to $.001 for the Company's
common stock. As a result of the split, 999,000 shares were
issued. All references in the accompanying financial statements
to the number of common shares and per-share amounts for 1998
have been restated to reflect the stock split.
NOTE 6 - SUBSEQUENT EVENTS
The Board of Directors has approved the proposed Asset
Acquisition Agreement (the "Agreement") with Mentor On Call,
Inc., a Barbadian International Business Corporation ("Mentor").
The name of the Company has been changed to Mentor On Call, Inc.
to reflect the Company's new direction, and, effective January
15, 2000, the Company declared a nine-for- one forward stock
split of its common stock.
The assets acquired include the Mentor On Call Managed
E-Learning System which is a proprietary and web-enabled managed
distance and e-learning system with patents pending and priority
dates set in eighty-nine countries. The Mentor On Call system
operates on Windows 95, 98 and NT platforms, on Novell and
Intranet and will support industry standard web servers and
browsers. The system is SQL compliant. The assets also include
the Trademark and domain name "Mentor On Call".
Mentor hopes to provide the best managed distance learning
system in the world, and intends to grow and achieve an
above-average financial return by maintaining a large share of
the public
<PAGE> F - 8
MENTOR ON CALL, INC.
(FORMERLY PSM CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(CONTINUED)
NOTE 6 - SUBSEQUENT EVENTS (CONTINUED)
school distance and e-learning market, as well as the corporate
training, professional continuing education and infomercial
marketplaces.
Under the terms of the Agreement, signed on January 17,
2000, Mentor On Call will be issued 9,350,000 post-split
restricted shares of PSM as consideration for the contributed
assets, resulting in a total of 13,850,000 issued and
outstanding shares of the Company, of which Mentor will control
approximately 67.5%. Mentor On Call's present management will
step in and take over all day-to-day operations of the Company.
James N. Rodgers has agreed to assume the position of President,
Chief Executive Officer and Chairman of the Board of Directors,
and Edwin W. Austin has agreed to step in as Chief Financial
Officer, Chief Operating Officer and Director.
<PAGE> F - 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may
read our SEC filings over the Internet at the Commission's
website at http://www.sec.gov. You may also read and copy
documents at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at its regional offices located
at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the Commission at 1-800-SEC-0330
for further information on the public reference rooms.
Our common stock is presently listed on the National
Association of Securities Dealers' Over-The-Counter Bulletin
Board and reports and proxy statements and other information
concerning us also can be inspected at the offices of The
Nasdaq-Amex Stock Market, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006-1500.
INFORMATION INCORPORATED BY REFERENCE
The Commission allows us to provide information about our
business and other important information to you by "incorporating
by reference" the information we file with the Commission, which
means that we can disclose the information to you by referring in
this prospectus to the documents we file with the Commission.
We incorporate by reference into this prospectus the
following documents that we have filed with the Commission. You
should consider each document incorporated by reference an
important part of this prospectus:
SEC FILING (FILE NO. 000-27739) PERIOD COVERED OR DATE OF FILING
------------------------------- --------------------------------
Annual Report on Form 10-K.......... Year ended December 31, 1999
Quarterly Report on Form 10-Q....... Quarter ended March 31, 2000
Quarterly Report on Form 10-Q........ Quarter ended June 30, 2000
Quarterly Report on Form 10-Q... Quarter ended September 30, 2000
Current Report on Form 8-K......................... April 5, 2000
We are delivering along with this prospectus a copy of our
most recent Annual Report on Form 10-K and Quarterly Report on
Form 10-Q. You may request a copy of the other filings that we
are incorporating by reference in this prospectus, but are not
delivering with this prospectus, at no cost, by writing or
telephoning us at the following address, telephone or facsimile
number:
Mentor On Call, Inc.
40 King Street, Suite 4900
Toronto
Ontario, Canada M5H 4A2
Phone: (416) 777-6714
Fax: (416) 777-6722
Attention: Edward Austin, CFO
We will not provide exhibits to a document unless they are
specifically incorporated by reference in that document.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XI of our By-Laws provide that no director of the
Company shall have personal liability to the corporation or to
its shareholders for damages for any breach of duty in such
capacity, provided, however, that the provisions shall not
eliminate or limit:
(a) acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or
(b) the payment of dividends in violation of Section 78.300
of the Nevada Revised Statutes.
Section 78.751(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director,
officer, employee, or corporate agent "who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the
right of the corporation" due to his or her corporate role.
Section 78.751(1) extends this protection "against expenses,
including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with the action, suit or proceeding if he or she acted
in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification
of the reasonable defense or settlement expenses of a corporate
director, officer, employee or agent who is sued, or is
threatened with a suit, by or in the right of the corporation.
The party must have been acting in good faith and with the
reasonable belief that his or her actions were not opposed to the
corporation's best interests. Unless the court rules that the
party is reasonably entitled to indemnification, the party
seeking indemnification must not have been found liable to the
corporation.
To the extent that a corporate director, officer, employee,
or agent is successful on the merits or otherwise in defending
any action or proceeding referred to in Section 78.751(1) or
78.751(2), Section 78.751(3) of the NRS requires that he be
indemnified "against expenses, including attorneys' fees,
actually and reasonably incurred by him or her in connection with
the defense."
Section 78.751 (4) of the NRS limits indemnification under
Sections 78.751 (1) and 78.751(2) to situations in which either
(1) the stockholders, (2) the majority of a disinterested quorum
of directors, or (3) independent legal counsel determine that
indemnification is proper under the circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation
may advance an officer's or director's expenses incurred in
defending any action or proceeding upon receipt of an
undertaking. Section 78.751(6)(a) provides that the rights to
indemnification and advancement of expenses shall not be deemed
exclusive of any other rights under any bylaw, agreement,
stockholder vote or vote of disinterested directors. Section
78.751(6)(b) extends the rights to indemnification and
advancement of expenses to former directors, officers, employees
and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent
has the right to indemnity, Section 78.752 allows the corporation
to purchase and maintain insurance on his behalf against
liability resulting from his or her corporate role.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will incur no expenses in connection with any sale or
other distribution by the selling shareholders of the common
stock being registered other than the expenses of preparation and
distribution of this Registration Statement and the Prospectus
included in this Registration Statement, which are set forth in
the following table. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee.
SEC registration fee................... $ 1,232
Legal fees and expenses................ $25,000
Accounting fees and expenses........... $
Miscellaneous expenses................. $
-------
Total......................... $
RECENT SALES OF UNREGISTERED SECURITIES
In connection with organizing the Company, on November 12,
1996, persons consisting of the officers, directors, and other
individuals were issued a total of 1,000 shares of common stock
at a value of $.001 per share. On May 6, 1999, those outstanding
shares were forward split 1,000 for 1, resulting in a total of
1,000,000 shares issued and outstanding.
On October 25, 1999, Mr. Daniel L. Hodges returned 500,000
shares to the treasury and the shares were canceled, resulting in
500,000 remaining shares outstanding.
On January 15, 2000, the Company declared a 9-for-1 forward
stock split, resulting in a total of 4,500,000 shares
outstanding.
On January 17, 2000, the Company issued 9,350,000 shares of
post-split restricted common stock in connection with an Asset
Acquisition Agreement, resulting in 13,850,000 shares
outstanding.
On September 8, 2000 the Company entered into an Investment
Agreement with an investment bank to register and underwrite
shares of its common stock with an aggregate market value not to
exceed $35,000,000 to the general public. The company is
obligated to issue warrants to purchase 800,000 shares of common
stock to the investment bank, whether or not the registration and
proposed sale of shares to the public is completed. The Company
is also obligated to issue additional warrants to the investment
bank upon achieving certain milestones in the registration
process.
EXHIBITS
<TABLE>
<CAPTION>
The following is a list of exhibits filed and/or
incorporated by reference as part of this Registration Statement:
<S> <C>
Exhibit
Number Exhibit Description
-------- -------------------
3.1 Articles of Incorporation, filed October 22, 1996.
(1)
3.2 Certificate of Amendment of Articles of
Incorporation, filed July 9, 1999. (1)
3.3 Certificate of Amendment of Articles of
Incorporation, filed January 11, 2000.
3.4 Bylaws, revised and adopted on May 6, 1999. (1)
4.1 Commitment Warrant Agreement to purchase 800,000
shares between the Company and Swartz Private
Equity, LLC, dated September 8, 2000.
4.2 Commitment Warrant Side Agreement between the
Company and Swartz Private Equity, LLC, dated
September 8, 2000.
4.3 Registration Rights Agreement between the Company
and Swartz Private Equity, LLC, dated September 8,
2000.
5.1 Opinion of Dieterich & Associates regarding the
validity of the common stock.
10.1 Asset Acquisition Agreement, dated January ,2000.
(2)
10.2 Mentor On Call Holdings Unanimous Shareholders
Agreement, dated January 18, 2000. (2)
10.3 Executive Employment Contract with James N.
Rodgers, dated January 18, 2000. (2)
10.4 Executive Employment Contract with Edwin W.
Austin, dated January 18, 2000. (2)
10.7 Mentor On Call Holdings Share Escrow Agreement,
dated January 18, 2000. (2)
10.8 Investment Agreement between the Company and
Swartz Private Equity, LLC, dated September 8,
2000.
10.9 Acknowledgment and Agreement with Swartz Private
Equity, LLC, dated September 8, 2000
23.1 Consent of Dieterich & Associates (Included in
their opinion filed as Exhibit 5.1 hereto).
23.2 Consent of Robison, Hill & Co.
24.1 Power of Attorney (included on signature page to
this Registration Statement on Form SB-2).
27 Financial Data Schedule
------------------
(1) Incorporated by reference to the Company's
registration statement on Form 10-SB filed October
20, 1999
(2) Incorporated by reference to the Company's Form
10-Q filed on May 8, 2000
</TABLE>
UNDERTAKINGS
A. Rule 415 Offering
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement; and
(iii)To include any material information with respect
to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
B. Request for Indemnification
(1) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, the Registrant
has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and
has duly caused this Registration Statement on Form SB-2 to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada,
on the 11th day of January, 2001.
Mentor On Call, Inc.
By: /s/ James N. Rodgers
--------------------------
James N. Rodgers
President, CEO & Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints James N. Rodgers and Edwin W. Austin, either one acting
alone, as his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for him and in his
name, place and stead in any and all capacities to execute in
the name of each such person who is then an officer or director
of the Registrant any and all amendments (including
post-effective amendments) to this Registration Statement, and to
file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them
full power and authority to do and perform each and every act and
thing required or necessary to be done in and about the premises
as fully as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either
of them, or their or his substitutes, may lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the date indicated
Signature Title Date
--------- ----- ----
/s/ James N. Rodgers President, CEO & January 11, 2001
James N. Rodgers Director
/s/ Edwin W. Austin COO & CFO January 11, 2001
Edwin W. Austin
<PAGE>
<PAGE>
EXHIBIT 3.3 CERTIFICATE OF AMENDMENT OF ARTICLES OF
INCORPORATION, filed January 11, 2000
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
PSM CORP. (NEVADA)
The undersigned, being the president and the Secretary of PSM
Corp. (Nevada), a Nevada Corporation, hereby certify that by
majority vote of the Board of Directors and Shareholders at a
meeting held on January 7, 2000, it was voted and adopted a
resolution to amend the original Articles of Incorporation as
follows:
RESOLVED: That Article One, the name of the corporation be and is
hereby amended to read:
"Mentor On Call, Inc."
RESOLVED: That the Corporation declare a 9 new shares for 1
existing share forward stock split to be effective
January 15, 2000.
The undersigned hereby certify that they have on this day January
7, 2000 executed this Certificate Amending that original Articles
of Incorporation heretofore filed with the Secretary of State of
Nevada.
/s/ Shirley A. Bethurum
President
/s/ Shirley A. Bethurum
Secretary
<PAGE>
<PAGE>
EXHIBIT 4.1 SWARTZ COMMITMENT WARRANT, dated September 8, 2000
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH
SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
HOLDERS MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND
ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH
UNDER THAT CERTAIN INVESTMENT AGREEMENT BY AND BETWEEN THE
COMPANY AND HOLDER REFERENCED THEREIN AS EXHIBIT J.
Warrant to Purchase
"N" shares Warrant Number ____
Warrant to Purchase Common Stock
of
Mentor On Call, Inc.
THIS CERTIFIES that Swartz Private Equity, LLC or any
subsequent holder hereof ("Holder"), has the right to purchase
from Mentor On Call, Inc., a Nevada corporation (the "Company"),
up to "N" fully paid and nonassessable shares, wherein "N" is
defined below, of the Company's common stock, $0.001 par value
per share ("Common Stock"), subject to adjustment as provided
herein, at a price equal to the Exercise Price as defined in
Section 3 below, at any time beginning on the Date of Issuance
(defined below) and ending at 5:00 p.m., New York, New York time
the date that is five (5) years after the Date of Issuance (the
"Exercise Period"); provided, that, with respect to each "Put,"
as that term is defined in that certain Investment Agreement (the
"Investment Agreement") by and between the initial Holder and
Company, dated on or about September 8, 2000, "N" shall equal ten
percent (10%) of the number of shares of Common Stock purchased
by the Holder in that Put.
Holder agrees with the Company that this Warrant to Purchase
Common Stock of the Company (this "Warrant") is issued and all
rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on _____________,
_________ ("Date of Issuance"). The term of this Warrant is five
(5) years from the Date of Issuance.
Notwithstanding anything to the contrary herein, the
applicable portion of this Warrant shall not be exercisable
during any time that, and only to the extent that, the number of
shares of Common Stock to be issued to Holder upon such exercise,
when added to the number of shares of Common Stock, if any, that
the Holder otherwise beneficially owns at the time of such
exercise, would equal or exceed 4.99% of the number of shares of
Common Stock then outstanding, as determined in accordance with
Section 13(d) of the Exchange Act (the "4.99% Limitation"). The
4.99% Limitation shall be conclusively satisfied if the
applicable Exercise Notice includes a signed representation by
the Holder that the issuance of the shares in such Exercise
Notice will not violate the 4.99% Limitation, and the Company
shall not be entitled to require additional documentation of such
satisfaction.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this
Warrant may be exercised as to all or any lesser number of full
shares of Common Stock covered hereby (the "Warrant Shares") upon
surrender of this Warrant, with the Exercise Form attached hereto
as Exhibit A (the "Exercise Form") duly completed and executed,
together with the full Exercise Price (as defined below) for each
share of Common Stock as to which this Warrant is exercised, at
the office of the Company, Attention: James N. Rodgers,
President, Mentor On Call, Scotia Plaza, 40 King Street, West,
Suite 4900, Toronto, Ontario, Canada M5H 4A2; Telephone: (604)
532-5357, Facsimile: (604) 532-5662, or at such other office or
agency as the Company may designate in writing, by overnight
mail, with an advance copy of the Exercise Form sent to the
Company and its Transfer Agent by facsimile (such surrender and
payment of the Exercise Price hereinafter called the "Exercise of
this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the
Warrant shall be defined as the date that the advance copy of the
completed and executed Exercise Form is sent by facsimile to the
Company, provided that the original Warrant and Exercise Form are
received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date
the original Exercise Form is received by the Company, if Holder
has not sent advance notice by facsimile. The Company shall not
be required to deliver the shares of Common Stock to the Holder
until the requirements of Section 2(a) above are satisfied.
(c) Delivery of Shares of Common Stock Upon Exercise. Upon
any exercise of this Warrant, the Company shall deliver, or shall
cause its transfer agent to deliver, a stock certificate or
certificates representing the number of shares of Common Stock
into which this Warrant was exercised, within three (3) trading
days of the Date of Exercise (as defined above). Such stock
certificates shall not contain a legend restricting transfer if a
registration statement covering the resale of such shares of
Common Stock is in effect at the time of such exercise or if such
shares of Common Stock may be resold pursuant to Rule 144 under
the Securities Act of 1933. If the Company has not delivered
stock certificates representing the requisite number of shares of
Common Stock (unlegended, if so required per the above) within
three (3) trading days of the Date of Exercise, the Company shall
pay to the Holder liquidated damages equal to $1,000 per day
until such share certificates (unlegended, if so required per the
above) are received by the Holder.
(d) Cancellation of Warrant. This Warrant shall be
canceled upon the Exercise of this Warrant, and, as soon as
practical after the Date of Exercise, Holder shall be entitled to
receive Common Stock for the number of shares purchased upon such
Exercise of this Warrant, and if this Warrant is not exercised in
full, Holder shall be entitled to receive a new Warrant
(containing terms identical to this Warrant) representing any
unexercised portion of this Warrant in addition to such Common
Stock.
(e) Holder of Record. Each person in whose name any
Warrant for shares of Common Stock is issued shall, for all
purposes, be deemed to be the Holder of record of such shares on
the Date of Exercise of this Warrant, irrespective of the date of
delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as
conferring upon Holder any rights as a stockholder of the
Company.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price"), shall initially equal
$Y per share ("Initial Exercise Price"), where "Y" shall equal
110% of the Market Price for the applicable Put (as both are
defined in the Investment Agreement) or, if the Date of Exercise
is more than six (6) months after the Date of Issuance, the
lesser of (i) the Initial Exercise Price or (ii) the "Lowest
Reset Price," as that term is defined below. The Company shall
calculate a "Reset Price" on each six-month anniversary date of
the Date of Issuance which shall equal the lowest Closing Bid
Price of the Common Stock for the five (5) trading days ending on
such six-month anniversary date of the Date of Issuance. The
"Lowest Reset Price" shall equal the lowest Reset Price
determined on any six-month anniversary date of the Date of
Issuance preceding the Date of Exercise, taking into account, as
appropriate, any adjustments made pursuant to Section 5 hereof.
For purposes hereof, the term "Closing Bid Price" shall mean
the closing bid price on the O.T.C. Bulletin Board, the National
Market System ("NMS"), the New York Stock Exchange, the Nasdaq
Small Cap Market, or if no longer traded on the O.T.C. Bulletin
Board, the NMS, the New York Stock Exchange, the Nasdaq Small Cap
Market, the "Closing Bid Price" shall equal the closing price on
the principal national securities exchange or the
over-the-counter system on which the Common Stock is so traded
and, if not available, the mean of the high and low prices on the
principal national securities exchange on which the Common Stock
is so traded.
Payment of the Exercise Price may be made by either of the
following, or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire
transfer; or
(ii) Cashless Exercise: surrender of this Warrant at the
principal office of the Company together with notice of cashless
election, in which event the Company shall issue Holder a number
of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be
issued to Holder.
Y = the number of shares of Common Stock for which this
Warrant is being exercised.
A = the Market Price of one (1) share of Common
Stock (for purposes of this Section 3(ii), the
"Market Price" shall be defined as the average
closing price of the Common Stock for the five (5)
trading days prior to the Date of Exercise of this
Warrant (the "Average Closing Price"), as reported
by the O.T.C. Bulletin Board, National Association
of Securities Dealers Automated Quotation System
("Nasdaq") Small Cap Market, or if the Common
Stock is not traded on the Nasdaq Small Cap
Market, the Average Closing Price in any other
over-the-counter market; provided, however, that
if the Common Stock is listed on a stock exchange,
the Market Price shall be the Average Closing
Price on such exchange for the five (5) trading
days prior to the date of exercise of the
Warrants. If the Common Stock is/was not traded
during the five (5) trading days prior to the Date
of Exercise, then the closing price for the last
publicly traded day shall be deemed to be the
closing price for any and all (if applicable) days
during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section
(d)(3)(ii) thereof, it is intended, understood and acknowledged
that the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction shall be deemed to have been
acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for
the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction shall be deemed to have commenced
on the date this Warrant was issued.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section
8 of this Warrant, this Warrant may be transferred on the books
of the Company, in whole or in part, in person or by attorney,
upon surrender of this Warrant properly completed and endorsed.
This Warrant shall be canceled upon such surrender and, as soon
as practicable thereafter, the person to whom such transfer is
made shall be entitled to receive a new Warrant or Warrants as to
the portion of this Warrant transferred, and Holder shall be
entitled to receive a new Warrant as to the portion hereof
retained.
(b) Registrable Securities. The Common Stock issuable upon
the exercise of this Warrant constitutes "Registrable Securities"
under that certain Registration Rights Agreement dated on or
about September 8, 2000 between the Company and certain investors
and, accordingly, has the benefit of the registration rights
pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time
declare a dividend payable in shares of Common Stock, then
Holder, upon Exercise of this Warrant after the record date for
the determination of holders of Common Stock entitled to receive
such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as
to which this Warrant is exercised, such additional shares of
Common Stock as such Holder would have received had this Warrant
been exercised immediately prior to such record date and the
Exercise Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company
shall at any time effect a recapitalization, reclassification or
other similar transaction of such character that the shares of
Common Stock shall be changed into or become exchangeable for a
larger or smaller number of shares, then upon the effective date
thereof, the number of shares of Common Stock which Holder shall
be entitled to purchase upon Exercise of this Warrant shall be
increased or decreased, as the case may be, in direct proportion
to the increase or decrease in the number of shares of Common
Stock by reason of such recapitalization, reclassification or
similar transaction, and the Exercise Price shall be, in the case
of an increase in the number of shares, proportionally decreased
and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give Holder the same
notice it provides to holders of Common Stock of any transaction
described in this Section 5(b).
(c) Distributions. If the Company shall at any time
distribute for no consideration to holders of Common Stock cash,
evidences of indebtedness or other securities or assets (other
than cash dividends or distributions payable out of earned
surplus or net profits for the current or preceding years) then,
in any such case, Holder shall be entitled to receive, upon
Exercise of this Warrant, with respect to each share of Common
Stock issuable upon such exercise, the amount of cash or
evidences of indebtedness or other securities or assets which
Holder would have been entitled to receive with respect to each
such share of Common Stock as a result of the happening of such
event had this Warrant been exercised immediately prior to the
record date or other date fixing shareholders to be affected by
such event (the "Determination Date") or, in lieu thereof, if the
Board of Directors of the Company should so determine at the time
of such distribution, a reduced Exercise Price determined by
multiplying the Exercise Price on the Determination Date by a
fraction, the numerator of which is the result of such Exercise
Price reduced by the value of such distribution applicable to one
share of Common Stock (such value to be determined by the Board
of Directors of the Company in its discretion) and the
denominator of which is such Exercise Price.
(d) Notice of Consolidation or Merger. The Company shall
not, at any time after the date hereof, effect a merger,
consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which
shares of Common Stock shall be changed into the same or a
different number of shares of the same or another class or
classes of stock or securities or other assets of the Company or
another entity or there is a sale of all or substantially all the
Company's assets (a "Corporate Change"), unless the resulting
successor or acquiring entity (the "Resulting Entity") assumes by
written instrument the Company's obligations under this Warrant,
including but not limited to the Exercise Price reset provisions
as provided herein during the term of the resultant warrants, and
agrees in such written instrument that this Warrant shall be
exerciseable into such class and type of securities or other
assets of the Resulting Entity as Holder would have received had
Holder exercised this Warrant immediately prior to such Corporate
Change, and the Exercise Price of this Warrant shall be
proportionately increased (if this Warrant shall be changed into
or become exchangeable for a warrant to purchase a smaller number
of shares of Common Stock of the Resulting Entity) or shall be
proportionately decreased (if this Warrant shall be changed or
become exchangeable for a warrant to purchase a larger number of
shares of Common Stock of the Resulting Entity); provided,
however, that Company may not affect any Corporate Change unless
it first shall have given thirty (30) days notice to Holder
hereof of any Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the
term "Exercise Price" shall mean the purchase price per share
specified in Section 3 of this Warrant, until the occurrence of
an event stated in subsection (a), (b), (c) or (d) of this
Section 5, and thereafter shall mean said price as adjusted from
time to time in accordance with the provisions of this Warrant.
No such adjustment under this Section 5 shall be made unless such
adjustment would change the Exercise Price at the time by $0.01
or more; provided, however, that all adjustments not so made
shall be deferred and made when the aggregate thereof would
change the Exercise Price at the time by $0.01 or more. No
adjustment made pursuant to any provision of this Section 5 shall
have the net effect of increasing the Exercise Price in relation
to the split adjusted and distribution adjusted price of the
Common Stock. The number of shares of Common Stock subject
hereto shall increase proportionately with each decrease in the
Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets.
In the event that at any time, as a result of an adjustment made
pursuant to this Section 5, Holder shall, upon Exercise of this
Warrant, become entitled to receive shares and/or other
securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares
and/or other securities or assets shall be subject to adjustment
from time to time in a manner and upon terms as nearly equivalent
as practicable to the provisions of this Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional
shares shall be issuable upon the Exercise of this Warrant, but
on Exercise of this Warrant, Holder may purchase only a whole
number of shares of Common Stock. If, on Exercise of this
Warrant, Holder would be entitled to a fractional share of Common
Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon exercise shall be the next
higher number of shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance
such number of authorized and unissued shares of Common Stock (or
other securities substituted therefor as herein above provided)
as shall be sufficient for the Exercise of this Warrant and
payment of the Exercise Price. The Company covenants and agrees
that upon the Exercise of this Warrant, all shares of Common
Stock issuable upon such exercise shall be duly and validly
issued, fully paid, nonassessable and not subject to preemptive
rights, rights of first refusal or similar rights of any person
or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant
has been issued in a transaction exempt from the registration
requirements of the Act by virtue of Regulation D and exempt from
state registration under applicable state laws. The Warrant and
the Common Stock issuable upon the Exercise of this Warrant may
not be pledged, transferred, sold or assigned except pursuant to
an effective registration statement or an exemption to the
registration requirements of the Act and applicable state laws.
(b) Assignment. If Holder can provide the Company
with reasonably satisfactory evidence that the conditions of (a)
above regarding registration or exemption have been satisfied,
Holder may sell, transfer, assign, pledge or otherwise dispose of
this Warrant, in whole or in part. Holder shall deliver a written
notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall
effect the assignment within ten (10) days, and shall deliver to
the assignee(s) designated by Holder a Warrant or Warrants of
like tenor and terms for the appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer
upon any person other than the Company and Holder any legal or
equitable right, remedy or claim under this Warrant and this
Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the
state of Georgia, without giving effect to conflict of law
provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of indemnity or security
reasonably satisfactory to the Company, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given
or made by Holder to or on the Company shall be sufficiently
given or made if sent by certified or registered mail, return
receipt requested, postage prepaid, and addressed, until another
address is designated in writing by the Company, to the address
set forth in Section 2(a) above. Notices or demands pursuant to
this Warrant to be given or made by the Company to or on Holder
shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and
addressed, to the address of Holder set forth in the Company's
records, until another address is designated in writing by
Holder.
IN WITNESS WHEREOF, the undersigned has executed this
Warrant as of the ______ day of __________, 200_.
MENTOR ON CALL, INC.
By:________________________________
James N. Rodgers, President
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: MENTOR ON CALL, INC.
The undersigned hereby irrevocably exercises the right to
purchase ____________ of the shares of Common Stock (the "Common
Stock") of Mentor On Call, Inc., a Nevada corporation (the
"Company"), evidenced by the attached warrant (the "Warrant"),
and herewith makes payment of the exercise price with respect to
such shares in full, all in accordance with the conditions and
provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or
otherwise dispose of any of the Common Stock obtained on exercise
of the Warrant, except in accordance with the provisions of
Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such
shares be issued free of any restrictive legend, if appropriate,
and a warrant representing any unexercised portion hereof be
issued, pursuant to the Warrant in the name of the undersigned
and delivered to the undersigned at the address set forth below:
Dated:
_________________________________________________________________
Signature
_________________________________________________________________
Print Name
_________________________________________________________________
Address
_________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to
the name as written upon the face of the attached Warrant in
every particular, without alteration or enlargement or any change
whatsoever.
_________________________________________________________________
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached
warrant (the "Warrant") hereby sells, assigns and transfers unto
the person or persons below named the right to purchase _______
shares of the Common Stock of Mentor On Call, Inc., evidenced by
the attached Warrant and does hereby irrevocably constitute and
appoint _______________________ attorney to transfer the said
Warrant on the books of the Company, with full power of
substitution in the premises.
Dated: _________ ______________________________
Signature
Fill in for new registration of Warrant:
___________________________________________
Name
____________________________________________
Address
____________________________________________
Please print name and address of assignee
(including zip code number)
_________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the
name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
_________________________________________________________________
<PAGE>
<PAGE>
EXHIBIT 4.2 SWARTZ COMMITMENT WARRANT SIDE AGREEMENT, dated
September 8, 2000
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of
September 8, 2000, by and among MENTOR ON CALL, INC., a
corporation duly organized and existing under the laws of the
State of Nevada (the "Company") and Swartz Private Equity, LLC
(hereinafter referred to as "Investor").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Equity Line")
of up to Thirty Five Million Dollars ($35,000,000), excluding any
funds paid upon exercise of the Warrants, of Common Stock of the
Company pursuant to that certain Investment Agreement (the
"Investment Agreement") between the Company and Investor dated on
or about September 8, 2000, the Company has agreed to sell and
Investor has agreed to purchase, from time to time as provided in
the Investment Agreement, shares of the Company's Common Stock
for a maximum aggregate offering amount of Thirty Five Million
Dollars ($35,000,000); and
WHEREAS, pursuant to the terms of the Investment Agreement,
the Company has agreed, among other things, to issue to the
Investor Commitment Warrants (the "Commitment Warrants"), as
defined in the Investment Agreement, to purchase a number of
shares of Common Stock, exercisable for five (5) years from their
respective dates of issuance.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth
in Agreement and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Issuance of Commitment Warrants. As compensation for
entering into the Equity Line, Investor received a warrant
convertible into 800,000 shares of the Company's Common Stock, in
the form attached hereto as Exhibit A (the "Commitment
Warrants").
2. Limitation on Exercise of Warrants. Except as otherwise set
forth below, the Investor agrees not to exercise any of the
warrants issued to the Investor by the Company pursuant to the
Investment Agreement, including but not limited to the Commitment
Warrant, the Purchase Warrants or the Additional Warrants, as
defined below (collectively referred to as the "Warrants") except
to the extent of the Exercisable Amount, defined as follows: For
each Calendar Month period (as defined in the Investment
Agreement) that passes after the date hereof, the Warrants shall
become exercisable as to an additional number of shares equal to
5% (aggregating monthly) of the number of shares of Common Stock
represented by all of the Warrants that have been issued as of
the last trading day of such Calendar Month, provided that in no
event shall more than 30% of the Warrants be exercised in any
Calendar Month period. Notwithstanding the Exercisable Amount,
the Investor may exercise any or all of the Warrants if either
(i) the highest trade price of the Company's Common Stock on the
principal market or exchange on which such shares are traded on
the date of exercise of the Warrant is more than $5, or (ii) more
than eighteen (18) months have passed since the date of issuance
of the Warrant.
3. Issuance of Additional Warrants. At the earlier of (i) July
5, 2001 or (ii) the date of the first Put Notice delivered to
Investor pursuant to the Investment Agreement, Investor shall
receive additional warrants (the "Additional Warrants"), to
purchase a number of shares of Common Stock, if necessary, such
that the sum of the number of Commitment Warrants and the number
of Additional Warrants issued to Investor shall equal at least 5%
of the number of fully diluted shares of Common Stock of the
Company as calculated at that time. If the Company shall at any
time effect a recapitalization, reclassification or other similar
transaction of such character that the shares of Common Stock
shall be changed into or become exchangeable for a smaller number
of shares (a "Reverse Stock Split"), then on the date of such
Reverse Stock Split, and on each six (6) month anniversary (each,
a "Six Month Anniversary Date") of the Reverse Stock Split
thereafter throughout the term of the Commitment Warrants, the
Company shall issue to Investor additional warrants (the
"Additional Warrants"), in the form of Exhibit A, to purchase a
number of shares of Common Stock, if necessary, such that the sum
of the number of Warrants and the number of Additional Warrants
issued to Investor shall equal at least 5.0% of the number of
fully diluted shares of Common Stock of the Company that are
outstanding immediately following the Reverse Stock Split or
Anniversary Date, as applicable. The Additional Warrants shall
be exerciseable at the same price as the Commitment Warrants (as
most recently reset), shall have the same reset provisions as the
Commitment Warrants, shall have piggyback registration rights and
shall have a 5-year term.
4. Opinion of Counsel. Concurrently with the issuance and
delivery of the Commitment Opinion (as defined in the Investment
Agreement) to the Investor, or on the date that is six (6) months
after the date of this Agreement, whichever is sooner, the
Company shall deliver to the Investor an Opinion of Counsel
(signed by the Company's independent counsel) covering the
issuance of the Commitment Warrants and the Additional Warrants,
and the issuance and resale of the Common Stock issuable upon
exercise of the Warrants and the Additional Warrants.
[INTENTIONALLY LEFT BLANK].
5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia
applicable to agreements made in and wholly to be performed in
that jurisdiction, except for matters arising under the Act or
the Securities Exchange Act of 1934, which matters shall be
construed and interpreted in accordance with such laws.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of this 8th day of September, 2000.
MENTOR ON CALL, INC. INVESTOR:
SWARTZ PRIVATE EQUITY, LLC.
By: ____________________________ By: __________________________
James N. Rodgers, President Eric S. Swartz, Manager
Mentor On Call, Inc.
Scotia Plaza, 40 King Street, West, 1080 Holcomb Bridge Road
Suite 4900 Bldg. 200, Suite 285
Toronto Ontario, Canada M5H 4A2 Roswell, GA 30076
Telephone: (604) 532-5357 Telephone: (770) 640-8130
Facsimile: (604) 532-5662 Facsimile: (770) 640-7150
<PAGE>
<PAGE>
EXHIBIT 4.3 SWARTZ REGISTRATION RIGHTS AGREEMENT, dated
September 8, 2000
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of September 8, 2000, by and among Mentor On
Call, Inc., a corporation duly incorporated and existing under
the laws of the State of Nevada (the "Company"), and the
subscriber as named on the signature page hereto (hereinafter
referred to as "Subscriber").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Offering") of
up to Thirty-Five Million Dollars ($35,000,000), excluding any
funds paid upon exercise of the Warrants, of Common Stock of the
Company pursuant to that certain Investment Agreement of even
date herewith (the "Investment Agreement") between the Company
and the Subscriber, the Company has agreed to sell and the
Subscriber has agreed to purchase, from time to time as provided
in the Investment Agreement, shares of the Company's Common Stock
for a maximum aggregate offering amount of Thirty-Five Million
Dollars ($35,000,000);
WHEREAS, pursuant to the terms of the Investment Agreement,
the Company has agreed to issue to the Subscriber the Commitment
Warrants and, from time to time, the Purchase Warrants, each as
defined in the Investment Agreement, to purchase a number of
shares of Common Stock, exercisable for five (5) years from their
respective dates of issuance (collectively, the "Warrants"); and
WHEREAS, pursuant to the terms of the Investment Agreement,
the Company has agreed to provide the Subscriber with certain
registration rights with respect to the Common Stock to be issued
in the Offering and the Common Stock issuable upon exercise of
the Warrants as set forth in this Agreement.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth
in this Agreement and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement
(including the Recitals above), the following terms shall have
the following meanings (such meanings to be equally applicable to
both singular and plural forms of the terms defined):
"Additional Registration Statement" shall have the
meaning set forth in Section 3(b).
"Amended Registration Statement" shall have the meaning
set forth in Section 3(b).
"Business Day" shall have the meaning set forth in the
Investment Agreement.
"Closing Bid Price" shall have the meaning set forth in
the Investment Agreement.
"Common Stock" shall mean the common stock, par value
$0.001, of the Company.
"Due Date" shall mean the date that is one hundred
twenty (120) days after the date of this Agreement.
"Effective Date" shall have the meaning set forth in
Section 2.3.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, together with the rules and regulations
promulgated thereunder.
"Filing Deadline" shall mean the date that is
forty-five (45) days after the date of this Agreement.
"Ineffective Period" shall mean any period of time
after the Effective Date during the term hereof that the
Registration Statement or any Supplemental Registration Statement
(each as defined herein) becomes ineffective or unavailable for
use for the sale or resale, as applicable, of any or all of the
Registrable Securities (as defined herein) for any reason (or in
the event the prospectus under either of the above is not current
and deliverable).
"Investment Agreement" shall have the meaning set forth
in the Recitals hereto.
"Holder" shall mean Subscriber, and any other person or
entity owning or having the right to acquire Registrable
Securities or any permitted assignee.
"Piggyback Registration" and "Piggyback Registration
Statement" shall have the meaning set forth in Section 4.
"Put" shall have the meaning as set forth in the
Investment Agreement.
"Register," "Registered," and "Registration" shall mean
and refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act
or any successor rule, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" shall have the meaning set
forth in Section 2.1.
"Registration Statement" shall have the meaning set
forth in Section 2.2.
"Rule 144" shall mean Rule 144, as amended, promulgated
under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933,
as amended, together with the rules and regulations promulgated
thereunder.
"Subscriber" shall have the meaning set forth in the
preamble to this Agreement.
"Supplemental Registration Statement" shall have the
meaning set forth in Section 3(b).
"Warrants" shall have the meaning set forth in the
above Recitals.
"Warrant Shares" shall mean shares of Common Stock
issuable upon exercise of any Warrant.
2. Required Registration.
2.1 Registrable Securities. "Registrable Securities"
shall mean those shares of the Common Stock of the Company
together with any capital stock issued in replacement of, in
exchange for or otherwise in respect of such Common Stock, that
are: (i) issuable or issued to the Subscriber pursuant to the
Investment Agreement, and (ii) issuable or issued upon exercise
of the Warrants; provided, however, that notwithstanding the
above, the following shall not be considered Registrable
Securities:
(a) any Common Stock which would otherwise be
deemed to be Registrable Securities, if and to the extent that
those shares of Common Stock may be resold in a public
transaction without volume limitations or other material
restrictions without registration under the Securities Act,
including without limitation, pursuant to Rule 144 under the
Securities Act; and
(b) any shares of Common Stock which have been
sold in a private transaction in which the transferor's rights
under this Agreement are not assigned.
2.2 Filing of Initial Registration Statement. The
Company shall, by the Filing Deadline, file a registration
statement ("Registration Statement") on Form SB-2 (or other
suitable form, at the Company's discretion, but subject to the
reasonable approval of Subscriber), covering the resale of a
number of shares of Common Stock as Registrable Securities equal
to at least Twenty Million (20,000,000) shares of Common Stock
and shall cover, to the extent allowed by applicable law, such
indeterminate number of additional shares of Common Stock that
may be issued or become issuable as Registrable Securities by the
Company pursuant to Rule 416 of the Securities Act. In the event
that the Company has not filed the Registration Statement by the
Filing Deadline, then the Company shall pay to Subscriber an
amount equal to $500, in cash, for each Business Day after the
Filing Deadline until such Registration Statement is filed,
payable within ten (10) Business Days following the end of each
calendar month in which such payments accrue.
2.3 Registration Effective Date. The Company shall
use its best efforts to have the Registration Statement declared
effective by the SEC (the date of such effectiveness is referred
to herein as the "Effective Date") by the Due Date.
2.4 Shelf Registration. The Registration Statement
shall be prepared as a "shelf" registration statement under Rule
415, and shall be maintained effective until all Registrable
Securities are resold pursuant to the Registration Statement.
2.5 Supplemental Registration Statement. Anytime the
Registration Statement does not cover a sufficient number of
shares of Common Stock to cover all outstanding Registrable
Securities, the Company shall promptly prepare and file with the
SEC such Supplemental Registration Statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all such Registrable
Securities and shall use its best efforts to cause such
Supplemental Registration Statement to be declared effective as
soon as possible.
3. Obligations of the Company. Whenever required under
this Agreement to effect the registration of any Registrable
Securities, the Company shall, as expeditiously and reasonably
possible:
(a) Prepare and file with the Securities and Exchange
Commission ("SEC") a Registration Statement with respect to such
Registrable Securities and use its best efforts to cause such
Registration Statement to become effective and to remain
effective until all Registrable Securities are resold pursuant to
such Registration Statement, notwithstanding any Termination or
Automatic Termination (as each is defined in the Investment
Agreement) of the Investment Agreement.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement ("Amended
Registration Statement") or prepare and file any additional
registration statement ("Additional Registration Statement,"
together with the Amended Registration Statement, "Supplemental
Registration Statements") as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such Supplemental Registration
Statements or such prior registration statement and to cover the
resale of all Registrable Securities.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus (if applicable),
in conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by
them.
(d) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such
other securities or Blue Sky laws of the jurisdictions in which
the Holders are located, of such other jurisdictions as shall be
reasonably requested by the Holders of the Registrable Securities
covered by such Registration Statement and of all other
jurisdictions where legally required, provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) [Intentionally Omitted].
(f) As promptly as practicable after becoming aware of
such event, notify each Holder of Registrable Securities of the
happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver a number of copies of such
supplement or amendment to each Holder as such Holder may
reasonably request.
(g) Provide Holders with notice of the date that a
Registration Statement or any Supplemental Registration Statement
registering the resale of the Registrable Securities is declared
effective by the SEC, and the date or dates when the Registration
Statement is no longer effective.
(h) Provide Holders and their representatives the
opportunity and a reasonable amount of time, based upon
reasonable notice delivered by the Company, to conduct a
reasonable due diligence inquiry of Company's pertinent financial
and other records and make available its officers and directors
for questions regarding such information as it relates to
information contained in the Registration Statement.
(i) Provide Holders and their representatives the
opportunity to review the Registration Statement and all
amendments or supplements thereto prior to their filing with the
SEC by giving the Holder at least ten (10) business days advance
written notice prior to such filing.
(j) Provide each Holder with prompt notice of the
issuance by the SEC or any state securities commission or agency
of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceeding for
such purpose. The Company shall use its best efforts to prevent
the issuance of any stop order and, if any is issued, to obtain
the removal thereof at the earliest possible date.
(k) Use its best efforts to list the Registrable
Securities covered by the Registration Statement with all
securities exchanges or markets on which the Common Stock is then
listed and prepare and file any required filing with the NASD,
American Stock Exchange, NYSE and any other exchange or market on
which the Common Stock is listed.
4. Ineffective Period. Within five (5) Business Days of
the last day of any calendar month in which any Ineffective
Period occurs, the Company will pay to the Investor in cash, for
each trading day of such Ineffective Period that has occurred
during that calendar month, as liquidated damages for such
suspension and not as a penalty, an amount equal to X% of (i) the
number of Registrable Securities held by the Investor as of the
close of trading on such trading day, multiplied by (ii) the
closing bid price of the Company's Common Stock on such trading
day, accruing each trading day until the suspension is lifted,
where "X%" shall equal 2% for the first twenty (20) trading days,
in the aggregate, on which the Registration Statement is subject
to any Ineffective Period or Ineffective Periods, and where "X%"
shall equal 3% thereafter.
5. Piggyback Registration. If anytime prior to the date
that the Registration Statement is declared effective or during
any Ineffective Period (as defined in the Investment Agreement)
the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than
the Holders) any of its Common Stock under the Securities Act in
connection with the public offering of such securities solely for
cash (other than a registration relating solely for the sale of
securities to participants in a Company stock plan or a
registration on Form S-4 promulgated under the Securities Act or
any successor or similar form registering stock issuable upon a
reclassification, upon a business combination involving an
exchange of securities or upon an exchange offer for securities
of the issuer or another entity), the Company shall, at such
time, promptly give each Holder written notice of such
registration (a "Piggyback Registration Statement"). Upon the
written request of each Holder given by fax within ten (10) days
after mailing of such notice by the Company, the Company shall
cause to be included in such registration statement under the
Securities Act all of the Registrable Securities that each such
Holder has requested to be registered ("Piggyback Registration")
to the extent such inclusion does not violate the registration
rights of any other security holder of the company granted prior
to the date hereof; provided, however, that nothing herein shall
prevent the Company from withdrawing or abandoning such
registration statement prior to its effectiveness.
6. Limitation on Obligations to Register under a Piggyback
Registration. In the case of a Piggyback Registration pursuant
to an underwritten public offering by the Company, if the
managing underwriter determines and advises in writing that the
inclusion in the related Piggyback Registration Statement of all
Registrable Securities proposed to be included would interfere
with the successful marketing of the securities proposed to be
registered by the Company, then the number of such Registrable
Securities to be included in such Piggyback Registration
Statement, to the extent any such Registrable Securities may be
included in such Piggyback Registration Statement, shall be
allocated among all Holders who had requested Piggyback
Registration pursuant to the terms hereof, in the proportion that
the number of Registrable Securities which each such Holder seeks
to register bears to the total number of Registrable Securities
sought to be included by all Holders. If required by the managing
underwriter of such an underwritten public offering, the Holders
shall enter into an agreement limiting the number of Registrable
Securities to be included in such Piggyback Registration
Statement and the terms, if any, regarding the future sale of
such Registrable Securities.
7. Dispute as to Registrable Securities. In the event the
Company believes that shares sought to be registered under
Section 2 or Section 4 by Holders do not constitute "Registrable
Securities" by virtue of Section 2.1 of this Agreement, and the
status of those shares as Registrable Securities is disputed, the
Company shall provide, at its expense, an Opinion of Counsel,
reasonably acceptable to the Holders of the Securities at issue
(and satisfactory to the Company's transfer agent to permit the
sale and transfer), that those securities may be sold
immediately, without volume limitation or other material
restrictions, without registration under the Securities Act, by
virtue of Rule 144 or similar provisions.
8. Furnish Information. At the Company's request, each
Holder shall furnish to the Company such information regarding
Holder, the Registrable Securities held by it, and the intended
method of disposition of such securities to the extent required
to effect the registration of its Registrable Securities or to
determine that registration is not required pursuant to Rule 144
or other applicable provision of the Securities Act. The Company
shall include all information provided by such Holder pursuant
hereto in the Registration Statement, substantially in the form
supplied, except to the extent such information is not permitted
by law.
9. Expenses. All expenses, other than commissions and
fees and expenses of counsel to the selling Holders, incurred in
connection with registrations, filings or qualifications pursuant
hereto, including (without limitation) all registration, filing
and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, shall be borne by the
Company.
10. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this
Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors,
partners, legal counsel, and accountants of each Holder, any
underwriter (as defined in the Securities Act, or as deemed by
the Securities Exchange Commission, or as indicated in a
registration statement) for such Holder and each person, if any,
who controls such Holder or underwriter within the meaning of
Section 15 of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements or omissions: (i) any untrue statement or alleged
untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or
supplements thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, and the
Company will reimburse each such Holder, officer or director,
underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
subsection 9(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of
or is based upon a violation which occurs in reliance upon and in
conformity with written information furnished expressly for use
in connection with such registration by any such Holder, officer,
director, underwriter or controlling person; provided however,
that the above shall not relieve the Company from any other
liabilities which it might otherwise have.
(b) Each Holder of any securities included in such
registration being effected shall indemnify and hold harmless the
Company, its directors and officers, each underwriter and each
other person, if any, who controls (within the meaning of the
Securities Act) the Company or such other indemnified party,
against any liability, joint or several, to which any such
indemnified party may become subject under the Securities Act or
any other statute or at common law, insofar as such liability (or
actions in respect thereof) arises out of or is based upon (i)
any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in any
registration statement under which securities were registered
under the Securities Act at the request of such Holder, any
preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or (ii) any omission or
alleged omission by such Holder to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration
statement, preliminary or final prospectus, amendment or
supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by such Holder
specifically for use therein. Such Holder shall reimburse any
indemnified party for any legal fees incurred in investigating or
defending any such liability; provided, however, that such
Holder's obligations hereunder shall be limited to an amount
equal to the proceeds to such Holder of the securities sold in
any such registration; and provided further, that no Holder shall
be required to indemnify any party against any liability arising
from any untrue or misleading statement or omission contained in
any preliminary prospectus if such deficiency is corrected in the
final prospectus or for any liability which arises out of the
failure of such party to deliver a prospectus as required by the
Securities Act.
(c) Promptly after receipt by an indemnified party
under this Section 9 of notice of the commencement of any action
(including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any
indemnifying party under this Section 9, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume,
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the reasonably incurred
fees and expenses of one such counsel to be paid by the
indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflicting interests
between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying
party of any liability to the indemnified party under this
Section 9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this
Section 9.
(d) In the event that the indemnity provided in
paragraphs (a) and/or (b) of this Section 9 is unavailable to or
insufficient to hold harmless an indemnified party for any
reason, the Company and each Holder agree to contribute to the
aggregate claims, losses, damages and liabilities (including
legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which
the Company and one or more of the Holders may be subject in such
proportion as is appropriate to reflect the relative fault of the
Company and the Holders in connection with the statements or
omissions which resulted in such Losses. Relative fault shall be
determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or by
the Holders. The Company and the Holders agree that it would not
be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9,
each person who controls a Holder of Registrable Securities
within the meaning of either the Securities Act or the Exchange
Act and each director, officer, partner, employee and agent of a
Holder shall have the same rights to contribution as such holder,
and each person who controls the Company within the meaning of
either the Securities Act or the Exchange Act and each director
and officer of the Company shall have the same rights to
contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The obligations of the Company and Holders under
this Section 9 shall survive the resale, if any, of the Common
Stock, the completion of any offering of Registrable Securities
in a Registration Statement under this Agreement, and otherwise.
11. Reports Under Exchange Act. With a view to making
available to the Holders the benefits of Rule 144 promulgated
under the Securities Act and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration, the Company
agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144; and
(b) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act.
12. Amendments to Registration Rights. Any provision of
this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the written consent of each Holder affected
thereby. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder, each future
Holder, and the Company. The Company will provide the Holder
five (5) business days notice prior to filing any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus and shall give the Holder the opportunity to review
and comment on any such amendment or supplement. Failure of the
Purchaser to comment within five (5) business days shall not
preclude the Company from filing such amendment or supplement
after such notice period has expired.
13. Notices. All notices required or permitted under this
Agreement shall be made in writing signed by the party making the
same, shall specify the section under this Agreement pursuant to
which it is given, and shall be addressed if to (i) the Company
at: Mentor On Call, Inc.; Attn: James N. Rodgers, President,
Scotia Plaza, 40 King Street West, Suite 4900, Toronto Ontario,
Canada M5H 4A2; Telephone: (604) 532-5357, Facsimile: (604)
532-5662 (or at such other location as directed by the Company in
writing) and (ii) the Holders at their respective last address as
the party as shown on the records of the Company. Any notice,
except as otherwise provided in this Agreement, shall be made by
fax and shall be deemed given at the time of transmission of the
fax.
14. Termination. This Agreement shall terminate on the
date all Registrable Securities cease to exist (as that term is
defined in Section 2.1 hereof); but without prejudice to (i) the
parties' rights and obligations arising from breaches of this
Agreement occurring prior to such termination (ii) other
indemnification obligations under this Agreement.
15. Assignment. No assignment, transfer or delegation,
whether by operation of law or otherwise, of any rights or
obligations under this Agreement by the Company or any Holder,
respectively, shall be made without the prior written consent of
the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be
transferred to a subsequent holder of the Holder's Registrable
Securities (provided such transferee shall provide to the
Company, together with or prior to such transferee's request to
have such Registrable Securities included in a Registration, a
writing executed by such transferee agreeing to be bound as a
Holder by the terms of this Agreement), and the Company hereby
agrees to file an amended registration statement including such
transferee or a selling security holder thereunder; and provided
further that the Company may transfer its rights and obligations
under this Agreement to a purchaser of all or a substantial
portion of its business if the obligations of the Company under
this Agreement are assumed in connection with such transfer,
either by merger or other operation of law (which may include
without limitation a transaction whereby the Registrable
Securities are converted into securities of the successor in
interest) or by specific assumption executed by the transferee.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia
applicable to agreements made in and wholly to be performed in
that jurisdiction, except for matters arising under the
Securities Act or the Exchange Act, which matters shall be
construed and interpreted in accordance with such laws. Any
dispute arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be finally settled
by the federal or state courts located in Fulton County, Georgia.
17. Execution in Counterparts Permitted. This Agreement
may be executed in any number of counterparts, each of which
shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one (1)
instrument.
18. Specific Performance. The Holder shall be entitled to
the remedy of specific performance in the event of the Company's
breach of this Agreement, the parties agreeing that a remedy at
law would be inadequate.
19. Indemnity. Each party shall indemnify each other party
against any and all claims, damages (including reasonable
attorney's fees), and expenses arising out of the first party's
breach of any of the terms of this Agreement.
20. Entire Agreement; Written Amendments Required. This
Agreement, including the Exhibits attached hereto, the Investment
Agreement, the Common Stock certificates, and the other documents
delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to
the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth
herein or therein. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of this 8th day of September, 2000.
MENTOR ON CALL, INC.
By:________________________________
James N. Rodgers, President
Address: Scotia Plaza
40 King Street, West, Suite 4900
Toronto Ontario, Canada M5H 4A2
Telephone: (604) 532-5357
Facsimile: (604) 532-5662
SUBSCRIBER:
SWARTZ PRIVATE EQUITY, LLC.
By:________________________________
Eric S. Swartz, Manager
Address: 1080 Holcomb Bridge Road
Bldg. 200, Suite 285
Roswell, GA 30076
Telephone: (770) 640-8130
Facsimile: (770) 640-7150
<PAGE>
<PAGE>
EXHIBIT 5.1 OPINION OF DIETERICH & ASSOCIATES REGARDING THE
VALIDITY OF THE COMMON STOCK.
[DIETERICH & ASSOCIATES LETTERHEAD]
January 10, 2001
Mentor On Call, Inc.
40 King Street, West, Suite 4900
Toronto Ontario, Canada M5H 4A2
Re: Registration Statement on Form SB-2
-----------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form SB-2 to be filed by Mentor On Call, Inc. (the "Company")
with the Securities and Exchange Commission in connection with
the registration under the Securities Act of 1933, as amended, of
certain shares of the Company's common stock, par value $0.001
per share, including 20,000,000 shares of the Company's common
stock underlying the Swartz warrant and equity line (the "Company
Shares").
As your counsel, we are familiar with the proceedings taken
in connection with the authorization, issuance and delivery of
the Company Shares, and we have examined such matters of fact and
law as we have deemed relevant in connection with this opinion.
Based upon the foregoing, we are of the opinion that the
Company Shares when issued upon the exercise of the warrants and
in accordance with the Investment Agreement, dated September 8,
2000, by and between the Company and Swartz, and upon payment of
the purchase price as set forth therein, will be legally and
validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the
caption "Legal Matters" in the Prospectus that is a part thereof.
Respectfully submitted,
DIETERICH & ASSOCIATES
<PAGE>
<PAGE>
EXHIBIT 10.8 SWARTZ INVESTMENT AGREEMENT, dated September 8,
2000
MENTOR ON CALL, INC.
INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER
SECURITIES AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL
AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE
SECURITIES DESCRIBED HEREIN BY OR TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE SUCH
AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF
RISK. THE INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE
INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED. SEE THE
RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS
AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS INVESTMENT AGREEMENT (this "Agreement" or
"Investment Agreement") is made as of the 8th day of September,
2000, by and between Mentor On Call, Inc., a corporation duly
organized and existing under the laws of the State of Nevada (the
"Company"), and the undersigned Investor executing this Agreement
("Investor").
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue to
the Investor, and the Investor shall purchase from the Company,
from time to time as provided herein, shares of the Company's
Common Stock, as part of an offering of Common Stock by the
Company to Investor, for a maximum aggregate offering amount of
Thirty Five Million Dollars ($35,000,000) (the "Maximum Offering
Amount"); and
WHEREAS, the solicitation of this Investment Agreement and,
if accepted by the Company, the offer and sale of the Common
Stock are being made in reliance upon the provisions of
Regulation D ("Regulation D") promulgated under the Act, Section
4(2) of the Act, and/or upon such other exemption from the
registration requirements of the Act as may be available with
respect to any or all of the purchases of Common Stock to be made
hereunder.
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement
(including the recitals above), the following terms shall have
the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"20% Approval" shall have the meaning set forth in Section
5.25.
"9.9% Limitation" shall have the meaning set forth in
Section 2.3.1(f).
"Accredited Investor" shall have the meaning set forth in
Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit
E.
"Advance Put Notice Confirmation" shall have the meaning set
forth in Section 2.3.1(a), the form of which is attached hereto
as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth
in Section 2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.4.
"Aggregate Issued Shares" equals the aggregate number of
shares of Common Stock issued to Investor pursuant to the terms
of this Agreement or the Registration Rights Agreement as of a
given date, including Put Shares and Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set
forth in Section 2.5.3(b).
"Agreement" shall mean this Investment Agreement.
"Automatic Termination" shall have the meaning set forth in
Section 2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set
forth in Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal
Market is open for trading.
"Calendar Month" shall mean the period of time beginning on
the numeric day in question in a calendar month and for Calendar
Months thereafter, beginning on the earlier of (i) the same
numeric day of the next calendar month or (ii) the last day of
the next calendar month. Each Calendar Month shall end on the
day immediately preceding the beginning of the next succeeding
Calendar Month.
"Cap Amount" shall have the meaning set forth in Section
2.3.10.
"Capital Raising Limitations" shall have the meaning set
forth in Section 6.5.1.
"Capitalization Schedule" shall have the meaning set forth
in Section 3.2.4, attached hereto as Exhibit K.
"Change in Control" shall have the meaning set forth within
the definition of Major Transaction, below.
"Closing" shall mean one of (i) the Investment Commitment
Closing and (ii) each closing of a purchase and sale of Common
Stock pursuant to Section 2.
"Closing Bid Price" means, for any security as of any date,
the last closing bid price for such security during Normal
Trading on the O.T.C. Bulletin Board, or, if the O.T.C. Bulletin
Board is not the principal securities exchange or trading market
for such security, the last closing bid price during Normal
Trading of such security on the principal securities exchange or
trading market where such security is listed or traded as
reported by such principal securities exchange or trading market,
or if the foregoing do not apply, the last closing bid price
during Normal Trading of such security in the over-the-counter
market on the electronic bulletin board for such security, or, if
no closing bid price is reported for such security, the average
of the bid prices of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing
Bid Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Investor in
this Offering. If the Company and the Investor in this Offering
are unable to agree upon the fair market value of the Common
Stock, then such dispute shall be resolved by an investment
banking firm mutually acceptable to the Company and the Investor
in this offering and any fees and costs associated therewith
shall be paid by the Company.
"Commitment Evaluation Period" shall have the meaning set
forth in Section 2.6.
"Commitment Warrants" shall have the meaning set forth in
Section 2.4.1, the form of which is attached hereto as Exhibit U.
"Commitment Warrant Exercise Price" shall have the meaning
set forth in Section 2.4.1.
"Common Shares" shall mean the shares of Common Stock of the
Company.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Mentor On Call, Inc., a corporation
duly organized and existing under the laws of the State of
Nevada.
"Company Designated Maximum Put Dollar Amount" shall have
the meaning set forth in Section 2.3.1(a).
"Company Designated Minimum Put Share Price" shall have the
meaning set forth in Section 2.3.1(a).
"Company Termination" shall have the meaning set forth in
Section 2.3.12.
"Conditions to Investor's Obligations" shall have the
meaning as set forth in Section 2.2.2.
"Delisting Event" shall mean any time during the term of
this Investment Agreement, that the Company's Common Stock is not
listed for and actively trading on the O.T.C. Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National Market, the American
Stock Exchange, or the New York Stock Exchange or is suspended or
delisted with respect to the trading of the shares of Common
Stock on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth
in Section 3.2.4.
"Due Diligence Review" shall have the meaning as set forth
in Section 2.5.
"Effective Date" shall have the meaning set forth in Section
2.3.1.
"Equity Securities" shall have the meaning set forth in
Section 6.5.1.
"Evaluation Day" shall have the meaning set forth in Section
2.3.1(b).
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Excluded Day" shall have the meaning set forth in Section
2.3.1(b).
"Extended Put Period" shall mean the period of time between
the Advance Put Notice Date until the Pricing Period End Date.
"Impermissible Put Cancellation" shall have the meaning set
forth in Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth
in Section 9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in
Section 2.3.1 (b).
"Ineffective Period" shall have the meaning given to it in
the Registration Rights Agreement.
"Intended Put Share Amount" shall have the meaning set forth
in Section 2.3.1(a).
"Investment Commitment Closing" shall have the meaning set
forth in Section 2.2.1.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an
opinion from Company's independent counsel, substantially in the
form attached as Exhibit B, or such other form as agreed upon by
the parties, as to the Investment Commitment Closing.
"Investment Date" shall mean the date of the Investment
Commitment Closing.
"Investor" shall have the meaning set forth in the preamble
hereto.
"Key Employee" shall have the meaning set forth in Section
5.17, as set forth in Exhibit N.
"Late Payment Amount" shall have the meaning set forth in
Section 2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction" shall mean and shall be deemed to have
occurred at such time upon any of the following events:
(i) a consolidation, merger or other business
combination or event or transaction following which the holders
of Common Stock of the Company immediately preceding such
consolidation, merger, combination or event either (i) no longer
hold a majority of the shares of Common Stock of the Company or
(ii) no longer have the ability to elect the board of directors
of the Company (a "Change of Control");
(ii) the sale or transfer of a portion of the Company's
assets not in the ordinary course of business;
(iii) the purchase of assets by the Company not in the
ordinary course of business; or
(iv) a purchase, tender or exchange offer made to the
holders of outstanding shares of Common Stock.
"Market Price" shall equal the lowest Closing Bid Price for
the Common Stock on the Principal Market during the Pricing
Period for the applicable Put.
"Material Facts" shall have the meaning set forth in Section
2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (i) the
Company Designated Maximum Put Dollar Amount, if any, specified
by the Company in a Put Notice, and (ii) $2 million.
"Maximum Offering Amount" shall mean have the meaning set
forth in the recitals hereto.
"NASD" shall have the meaning set forth in Section 6.9.
"Nasdaq 20% Rule" shall have the meaning set forth in
Section 2.3.10.
"Normal Trading" shall mean trading that occurs between 9:30
AM and 4:00 PM, New York City Time, on any Business Day, and
shall expressly exclude "after hours" trading.
"Numeric Day" shall mean the numerical day of the month of
the Investment Date or the last day of the calendar month in
question, whichever is less.
"NYSE" shall have the meaning set forth in Section 6.9.
"Offering" shall mean the Company's offering of Common Stock
and Warrants issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by
an officer of the Company, to the effect that the representations
and warranties of the Company in this Agreement required to be
true for the applicable Closing are true and correct in all
material respects and all of the conditions and limitations set
forth in this Agreement for the applicable Closing are satisfied.
"Opinion of Counsel" shall mean, as applicable, the
Investment Commitment Opinion of Counsel, the Put Opinion of
Counsel, and the Registration Opinion.
"Payment Due Date" shall have the meaning set forth in
Section 2.3.8.
"Pricing Period" shall mean, unless otherwise shortened under the
terms of this Agreement, the period beginning on the Business Day
immediately following the Put Date and ending on and including
the date which is 20 Business Days after such Put Date.
"Pricing Period End Date" shall mean the last Business Day of any
Pricing Period.
"Principal Market" shall mean the O.T.C. Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National Market, the American
Stock Exchange or the New York Stock Exchange, whichever is at
the time the principal trading exchange or market for the Common
Stock.
"Proceeding" shall have the meaning as set forth Section
5.1.
"Purchase" shall have the meaning set forth in Section
2.3.7.
"Purchase Warrant Exercise Price" shall have the meaning set
forth in Section 2.4.2.
"Purchase Warrants" shall have the meaning set forth in
Section 2.4.2, the form of which is attached hereto as Exhibit D.
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in
Section 2.3.11(a).
"Put Cancellation Date" shall have the meaning set forth in
Section 2.3.11(a).
"Put Cancellation Notice" shall have the meaning set forth
in Section 2.3.11(a), the form of which is attached hereto as
Exhibit Q.
"Put Cancellation Notice Confirmation" shall have the
meaning set forth in Section 2.3.11(c), the form of which is
attached hereto as Exhibit S.
"Put Closing" shall have the meaning set forth in Section
2.3.8.
"Put Closing Date" shall have the meaning set forth in
Section 2.3.8.
"Put Date" shall mean the date that is specified by the
Company in any Put Notice for which the Company intends to
exercise a Put under Section 2.3.1, unless the Put Date is
postponed pursuant to the terms hereof, in which case the "Put
Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the
Put Share Amount by the respective Put Share Prices with respect
to such Put Shares, subject to the limitations herein.
"Put Notice" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth
in Section 2.3.1(d), the form of which is attached hereto as
Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from
Company's independent counsel, in the form attached as Exhibit I,
or such other form as agreed upon by the parties, as to any Put
Closing.
"Put Share Amount" shall have the meaning as set forth
Section 2.3.1(b).
"Put Share Price" shall have the meaning set forth in
Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are
purchased by the Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth
in the Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in
Section 2.3.6(a), the form of which is attached hereto as Exhibit
R.
"Registration Opinion Deadline" shall have the meaning set
forth in Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain
registration rights agreement entered into by the Company and
Investor on even date herewith, in the form attached hereto as
Exhibit A, or such other form as agreed upon by the parties.
"Registration Statement" shall have the meaning as set forth
in the Registration Rights Agreement.
"Regulation D" shall have the meaning set forth in the
recitals hereto.
"Reporting Issuer" shall have the meaning set forth in
Section 6.2.
"Restrictive Legend" shall have the meaning set forth in
Section 4.7.
"Required Put Documents" shall have the meaning set forth in
Section 2.3.5.
"Right of First Refusal" shall have the meaning set forth in
Section 6.5.2.
"Risk Factors" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in
Section 5, and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together
with the Common Stock of the Company, the Warrants and the
Warrant Shares issuable pursuant to this Investment Agreement.
"Semi-Annual Non-Usage Fee" shall have the meaning set forth
in Section 2.6.
"Share Authorization Increase Approval" shall have the
meaning set forth in Section 5.25.
"Stockholder 20% Approval" shall have the meaning set forth
in Section 6.11.
"Supplemental Registration Statement" shall have the meaning
set forth in the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be
a period of time beginning on the date of this Agreement and
ending on the Termination Date.
"Termination Date" shall mean the earlier of (i) the date
that is three (3) years after the Effective Date, or (ii) the
date that is thirty (30) Business Days after the later of (a) the
Put Closing Date on which the sum of the aggregate Put Share
Price for all Put Shares equal the Maximum Offering Amount, (b)
the date that the Company has delivered a Termination Notice to
the Investor, (c) the date of an Automatic Termination, and (d)
the date that all of the Warrants have been exercised.
"Termination Fee" shall have the meaning as set forth in
Section 2.6.
"Termination Notice" shall have the meaning as set forth in
Section 2.3.12.
"Third Party Report" shall have the meaning set forth in
Section 3.2.4.
"Trading Volume " shall mean the volume of shares of the
Company's Common Stock that trade between 9:30 AM and 4:00 PM,
New York City Time, on any Business Day, and shall expressly
exclude any shares trading during "after hours" trading.
"Transaction Documents" shall have the meaning set forth in
Section 9.
"Transfer Agent" shall have the meaning set forth in Section
6.10.
"Transfer Agent Instructions" shall mean the Company's
instructions to its transfer agent, substantially in the form
attached as Exhibit T, or such other form as agreed upon by the
parties.
"Trigger Price" shall have the meaning set forth in Section
2.3.1(b).
"Truncated Pricing Period" shall have the meaning set forth
in Section 2.3.11(d).
"Truncated Put Share Amount" shall have the meaning set
forth in Section 2.3.11(b).
"Unlegended Share Certificates" shall mean a certificate or
certificates (or electronically delivered shares, as appropriate)
(in denominations as instructed by Investor) representing the
shares of Common Stock to which the Investor is then entitled to
receive, registered in the name of Investor or its nominee (as
instructed by Investor) and not containing a restrictive legend
or stop transfer order, including but not limited to the Put
Shares for the applicable Put and Warrant Shares.
"Use of Proceeds Schedule" shall have the meaning as set
forth in Section 3.2.4, attached hereto as Exhibit L.
"Volume Limitations" shall have the meaning set forth in
Section 2.3.1(b).
"Warrant Shares" shall mean the Common Stock issued or
issuable upon exercise of the Warrants.
"Warrants" shall mean Purchase Warrants and Commitment
Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the
satisfaction of the conditions to closing set forth in Sections
2.2 and 2.3 below, Investor hereby agrees to purchase such
amounts of Common Stock and accompanying Warrants as the Company
may, in its sole and absolute discretion, from time to time elect
to issue and sell to Investor according to one or more Puts
pursuant to Section 2.3 below.
2.2 Investment Commitment.
2.2.1 Investment Commitment Closing. The
closing of this Agreement (the "Investment Commitment Closing")
shall be deemed to occur when this Agreement and the Registration
Rights Agreement have been executed by both Investor and the
Company, the Transfer Agent Instructions have been executed by
both the Company and the Transfer Agent, and the other Conditions
to Investor's Obligations set forth in Section 2.2.2 below have
been met.
2.2.2 Conditions to Investor's Obligations.
As a prerequisite to the Investment Commitment Closing and the
Investor's obligations hereunder, all of the following (the
"Conditions to Investor's Obligations") shall have been satisfied
prior to or concurrently with the Company's execution and
delivery of this Agreement:
(a) the following documents shall have been delivered
to the Investor: (i) the Registration Rights Agreement (executed
by the Company and Investor), (ii) the Investment Commitment
Opinion of Counsel (signed by the Company's counsel), (iii) the
Transfer Agent Instructions (executed by the Company and the
Transfer Agent), and (iv) a Secretary's Certificate as to (A) the
resolutions of the Company's board of directors authorizing this
transaction, (B) the Company's Certificate of Incorporation, and
(C) the Company's Bylaws;
(b) this Investment Agreement, accepted by the
Company, shall have been received by the Investor;
(c) the Company's Common Stock shall be listed for
trading and actually trading on the O.T.C. Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National Market, the American
Stock Exchange or the New York Stock Exchange;
(d) other than continuing losses described in the Risk
Factors set forth in the Disclosure Documents (provided for in
Section 3.2.4), as of the Closing there have been no material
adverse changes in the Company's business prospects or financial
condition since the date of the last balance sheet included in
the Disclosure Documents, including but not limited to incurring
material liabilities; and
(e) the representations and warranties of the Company
in this Agreement shall be true and correct in all material
respects and the conditions to Investor's obligations set forth
in this Section 2.2.2 shall have been satisfied as of such
Closing; and the Company shall deliver an Officer's Certificate,
signed by an officer of the Company, to such effect to the
Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to
the Individual Put Limit, the Maximum Offering Amount and the Cap
Amount (if applicable), and the other conditions and limitations
set forth in this Agreement, at any time beginning on the date on
which the Registration Statement is declared effective by the SEC
(the "Effective Date"), the Company may, in its sole and absolute
discretion, elect to exercise one or more Puts according to the
following procedure, provided that each subsequent Put Date after
the first Put Date shall be no sooner than five (5) Business Days
following the preceding Pricing Period End Date:
(a) Delivery of Advance Put Notice. At
least ten (10) Business Days but not more than twenty (20)
Business Days prior to any intended Put Date (unless otherwise
agreed in writing by the Investor), the Company shall deliver
advance written notice (the "Advance Put Notice," the form of
which is attached hereto as Exhibit E, the date of such Advance
Put Notice being the "Advance Put Notice Date") to Investor
stating the Put Date for which the Company shall, subject to the
limitations and restrictions contained herein, exercise a Put and
stating the number of shares of Common Stock (subject to the
Individual Put Limit and the Maximum Put Dollar Amount) which the
Company intends to sell to the Investor for the Put (the
"Intended Put Share Amount").
The Company may, at its option, also designate in any
Advance Put Notice (i) a maximum dollar amount of Common Stock,
not to exceed $2,000,000, which it shall sell to Investor during
the Put (the "Company Designated Maximum Put Dollar Amount")
and/or (ii) a minimum purchase price per Put Share at which the
Investor may purchase shares of Common Stock pursuant to such Put
Notice (a "Company Designated Minimum Put Share Price"). The
Company Designated Minimum Put Share Price, if applicable, shall
be no greater than the lesser of (i) 80% of the Closing Bid Price
of the Company's common stock on the Business Day immediately
preceding the Advance Put Notice Date, or (ii) the Closing Bid
Price of the Company's common stock on the Business Day
immediately preceding the Advance Put Notice Date minus $0.15.
The Company may decrease (but not increase) the Company
Designated Minimum Put Share Price for a Put at any time by
giving the Investor written notice of such decrease not later
than 12:00 Noon, New York City time, on the Business Day
immediately preceding the Business Day that such decrease is to
take effect. A decrease in the Company Designated Minimum Put
Share Price shall have no retroactive effect on the determination
of Trigger Prices and Excluded Days for days preceding the
Business Day that such decrease takes effect.
Notwithstanding the above, if, at the time of delivery of an
Advance Put Notice, more than two (2) Calendar Months have passed
since the date of the previous Put Closing, such Advance Put
Notice shall provide at least twenty (20) Business Days notice of
the intended Put Date, unless waived in writing by the Investor.
In order to effect delivery of the Advance Put Notice, the
Company shall (i) send the Advance Put Notice by facsimile on
such date so that such notice is received by the Investor by 6:00
p.m., New York, NY time, and (ii) surrender such notice on such
date to a courier for overnight delivery to the Investor (or two
(2) day delivery in the case of an Investor residing outside of
the U.S.). Upon receipt by the Investor of a facsimile copy of
the Advance Put Notice, the Investor shall, within two (2)
Business Days, send, via facsimile, a confirmation of receipt
(the "Advance Put Notice Confirmation," the form of which is
attached hereto as Exhibit F) of the Advance Put Notice to the
Company specifying that the Advance Put Notice has been received
and affirming the intended Put Date and the Intended Put Share
Amount.
(b) Put Share Amount. The "Put Share Amount"
is the number of shares of Common Stock that the Investor shall
be obligated to purchase in a given Put, and shall equal the
lesser of (i) the Intended Put Share Amount, and (ii) the
Individual Put Limit. The "Individual Put Limit" shall equal the
lesser of (i) 1,500,000 shares, (ii) 15% of the sum of the
aggregate daily reported Trading Volumes in the outstanding
Common Stock on the Company's Principal Market, excluding any
block trades of 20,000 or more shares of Common Stock, for all
Evaluation Days (as defined below) in the Pricing Period, (iii)
the number of Put Shares which, when multiplied by their
respective Put Share Prices, equals the Maximum Put Dollar
Amount, and (iv) the 9.9% Limitation, but in no event shall the
Individual Put Limit exceed 15% of the sum of the aggregate daily
reported Trading Volumes in the outstanding Common Stock on the
Company's Principal Market, excluding any block trades of 20,000
or more shares of Common Stock, for the twenty (20) Business Days
immediately preceding the Put Date (this limitation, together
with the limitation in (i) immediately above, are collectively
referred to herein as the "Volume Limitations"). Company agrees
not to trade Common Stock or arrange for Common Stock to be
traded for the purpose of artificially increasing the Volume
Limitations.
For purposes of this Agreement:
"Trigger Price" for any Pricing Period shall mean the
greater of (i) the Company Designated Minimum Put Share Price,
plus $0.15, or (ii) the Company Designated Minimum Put Share
Price divided by .91.
An "Excluded Day" shall mean each Business Day during a
Pricing Period where the lowest intra-day trading price of the
Common Stock is less than the Trigger Price.
An "Evaluation Day" shall mean each Business Day during
a Pricing Period that is not an Excluded Day.
(c) Put Share Price. The purchase price for
the Put Shares (the "Put Share Price") shall equal the lesser of
(i) the Market Price for such Put, minus $0.15, or (ii) 91% of
the Market Price for such Put, but shall in no event be less than
the Company Designated Minimum Put Share Price for such Put, if
applicable.
(d) Delivery of Put Notice. After delivery
of an Advance Put Notice, on the Put Date specified in the
Advance Put Notice the Company shall deliver written notice (the
"Put Notice," the form of which is attached hereto as Exhibit G)
to Investor stating (i) the Put Date, (ii) the Intended Put Share
Amount as specified in the Advance Put Notice (such exercise a
"Put"), (iii) the Company Designated Maximum Put Dollar Amount
(if applicable), and (iv) the Company Designated Minimum Put
Share Price (if applicable). In order to effect delivery of the
Put Notice, the Company shall (i) send the Put Notice by
facsimile on the Put Date so that such notice is received by the
Investor by 6:00 p.m., New York, NY time, and (ii) surrender such
notice on the Put Date to a courier for overnight delivery to the
Investor (or two (2) day delivery in the case of an Investor
residing outside of the U.S.). Upon receipt by the Investor of a
facsimile copy of the Put Notice, the Investor shall, within two
(2) Business Days, send, via facsimile, a confirmation of receipt
(the "Put Notice Confirmation," the form of which is attached
hereto as Exhibit H) of the Put Notice to Company specifying that
the Put Notice has been received and affirming the Put Date and
the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On
or before the Put Date for such Put, the Company shall deliver
the Required Put Documents (as defined in Section 2.3.5 below) to
the Investor (or to an agent of Investor, if Investor so
directs). Unless otherwise specified by the Investor, the
delivery of the Put Shares of Common Stock shall be in the form
of physical certificates. If specifically requested by the
Investor, the Put Shares shall be transmitted electronically
pursuant to such electronic delivery system as the Investor shall
request. If the Company has not delivered all of the Required
Put Documents to the Investor on or before the Put Date, the Put
shall be automatically cancelled, unless the Investor agrees to
delay the Put Date by up to three (3) Business Days, in which
case the Pricing Period begins on the Business Day following such
new Put Date. If the Company has not delivered all of the
Required Put Documents to the Investor on or before the Put Date
(or new Put Date, if applicable), and the Investor has not agreed
in writing to delay the Put Date, the Put is automatically
canceled (an "Impermissible Put Cancellation") and, unless the
Put was otherwise canceled in accordance with the terms of
Section 2.3.11, the Company shall pay the Investor $5,000 for its
reasonable due diligence expenses incurred in preparation for the
canceled Put and the Company may deliver an Advance Put Notice
for the subsequent Put no sooner than ten (10) Business Days
after the date that such Put was canceled, unless otherwise
agreed by the Investor.
(f) Limitation on Investor's Obligation to
Purchase Shares. Notwithstanding anything to the contrary in this
Agreement, in no event shall the Investor be required to
purchase, and an Intended Put Share Amount may not include, an
amount of Put Shares, which when added to the number of Put
Shares acquired by the Investor pursuant to this Agreement during
the 31 days preceding the Put Date with respect to which this
determination of the permitted Intended Put Share Amount is being
made, would exceed 9.99% of the number of shares of Common Stock
outstanding (on a fully diluted basis, to the extent that
inclusion of unissued shares is mandated by Section 13(d) of the
Exchange Act) on the Put Date for such Pricing Period, as
determined in accordance with Section 13(d) of the Exchange Act
(the "Section 13(d) Outstanding Share Amount"). Each Put Notice
shall include a representation of the Company as to the Section
13(d) Outstanding Share Amount on the related Put Date. In the
event that the Section 13(d) Outstanding Share Amount is
different on any date during a Pricing Period than on the Put
Date associated with such Pricing Period, then the number of
shares of Common Stock outstanding on such date during such
Pricing Period shall govern for purposes of determining whether
the Investor, when aggregating all purchases of Shares made
pursuant to this Agreement in the 31 calendar days preceding such
date, would have acquired more than 9.99% of the Section 13(d)
Outstanding Share Amount. The limitation set forth in this
Section 2.3.1(f) is referred to as the "9.9% Limitation."
2.3.2 Termination of Right to Put. The
Company's right to require the Investor to purchase any
subsequent Put Shares shall terminate permanently (each, an
"Automatic Termination") upon the occurrence of any of the
following:
(a) the Company shall not exercise a Put or
any Put thereafter if, at any time, either the Company or any
director or executive officer of the Company has engaged in a
transaction or conduct related to the Company that has resulted
in (i) a Securities and Exchange Commission enforcement action,
or (ii) a civil judgment or criminal conviction for fraud or
misrepresentation, or for any other offense that, if prosecuted
criminally, would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or
any Put thereafter, on any date after a cumulative time period or
series of time periods, consisting only of Ineffective Periods
and Delisting Events, that lasts for an aggregate of four (4)
months;
(c) the Company shall not exercise a Put or
any Put thereafter if at any time the Company has filed for
and/or is subject to any bankruptcy, insolvency, reorganization
or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors
instituted by or against the Company or any subsidiary of the
Company;
(d) the Company shall not exercise a Put
after the sooner of (i) the date that is three (3) years after
the Effective Date, or (ii) the Put Closing Date on which the
aggregate of the Put Dollar Amounts for all Puts equal the
Maximum Offering Amount; and
(e) the Company shall not exercise a Put
after the Company has breached any covenant in Section 2.6,
Section 6, or Section 9 hereof.
(f) if no Registration Statement has been
declared effective by the date that is one (1) year after the
date of this Agreement, the Automatic Termination shall occur on
the date that is one (1) year after the date of this Agreement.
2.3.3 Put Limitations. The Company's right to
exercise a Put shall be limited as follows:
(a) notwithstanding the amount of any Put,
the Investor shall not be obligated to purchase any additional
Put Shares once the aggregate Put Dollar Amount paid by Investor
equals the Maximum Offering Amount;
(b) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for
which the Company has announced a subdivision or combination,
including a reverse split, of its Common Stock or has subdivided
or combined its Common Stock during the Extended Put Period;
(c) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for
which the Company has paid a dividend of its Common Stock or has
made any other distribution of its Common Stock during the
Extended Put Period;
(d) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for
which the Company has made, during the Extended Put Period, a
distribution of all or any portion of its assets or evidences of
indebtedness to the holders of its Common Stock;
(e) the Investor shall not be obligated to
acquire and pay for the Put Shares with respect to any Put for
which a Major Transaction has occurred during the Extended Put
Period.
2.3.4 Conditions Precedent to the Right of the
Company to Deliver an Advance Put Notice or a Put Notice and the
Obligation of the Investor to Purchase Put Shares. The right of
the Company to deliver an Advance Put Notice or a Put Notice and
the obligation of the Investor hereunder to acquire and pay for
the Put Shares incident to a Closing is subject to the
satisfaction, on (i) the date of delivery of such Advance Put
Notice or Put Notice and (ii) the applicable Put Closing Date, of
each of the following conditions:
(a) the Company's Common Stock shall be listed for and
actively trading on the O.T.C. Bulletin Board, the
Nasdaq Small Cap Market, the Nasdaq National
Market or the New York Stock Exchange and the Put
Shares shall be so listed, and to the Company's
knowledge there is no notice of any suspension or
delisting with respect to the trading of the
shares of Common Stock on such market or exchange;
(b) the Company shall have satisfied any and all
obligations pursuant to the Registration Rights
Agreement, including, but not limited to, the
filing of the Registration Statement with the SEC
with respect to the resale of all Registrable
Securities and the requirement that the
Registration Statement shall have been declared
effective by the SEC for the resale of all
Registrable Securities and the Company shall have
satisfied and shall be in compliance with any and
all obligations pursuant to this Agreement and the
Warrants;
(c) the representations and warranties of the Company
are true and correct in all material respects as
if made on such date and the conditions to
Investor's obligations set forth in this Section
2.3.4 are satisfied as of such Closing, and the
Company shall deliver a certificate, signed by an
officer of the Company, to such effect to the
Investor;
(d) the Company shall have reserved for issuance a
sufficient number of Common Shares for the purpose
of enabling the Company to satisfy any obligation
to issue Common Shares pursuant to any Put and to
effect exercise of the Warrants;
(e) the Registration Statement is not subject to an
Ineffective Period as defined in the Registration
Rights Agreement, the prospectus included therein
is current and deliverable, and to the Company's
knowledge there is no notice of any investigation
or inquiry concerning any stop order with respect
to the Registration Statement; and
(f) if the Aggregate Issued Shares after the Closing
of the Put would exceed the Cap Amount, the
Company shall have obtained the Stockholder 20%
Approval as specified in Section 6.11, if the
Company's Common Stock is listed on the NASDAQ
Small Cap Market or the NASDAQ National Market
System (the "NMS"), and such approval is required
by the rules of the NASDAQ.
(g) the Company shall have no knowledge of any event
more likely than not to have the effect of causing
any Registration Statement to be suspended or
otherwise ineffective (which event is more likely
than not to occur within the twenty Business Days
following the date on which such Advance Put
Notice or Put Notice is deemed delivered).
(h) there is not then in effect any law, rule or
regulation prohibiting or restricting the
transactions contemplated hereby, or requiring any
consent or approval which shall not have been
obtained, nor is there any pending or threatened
proceeding or investigation which may have the
effect of prohibiting or adversely affecting any
of the transactions contemplated by this
Agreement.
2.3.5 Documents Required to be Delivered on
the Put Date as Conditions to Closing of any Put. The Closing of
any Put and Investor's obligations hereunder shall additionally
be conditioned upon the delivery to the Investor of each of the
following (the "Required Put Documents") on or before the
applicable Put Date:
(a) a number of Unlegended Share
Certificates equal to the Intended Put Share Amount, in
denominations of not more than 50,000 shares per certificate;
(b) the following documents: Put Opinion of
Counsel, Officer's Certificate, Put Notice, Registration Opinion,
and any report or disclosure required under Section 2.3.6 or
Section 2.5;
(c) all documents, instruments and other
writings required to be delivered on or before the Put Date
pursuant to any provision of this Agreement in order to implement
and effect the transactions contemplated herein.
2.3.6 Accountant's Letter and Registration
Opinion.
(a) The Company shall have caused to be
delivered to the Investor, (i) whenever required by Section
2.3.6(b) or by Section 2.5.3, and (ii) on the date that is three
(3) Business Days prior to each Put Date (the "Registration
Opinion Deadline"), an opinion of the Company's independent
counsel, in substantially the form of Exhibit R (the
"Registration Opinion"), addressed to the Investor stating, inter
alia, that no facts ("Material Facts") have come to such
counsel's attention that have caused it to believe that the
Registration Statement is subject to an Ineffective Period or to
believe that the Registration Statement, any Supplemental
Registration Statement (as each may be amended, if applicable),
and any related prospectuses, contain an untrue statement of
material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances under
which they were made, not misleading. If a Registration Opinion
cannot be delivered by the Company's independent counsel to the
Investor on the Registration Opinion Deadline due to the
existence of Material Facts or an Ineffective Period, the Company
shall promptly notify the Investor and as promptly as possible
amend each of the Registration Statement and any Supplemental
Registration Statements, as applicable, and any related
prospectus or cause such Ineffective Period to terminate, as the
case may be, and deliver such Registration Opinion and updated
prospectus as soon as possible thereafter. If at any time after
a Put Notice shall have been delivered to Investor but before the
related Pricing Period End Date, the Company acquires knowledge
of such Material Facts or any Ineffective Period occurs, the
Company shall promptly notify the Investor and shall deliver a
Put Cancellation Notice to the Investor pursuant to Section
2.3.11 by facsimile and overnight courier by the end of that
Business Day.
(b) (i) the Company shall engage its
independent auditors to perform the procedures in accordance with
the provisions of Statement on Auditing Standards No. 71, as
amended, as agreed to by the parties hereto, and reports thereon
(the "Bring Down Cold Comfort Letters") as shall have been
reasonably requested by the Investor with respect to certain
financial information contained in the Registration Statement and
shall have delivered to the Investor such a report addressed to
the Investor, on the date that is three (3) Business Days prior
to each Put Date.
(ii) in the event that the Investor
shall have requested delivery of an Agreed Upon Procedures Report
pursuant to Section 2.5.3, the Company shall engage its
independent auditors to perform certain agreed upon procedures
and report thereon as shall have been reasonably requested by the
Investor with respect to certain financial information of the
Company and the Company shall deliver to the Investor a copy of
such report addressed to the Investor. In the event that the
report required by this Section 2.3.6(b) cannot be delivered by
the Company's independent auditors, the Company shall, if
necessary, promptly revise the Registration Statement and the
Company shall not deliver a Put Notice until such report is
delivered.
2.3.7 Investor's Obligation and Right to
Purchase Shares. Subject to the conditions set forth in this
Agreement, following the Investor's receipt of a validly
delivered Put Notice, the Investor shall be required to purchase
(each a "Purchase") from the Company a number of Put Shares equal
to the Put Share Amount, in the manner described below.
2.3.8 Mechanics of Put Closing. Each of the
Company and the Investor shall deliver all documents, instruments
and writings required to be delivered by either of them pursuant
to this Agreement at or prior to each Closing. Subject to such
delivery and the satisfaction of the conditions set forth in
Sections 2.3.4 and 2.3.5, the closing of the purchase by the
Investor of Shares shall occur by 5:00 PM, New York City Time, on
the date which is five (5) Business Days following the applicable
Pricing Period End Date (the "Payment Due Date") at the offices
of Investor. On each or before each Payment Due Date, the
Investor shall deliver to the Company, in the manner specified in
Section 8 below, the Put Dollar Amount to be paid for such Put
Shares, determined as aforesaid. The closing (each a "Put
Closing") for each Put shall occur on the date that both (i) the
Company has delivered to the Investor all Required Put Documents,
and (ii) the Investor has delivered to the Company such Put
Dollar Amount and any Late Payment Amount, if applicable (each a
"Put Closing Date").
If the Investor does not deliver to the Company the Put
Dollar Amount for such Put Closing on or before the Payment Due
Date, then the Investor shall pay to the Company, in addition to
the Put Dollar Amount, an amount (the "Late Payment Amount") at a
rate of X% per month, accruing daily, multiplied by such Put
Dollar Amount, where "X" equals one percent (1%) for the first
month following the date in question, and increases by an
additional one percent (1%) for each month that passes after the
date in question, up to a maximum of five percent (5%) per month;
provided, however, that in no event shall the amount of interest
that shall become due and payable hereunder exceed the maximum
amount permissible under applicable law.
2.3.9 Limitation on Short Sales. The Investor
and its affiliates shall not engage in short sales of the
Company's Common Stock; provided, however, that the Investor may
enter into any short exempt sale or any short sale or other
hedging or similar arrangement it deems appropriate with respect
to Put Shares after it receives a Put Notice with respect to such
Put Shares so long as such sales or arrangements do not involve
more than the number of such Put Shares specified in the Put
Notice.
2.3.10 Cap Amount. If the Company becomes
listed on the Nasdaq Small Cap Market or the Nasdaq National
Market, then, unless the Company has obtained Stockholder 20%
Approval as set forth in Section 6.11 or unless otherwise
permitted by Nasdaq, in no event shall the Aggregate Issued
Shares exceed the maximum number of shares of Common Stock (the
"Cap Amount") that the Company can, without stockholder approval,
so issue pursuant to Nasdaq Rule 4460(i)(1)(d)(ii) (or any other
applicable Nasdaq Rules or any successor rule) (the "Nasdaq 20%
Rule").
2.3.11 Put Cancellation.
(a) Mechanics of Put Cancellation. If at any
time during a Pricing Period the Company discovers the existence
of Material Facts or any Ineffective Period or Delisting Event
occurs, the Company shall cancel the Put (a "Put Cancellation"),
by delivering written notice to the Investor (the "Put
Cancellation Notice"), attached as Exhibit Q, by facsimile and
overnight courier. The "Put Cancellation Date" shall be the date
that the Put Cancellation Notice is first received by the
Investor, if such notice is received by the Investor by 6:00
p.m., New York, NY time, and shall be the following date, if such
notice is received by the Investor after 6:00 p.m., New York, NY
time.
(b) Effect of Put Cancellation. Anytime a
Put Cancellation Notice is delivered to Investor after the Put
Date, the Put, shall remain effective with respect to a number of
Put Shares (the "Truncated Put Share Amount") equal to the
Individual Put Limit for the Truncated Pricing Period.
(c) Put Cancellation Notice Confirmation.
Upon receipt by the Investor of a facsimile copy of the Put
Cancellation Notice, the Investor shall promptly send, via
facsimile, a confirmation of receipt (the "Put Cancellation
Notice Confirmation," a form of which is attached as Exhibit S)
of the Put Cancellation Notice to the Company specifying that the
Put Cancellation Notice has been received and affirming the Put
Cancellation Date.
(d) Truncated Pricing Period. If a Put
Cancellation Notice has been delivered to the Investor after the
Put Date, the Pricing Period for such Put shall end at on the
close of trading on the last full trading day on the Principal
Market that ends prior to the moment of initial delivery of the
Put Cancellation Notice (a "Truncated Pricing Period") to the
Investor.
2.3.12 Investment Agreement Cancellation. The
Company may terminate (a "Company Termination") its right to
initiate future Puts by providing written notice ("Termination
Notice") to the Investor, by facsimile and overnight courier, at
any time other than during an Extended Put Period, provided that
such termination shall have no effect on the parties' other
rights and obligations under this Agreement, the Registration
Rights Agreement or the Warrants. Notwithstanding the above, any
cancellation occurring during an Extended Put Period is governed
by Section 2.3.11.
2.3.13 Return of Excess Common Shares. In the
event that the number of Shares purchased by the Investor
pursuant to its obligations hereunder is less than the Intended
Put Share Amount, the Investor shall promptly return to the
Company any shares of Common Stock in the Investor's possession
that are not being purchased by the Investor.
2.4 Warrants.
2.4.1 Commitment Warrants. In partial
consideration hereof, following the execution of the Letter of
Agreement dated on or about July 5, 2000 between the Company and
the Investor, the Company issued and delivered to Investor or its
designated assignees, warrants (the "Commitment Warrants") in the
form attached hereto as Exhibit U, or such other form as agreed
upon by the parties, to purchase 800,000 shares of Common Stock.
Each Commitment Warrant shall be immediately exercisable in
accordance with its terms, and shall have a term beginning on the
date of issuance and ending on date that is five (5) years
thereafter. The Warrant Shares shall be registered for resale
pursuant to the Registration Rights Agreement. The Investment
Commitment Opinion of Counsel shall cover the issuance of the
Commitment Warrant and the issuance of the common stock upon
exercise of the Commitment Warrant.
Notwithstanding any Termination or Automatic Termination of
this Agreement, regardless of whether or not the Registration
Statement is or is not filed, and regardless of whether or not
the Registration Statement is approved or denied by the SEC, the
Investor shall retain full ownership of the Commitment Warrant as
partial consideration for its commitment hereunder.
2.4.2 Purchase Warrants. Within five (5)
Business Days of the end of each Pricing Period, the Company
shall issue and deliver to the Investor a warrant ("Purchase
Warrant"), in the form attached hereto as Exhibit D, or such
other form as agreed upon by the parties, to purchase a number of
shares of Common Stock equal to 10% of the Put Share Amount for
that Put. Each Purchase Warrant shall be exerciseable at a price
(the "Purchase Warrant Exercise Price") which shall initially
equal 110% of the Market Price for the applicable Put, and shall
have semi-annual reset provisions. Each Purchase Warrant shall
be immediately exercisable at the Purchase Warrant Exercise
Price, and shall have a term beginning on the date of issuance
and ending on the date that is five (5) years thereafter. The
Warrant Shares shall be registered for resale pursuant to the
Registration Rights Agreement.
2.5 Due Diligence Review. The Company shall make
available for inspection and review by the Investor (the "Due
Diligence Review"), advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and
who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the
Investor pursuant to the Registration Statement, any Supplemental
Registration Statement, or amendments or supplements thereto or
any blue sky, NASD or other filing, all financial and other
records, all filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information
reasonably requested by the Investor or any such representative,
advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any
of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose
of enabling the Investor and such representatives, advisors and
underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
2.5.1 Treatment of Nonpublic Information. The
Company shall not disclose nonpublic information to the Investor
or to its advisors or representatives unless prior to disclosure
of such information the Company identifies such information as
being nonpublic information and provides the Investor and such
advisors and representatives with the opportunity to accept or
refuse to accept such nonpublic information for review. The
Company may, as a condition to disclosing any nonpublic
information hereunder, require the Investor and its advisors and
representatives to enter into a confidentiality agreement
(including an agreement with such advisors and representatives
prohibiting them from trading in Common Stock during such period
of time as they are in possession of nonpublic information) in
form reasonably satisfactory to the Company and the Investor.
Nothing herein shall require the Company to disclose
nonpublic information to the Investor or its advisors or
representatives, and the Company represents that it does not
disseminate nonpublic information to any investors who purchase
stock in the Company in a public offering, to money managers or
to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove
provided, immediately notify the advisors and representatives of
the Investor and, if any, underwriters, of any event or the
existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware,
constituting nonpublic information (whether or not requested of
the Company specifically or generally during the course of due
diligence by and such persons or entities), which, if not
disclosed in the Prospectus included in the Registration
Statement, would cause such Prospectus to include a material
misstatement or to omit a material fact required to be stated
therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Nothing
contained in this Section 2.5 shall be construed to mean that
such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such
information) may not obtain nonpublic information in the course
of conducting due diligence in accordance with the terms of this
Agreement; provided, however, that in no event shall the
Investor's advisors or representatives disclose to the Investor
the nature of the specific event or circumstances constituting
any nonpublic information discovered by such advisors or
representatives in the course of their due diligence without the
written consent of the Investor prior to disclosure of such
information.
2.5.2 Disclosure of Misstatements and
Omissions. The Investor's advisors or representatives shall make
complete disclosure to the Investor's counsel of all events or
circumstances constituting nonpublic information discovered by
such advisors or representatives in the course of their due
diligence upon which such advisors or representatives form the
opinion that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to
be stated in the Registration Statement or necessary to make the
statements contained therein, in the light of the circumstances
in which they were made, not misleading. Upon receipt of such
disclosure, the Investor's counsel shall consult with the
Company's independent counsel in order to address the concern
raised as to the existence of a material misstatement or omission
and to discuss appropriate disclosure with respect thereto;
provided, however, that such consultation shall not constitute
the advice of the Company's independent counsel to the Investor
as to the accuracy of the Registration Statement and related
Prospectus.
2.5.3 Procedure if Material Facts are
Reasonably Believed to be Untrue or are Omitted. In the event
after such consultation the Investor or the Investor's counsel
reasonably believes that the Registration Statement contains an
untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the
circumstances in which they were made, not misleading,
(a) the Company shall file with the SEC
an amendment to the Registration Statement responsive to such
alleged untrue statement or omission and provide the Investor, as
promptly as practicable, with copies of the Registration
Statement and related Prospectus, as so amended, or
(b) if the Company disputes the
existence of any such material misstatement or omission, (i) the
Company's independent counsel shall provide the Investor's
counsel with a Registration Opinion and (ii) in the event the
dispute relates to the adequacy of financial disclosure and the
Investor shall reasonably request, the Company's independent
auditors shall provide to the Company a letter ("Agreed Upon
Procedures Report") outlining the performance of such "agreed
upon procedures" as shall be reasonably requested by the Investor
and the Company shall provide the Investor with a copy of such
letter.
2.6 Commitment Payments.
On the last Business Day of each six (6) Calendar Month
period following the Effective Date (each such period a
"Commitment Evaluation Period"), if the Company has not Put at
least $1,000,000 in aggregate Put Dollar Amount during that
Commitment Evaluation Period, the Company, in consideration of
Investor's commitment costs, including, but not limited to, due
diligence expenses, shall pay to the Investor an amount (the
"Semi-Annual Non-Usage Fee") equal to the difference of (i)
$100,000, minus (ii) 10% of the aggregate Put Dollar Amount of
the Put Shares put to Investor during that Commitment Evaluation
Period. In the event that the Company delivers a Termination
Notice to the Investor or an Automatic Termination occurs, the
Company shall pay to the Investor (the "Termination Fee") the
greater of (i) the Semi-Annual Non-Usage Fee for the applicable
Commitment Evaluation Period, or (ii) the difference of (x)
$200,000, minus (y) 10% of the aggregate Put Dollar Amount of the
Put Shares put to Investor during all Puts to date, and the
Company shall not be required to pay the Semi-Annual Non-Usage
Fee thereafter.
Each Semi Annual Non-Usage Fee or Termination Fee is
payable, in cash, within five (5) business days of the date it
accrued. The Company shall not be required to deliver any
payments to Investor under this subsection until Investor has
paid all Put Dollar Amounts that are then due.
3. Representations, Warranties and Covenants of Investor.
Investor hereby represents and warrants to and agrees with the
Company as follows:
3.1 Accredited Investor. Investor is an accredited
investor ("Accredited Investor"), as defined in Rule 501 of
Regulation D, and has checked the applicable box set forth in
Section 10 of this Agreement.
3.2 Investment Experience; Access to Information;
Independent Investigation.
3.2.1 Access to Information. Investor or
Investor's professional advisor has been granted the opportunity
to ask questions of and receive answers from representatives of
the Company, its officers, directors, employees and agents
concerning the terms and conditions of this Offering, the Company
and its business and prospects, and to obtain any additional
information which Investor or Investor's professional advisor
deems necessary to verify the accuracy and completeness of the
information received.
3.2.2 Reliance on Own Advisors. Investor has
relied completely on the advice of, or has consulted with,
Investor's own personal tax, investment, legal or other advisors
and has not relied on the Company or any of its affiliates,
officers, directors, attorneys, accountants or any affiliates of
any thereof and each other person, if any, who controls any of
the foregoing, within the meaning of Section 15 of the Act for
any tax or legal advice (other than reliance on information in
the Disclosure Documents as defined in Section 3.2.4 below and on
the Opinion of Counsel). The foregoing, however, does not limit
or modify Investor's right to rely upon covenants,
representations and warranties of the Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has
such knowledge and experience in financial and business matters
so as to enable such Investor to utilize the information made
available to it in connection with the Offering in order to
evaluate the merits and risks of the prospective investment,
which are substantial, including without limitation those set
forth in the Disclosure Documents (as defined in Section 3.2.4
below).
3.2.4 Disclosure Documents. Investor, in
making Investor's investment decision to subscribe for the
Investment Agreement hereunder, represents that (a) Investor has
received and had an opportunity to review (i) the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1999, (ii) the Company's quarterly report on Form 10-QSB for the
quarters ended September 30, 1999, and March 31, 2000, (iii) the
Risk Factors, attached as Exhibit J, (the "Risk Factors") (iv)
the Capitalization Schedule, attached as Exhibit K, (the
"Capitalization Schedule") and (v) the Use of Proceeds Schedule,
attached as Exhibit L, (the "Use of Proceeds Schedule"); (b)
Investor has read, reviewed, and relied solely on the documents
described in (a) above, the Company's representations and
warranties and other information in this Agreement, including the
exhibits, documents prepared by the Company which have been
specifically provided to Investor in connection with this
Offering (the documents described in this Section 3.2.4 (a) and
(b) are collectively referred to as the "Disclosure Documents"),
and an independent investigation made by Investor and Investor's
representatives, if any; (c) Investor has, prior to the date of
this Agreement, been given an opportunity to review material
contracts and documents of the Company which have been filed as
exhibits to the Company's filings under the Act and the Exchange
Act and has had an opportunity to ask questions of and receive
answers from the Company's officers and directors; and (d) is not
relying on any oral representation of the Company or any other
person, nor any written representation or assurance from the
Company other than those contained in the Disclosure Documents or
incorporated herein or therein. The foregoing, however, does not
limit or modify Investor's right to rely upon covenants,
representations and warranties of the Company in Sections 5 and 6
of this Agreement. Investor acknowledges and agrees that the
Company has no responsibility for, does not ratify, and is under
no responsibility whatsoever to comment upon or correct any
reports, analyses or other comments made about the Company by any
third parties, including, but not limited to, analysts' research
reports or comments (collectively, "Third Party Reports"), and
Investor has not relied upon any Third Party Reports in making
the decision to invest.
3.2. Investment Experience; Fend for Self.
Investor has substantial experience in investing in securities
and it has made investments in securities other than those of the
Company. Investor acknowledges that Investor is able to fend for
Investor's self in the transaction contemplated by this
Agreement, that Investor has the ability to bear the economic
risk of Investor's investment pursuant to this Agreement and that
Investor is an "Accredited Investor" by virtue of the fact that
Investor meets the investor qualification standards set forth in
Section 3.1 above. Investor has not been organized for the
purpose of investing in securities of the Company, although such
investment is consistent with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 No General Solicitation. The Investment
Agreement was not offered to Investor through, and Investor is
not aware of, any form of general solicitation or general
advertising, including, without limitation, (i) any
advertisement, article, notice or other communication published
in any newspaper, magazine or similar media or broadcast over
television or radio, and (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or
general advertising.
3.3.2 Restricted Securities. Investor
understands that the Investment Agreement is, the Common Stock
and Warrants issued at each Put Closing will be, and the Warrant
Shares will be, characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired
from the Company in a transaction exempt from the registration
requirements of the federal securities laws and that under such
laws and applicable regulations such securities may not be
transferred or resold without registration under the Act or
pursuant to an exemption therefrom. In this connection, Investor
represents that Investor is familiar with Rule 144 under the Act,
as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
3.3.3 Disposition. Without in any way
limiting the representations set forth above, Investor agrees
that until the Securities are sold pursuant to an effective
Registration Statement or an exemption from registration, they
will remain in the name of Investor and will not be transferred
to or assigned to any broker, dealer or depositary. Investor
further agrees not to sell, transfer, assign, or pledge the
Securities (except for any bona fide pledge arrangement to the
extent that such pledge does not require registration under the
Act or unless an exemption from such registration is available
and provided further that if such pledge is realized upon, any
transfer to the pledgee shall comply with the requirements set
forth herein), or to otherwise dispose of all or any portion of
the Securities unless and until:
(a) There is then in effect a registration
statement under the Act and any applicable state securities laws
covering such proposed disposition and such disposition is made
in accordance with such registration statement and in compliance
with applicable prospectus delivery requirements; or
(b) (i) Investor shall have notified the
Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the
proposed disposition to the extent relevant for determination of
the availability of an exemption from registration, and (ii) if
reasonably requested by the Company, Investor shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not
require registration of the Securities under the Act or state
securities laws. It is agreed that the Company will not require
the Investor to provide opinions of counsel for transactions made
pursuant to Rule 144 provided that Investor and Investor's
broker, if necessary, provide the Company with the necessary
representations for counsel to the Company to issue an opinion
with respect to such transaction.
The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether
or not legally binding) at any time to sell the Common Stock to
or through any person or entity; provided, however, that by
making the representations herein, the Investor does not agree to
hold the Common Stock for any minimum or other specific term and
reserves the right to dispose of the Common Stock at any time in
accordance with federal and state securities laws applicable to
such disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this
Investment Agreement, if executing this Agreement in a
representative or fiduciary capacity, has full power and
authority to execute and deliver this Agreement and each other
document included herein for which a signature is required in
such capacity and on behalf of the subscribing individual,
partnership, trust, estate, corporation or other entity for whom
or which Investor is executing this Agreement. Investor has
reached the age of majority (if an individual) according to the
laws of the state in which he or she resides.
3.4.2 Due Authorization. Investor is duly and
validly organized, validly existing and in good standing as a
limited liability company under the laws of Georgia with full
power and authority to purchase the Securities to be purchased by
Investor and to execute and deliver this Agreement.
3.4.3 Partnerships. If Investor is a
partnership, the representations, warranties, agreements and
understandings set forth above are true with respect to all
partners of Investor (and if any such partner is itself a
partnership, all persons holding an interest in such partnership,
directly or indirectly, including through one or more
partnerships), and the person executing this Agreement has made
due inquiry to determine the truthfulness of the representations
and warranties made hereby.
3.4.4 Representatives. If Investor is
purchasing in a representative or fiduciary capacity, the
representations and warranties shall be deemed to have been made
on behalf of the person or persons for whom Investor is so
purchasing.
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an
investment in the Company involves substantial risks, including
the potential loss of Investor's entire investment herein.
Investor recognizes that the Disclosure Documents, this Agreement
and the exhibits hereto do not purport to contain all the
information, which would be contained in a registration statement
under the Act;
4.2 No Government Approval. No federal or state
agency has passed upon the Securities, recommended or endorsed
the Offering, or made any finding or determination as to the
fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of
the date of this Agreement, the Securities and any component
thereof have not been registered under the Act or any applicable
state securities laws by reason of exemptions from the
registration requirements of the Act and such laws, and may not
be sold, pledged (except for any limited pledge in connection
with a margin account of Investor to the extent that such pledge
does not require registration under the Act or unless an
exemption from such registration is available and provided
further that if such pledge is realized upon, any transfer to the
pledgee shall comply with the requirements set forth herein),
assigned or otherwise disposed of in the absence of an effective
registration of the Securities and any component thereof under
the Act or unless an exemption from such registration is
available;
4.4 Restrictions on Transfer. Investor may not
attempt to sell, transfer, assign, pledge or otherwise dispose of
all or any portion of the Securities or any component thereof in
the absence of either an effective registration statement or an
exemption from the registration requirements of the Act and
applicable state securities laws;
4.5 No Assurances of Registration. There can be no
assurance that any registration statement will become effective
at the scheduled time, or ever, or remain effective when
required, and Investor acknowledges that it may be required to
bear the economic risk of Investor's investment for an indefinite
period of time;
4.6 Exempt Transaction. Investor understands that the
Securities are being offered and sold in reliance on specific
exemptions from the registration requirements of federal and
state law and that the representations, warranties, agreements,
acknowledgments and understandings set forth herein are being
relied upon by the Company in determining the applicability of
such exemptions and the suitability of Investor to acquire such
Securities.
4.7 Legends. The certificates representing the Put
Shares shall not bear a legend restricting the sale or transfer
thereof ("Restrictive Legend"). The certificates representing the
Warrant Shares shall not bear a Restrictive Legend unless they
are issued at a time when the Registration Statement is not
effective for resale. It is understood that the certificates
evidencing any Warrant Shares issued at a time when the
Registration Statement is not effective for resale, subject to
legend removal under the terms of Section 6.8 below, shall bear
the following legend (the "Legend"):
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, or applicable
state securities laws, nor the securities laws of any other
jurisdiction. They may not be sold or transferred in the
absence of an effective registration statement under those
securities laws or pursuant to an exemption therefrom."
5. Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties
to Investor (which shall be true at the signing of this
Agreement, and as of any such later date as contemplated
hereunder) and agrees with Investor that, except as set forth in
the "Schedule of Exceptions" attached hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada, USA and
has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the business or
properties of the Company and its subsidiaries taken as a whole.
The Company is not the subject of any pending, threatened or, to
its knowledge, contemplated investigation or administrative or
legal proceeding (a "Proceeding") by the Internal Revenue
Service, the taxing authorities of any state or local
jurisdiction, or the Securities and Exchange Commission, The
National Association of Securities Dealer, Inc., The Nasdaq Stock
Market, Inc. or any state securities commission, or any other
governmental entity, which have not been disclosed in the
Disclosure Documents. None of the disclosed Proceedings, if any,
will have a material adverse effect upon the Company or the
market for the Common Stock. The Company has the following
subsidiaries:
5.2 Corporate Condition. The Company's condition is,
in all material respects, as described in the Disclosure
Documents (as further set forth in any subsequently filed
Disclosure Documents, if applicable), except for changes in the
ordinary course of business and normal year-end adjustments that
are not, in the aggregate, materially adverse to the Company.
Except for continuing losses, there have been no material adverse
changes to the Company's business, financial condition, or
prospects since the dates of such Disclosure Documents. The
financial statements as contained in the 10-KSB and 10-QSB have
been prepared in accordance with generally accepted accounting
principles, consistently applied (except as otherwise permitted
by Regulation S-X of the Exchange Act), subject, in the case of
unaudited interim financial statements, to customary year end
adjustments and the absence of certain footnotes, and fairly
present the financial condition of the Company as of the dates of
the balance sheets included therein and the consolidated results
of its operations and cash flows for the periods then ended,.
Without limiting the foregoing, there are no material
liabilities, contingent or actual, that are not disclosed in the
Disclosure Documents (other than liabilities incurred by the
Company in the ordinary course of its business, consistent with
its past practice, after the period covered by the Disclosure
Documents). The Company has paid all material taxes that are
due, except for taxes that it reasonably disputes. There is no
material claim, litigation, or administrative proceeding pending
or, to the best of the Company's knowledge, threatened against
the Company, except as disclosed in the Disclosure Documents.
This Agreement and the Disclosure Documents do not contain any
untrue statement of a material fact and do not omit to state any
material fact required to be stated therein or herein necessary
to make the statements contained therein or herein not misleading
in the light of the circumstances under which they were made. No
event or circumstance exists relating to the Company which, under
applicable law, requires public disclosure but which has not been
so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part
of the Company by its officers, directors and stockholders
necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company
hereunder and the authorization, issuance and delivery of the
Common Stock being sold hereunder and the issuance (and/or the
reservation for issuance) of the Warrants and the Warrant Shares
have been taken, and this Agreement and the Registration Rights
Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, except
insofar as the enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally or by principles governing
the availability of equitable remedies. The Company has obtained
all consents and approvals required for it to execute, deliver
and perform each agreement referenced in the previous sentence.
5.4 Valid Issuance of Common Stock. The Common Stock
and the Warrants, when issued, sold and delivered in accordance
with the terms hereof, for the consideration expressed herein,
will be validly issued, fully paid and nonassessable and, based
in part upon the representations of Investor in this Agreement,
will be issued in compliance with all applicable U.S. federal and
state securities laws. The Warrant Shares, when issued in
accordance with the terms of the Warrants, shall be duly and
validly issued and outstanding, fully paid and nonassessable, and
based in part on the representations and warranties of Investor,
will be issued in compliance with all applicable U.S. federal and
state securities laws. The Put Shares, the Warrants and the
Warrant Shares will be issued free of any preemptive rights.
5.5 Compliance with Other Instruments. The Company is
not in violation or default of any provisions of its Certificate
of Incorporation or Bylaws, each as amended and in effect on and
as of the date of the Agreement, or of any material provision of
any material instrument or material contract to which it is a
party or by which it is bound or of any provision of any federal
or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company, which would
have a material adverse effect on the Company's business or
prospects, or on the performance of its obligations under this
Agreement or the Registration Rights Agreement. The execution,
delivery and performance of this Agreement and the other
agreements entered into in conjunction with the Offering and the
consummation of the transactions contemplated hereby and thereby
will not (a) result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument or
contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company, which would
have a material adverse effect on the Company's business or
prospects, or on the performance of its obligations under this
Agreement, the Registration Rights Agreement, or (b) violate the
Company's Certificate of Incorporation or By-Laws or (c) violate
any statute, rule or governmental regulation applicable to the
Company which violation would have a material adverse effect on
the Company's business or prospects.
5.6 Reporting Company. The Company is subject to the
reporting requirements of the Exchange Act, has a class of
securities registered under Section 12 of the Exchange Act, and
has filed all reports required by the Exchange Act since the date
the Company first became subject to such reporting obligations.
The Company undertakes to furnish Investor with copies of such
reports as may be reasonably requested by Investor prior to
consummation of this Offering and thereafter, to make such
reports available, for the full term of this Agreement, including
any extensions thereof, and for as long as Investor holds the
Securities. The Common Stock is duly listed or approved for
quotation on the O.T.C. Bulletin Board. The Company is not in
violation of the listing requirements of the O.T.C. Bulletin
Board and does not reasonably anticipate that the Common Stock
will be delisted by the O.T.C. Bulletin Board for the foreseeable
future. The Company has filed all reports required under the
Exchange Act. The Company has not furnished to the Investor any
material nonpublic information concerning the Company.
5.7 Capitalization. The capitalization of the Company
as of the date hereof is, and the capitalization as of the
Closing, subject to exercise of any outstanding warrants and/or
exercise of any outstanding stock options, after taking into
account the offering of the Securities contemplated by this
Agreement and all other share issuances occurring prior to this
Offering, will be, as set forth in the Capitalization Schedule as
set forth in Exhibit K. There are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities. Except as disclosed
in the Capitalization Schedule, as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of
the Company or any of its subsidiaries, or arrangements by which
the Company or any of its subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of its or their
securities under the Act (except the Registration Rights
Agreement).
5.8 Intellectual Property. The Company has valid,
unrestricted and exclusive ownership of or rights to use the
patents, trademarks, trademark registrations, trade names,
copyrights, know-how, technology and other intellectual property
necessary to the conduct of its business. Exhibit M lists all
patents, trademarks, trademark registrations, trade names and
copyrights of the Company. The Company has granted such licenses
or has assigned or otherwise transferred a portion of (or all of)
such valid, unrestricted and exclusive patents, trademarks,
trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the
conduct of its business as set forth in Exhibit M. The Company
has been granted licenses, know-how, technology and/or other
intellectual property necessary to the conduct of its business as
set forth in Exhibit M. To the best of the Company's knowledge
after due inquiry, the Company is not infringing on the
intellectual property rights of any third party, nor is any third
party infringing on the Company's intellectual property rights.
There are no restrictions in any agreements, licenses,
franchises, or other instruments that preclude the Company from
engaging in its business as presently conducted.
5.9 Use of Proceeds. As of the date hereof, the
Company expects to use the proceeds from this Offering (less fees
and expenses) for the purposes and in the approximate amounts set
forth on the Use of Proceeds Schedule set forth as Exhibit L
hereto. These purposes and amounts are estimates and are subject
to change without notice to any Investor.
5.10 No Rights of Participation. No person or entity,
including, but not limited to, current or former stockholders of
the Company, underwriters, brokers, agents or other third
parties, has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the
financing contemplated by this Agreement which has not been
waived.
5.11 Company Acknowledgment. The Company hereby
acknowledges that Investor may elect to hold the Securities for
various periods of time, as permitted by the terms of this
Agreement, the Warrants, and other agreements contemplated
hereby, and the Company further acknowledges that Investor has
made no representations or warranties, either written or oral, as
to how long the Securities will be held by Investor or regarding
Investor's trading history or investment strategies.
5.12 No Advance Regulatory Approval. The Company
acknowledges that this Investment Agreement, the transaction
contemplated hereby and the Registration Statement contemplated
hereby have not been approved by the SEC, or any other regulatory
body and there is no guarantee that this Investment Agreement,
the transaction contemplated hereby and the Registration
Statement contemplated hereby will ever be approved by the SEC or
any other regulatory body. The Company is relying on its own
analysis and is not relying on any representation by Investor
that either this Investment Agreement, the transaction
contemplated hereby or the Registration Statement contemplated
hereby has been or will be approved by the SEC or other
appropriate regulatory body.
5.13 Underwriter's Fees and Rights of First Refusal.
The Company is not obligated to pay any compensation or other
fees, costs or related expenditures in cash or securities to any
underwriter, broker, agent or other representative other than the
Investor in connection with this Offering.
5.14 Availability of Suitable Form for Registration.
The Company is currently eligible and agrees to maintain its
eligibility to register the resale of its Common Stock on a
registration statement on a suitable form under the Act.
5.15 No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of
any of the Company's securities or solicited any offers to buy
any security under circumstances that would prevent the parties
hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under Regulation D of
the Act or would require the issuance of any other securities to
be integrated with this Offering under the Rules of the SEC. The
Company has not engaged in any form of general solicitation or
advertising in connection with the offering of the Common Stock
or the Warrants.
5.16 Foreign Corrupt Practices. Neither the Company,
nor any of its subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any
subsidiary has, in the course of its actions for, or on behalf
of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official
or employee from corporate funds; violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government official or employee.
5.17 Key Employees. Each "Key Employee" (as defined in
Exhibit N) is currently serving the Company in the capacity
disclosed in Exhibit N. No Key Employee, to the best knowledge of
the Company and its subsidiaries, is, or is now expected to be,
in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each
Key Employee does not subject the Company or any of its
subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of
the Company and its subsidiaries, any intention to terminate his
employment with, or services to, the Company or any of its
subsidiaries.
5.18 Representations Correct. The foregoing
representations, warranties and agreements are true, correct and
complete in all material respects, and shall survive any Put
Closing and the issuance of the shares of Common Stock thereby.
5.19 Tax Status. The Company has made or filed all
federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company has set aside on
its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and as
set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
5.20 Transactions With Affiliates. Except as set forth
in the Disclosure Documents, none of the officers, directors, or
employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers
and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
5.21 Application of Takeover Protections. The Company
and its board of directors have taken all necessary action, if
any, in order to render inapplicable any control share
acquisition, business combination or other similar anti-takeover
provision under Nevada law which is or could become applicable to
the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the issuance of the
Common Stock, any exercise of the Warrants and ownership of the
Common Shares and Warrant Shares. The Company has not adopted
and will not adopt any "poison pill" provision that will be
applicable to Investor as a result of transactions contemplated
by this Agreement.
5.22 Other Agreements. The Company has not, directly
or indirectly, made any agreements with the Investor under a
subscription in the form of this Agreement for the purchase of
Common Stock, relating to the terms or conditions of the
transactions contemplated hereby or thereby except as expressly
set forth herein, respectively, or in exhibits hereto or thereto.
5.23 Major Transactions. There are no other Major
Transactions currently pending or contemplated by the Company.
5.24 Financings. There are no other financings
currently pending or contemplated by the Company.
5.25 Shareholder Authorization. The Company shall, at
its next annual shareholder meeting following its listing on
either the Nasdaq Small Cap Market or the Nasdaq National Market,
or at a special meeting to be held as soon as practicable
thereafter, use its best efforts to obtain approval of its
shareholders to (i) authorize the issuance of the full number of
shares of Common Stock which would be issuable under this
Agreement and eliminate any prohibitions under applicable law or
the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with
jurisdiction over the Company or any of its securities with
respect to the Company's ability to issue shares of Common Stock
in excess of the Cap Amount (such approvals being the "20%
Approval") and (ii) the increase in the number of authorized
shares of Common Stock of the Company (the "Share Authorization
Increase Approval") such that at least 20,000,000 shares can be
reserved for this Offering. In connection with such shareholder
vote, the Company shall use its best efforts to cause all
officers and directors of the Company to promptly enter into
irrevocable agreements to vote all of their shares in favor of
eliminating such prohibitions. As soon as practicable after the
20% Approval and the Share Authorization Increase Approval, the
Company agrees to use its best efforts to reserve 20,000,000
shares of Common Stock for issuance under this Agreement.
5.26 Acknowledgment of Limitations on Put Amounts.
The Company understands and acknowledges that the amounts
available under this Investment Agreement are limited, among
other things, based upon the liquidity of the Company's Common
Stock traded on its Principal Market.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at
least the Termination Date, maintain as its independent auditors
an accounting firm authorized to practice before the SEC.
6.2 Corporate Existence and Taxes; Change in Corporate
Entity. The Company shall, until at least the Termination Date,
maintain its corporate existence in good standing and, once it
becomes a "Reporting Issuer" (defined as a Company which files
periodic reports under the Exchange Act), remain a Reporting
Issuer and shall pay all its taxes when due except for taxes
which the Company disputes. The Company shall not, at any time
after the date hereof, enter into any merger, consolidation or
corporate reorganization of the Company with or into, or transfer
all or substantially all of the assets of the Company to, another
entity unless the resulting successor or acquiring entity in such
transaction, if not the Company (the "Surviving Entity"), (i) has
Common Stock listed for trading on Nasdaq or on another national
stock exchange and is a Reporting Issuer, (ii) assumes by written
instrument the Company's obligations with respect to this
Investment Agreement, the Warrants, and the other agreements
referred to herein, including but not limited to the obligations
to deliver to the Investor shares of Common Stock and/or
securities that Investor is entitled to receive pursuant to this
Investment Agreement and upon exercise of the Warrants and agrees
by written instrument to reissue, in the name of the Surviving
Entity, any Commitment Warrants and Purchase Warrants (each in
the same terms, including but not limited to the same reset
provisions, as the Commitment Warrants and/or Purchase Warrants
originally issued or required to be issued by the Company) that
are outstanding immediately prior to such transaction, making
appropriate proportional adjustments to the number of shares
represented by such Warrants and the exercise prices of such
Warrants to accurately reflect the exchange represented by the
transaction.
6.3 Registration Rights. The Company will enter into
a registration rights agreement covering the resale of the Common
Shares and the Warrant Shares substantially in the form of the
Registration Rights Agreement attached as Exhibit A.
6.4 Asset Transfers. The Company shall not (i)
transfer, sell, convey or otherwise dispose of any of its
material assets to any subsidiary except for a cash or cash
equivalent consideration and for a proper business purpose or
(ii) transfer, sell, convey or otherwise dispose of any of its
material assets to any Affiliate, as defined below, during the
Term of this Agreement. For purposes hereof, "Affiliate" shall
mean any officer of the Company, director of the Company or owner
of twenty percent (20%) or more of the Common Stock or other
securities of the Company.
6.5 Rights of First Refusal.
6.5.1 Capital Raising Limitations. During the
period from the date of this Agreement until the date that is one
year after the Termination Date, the Company shall not issue or
sell, or agree to issue or sell Equity Securities (as defined
below), for cash in private capital raising transactions without
obtaining the prior written approval of the Investor of the
Offering (the limitations referred to in this subsection 6.5.1
are collectively referred to as the "Capital Raising
Limitations"). For purposes hereof, the following shall be
collectively referred to herein as, the "Equity Securities": (i)
Common Stock or any other equity securities, (ii) any debt or
equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares
of Common Stock or other equity securities, or (iii) any
securities of the Company pursuant to an equity line structure or
format similar in nature to this Offering.
6.5.2 Investor's Right of First Refusal. For
any private capital raising transactions of Equity Securities
which close after the date hereof and on or prior to the date
that is one (1) year after the Termination Date of this
Agreement, not including any warrants issued in conjunction with
this Investment Agreement, the Company agrees to deliver to
Investor, at least ten (10) days prior to the closing of such
transaction, written notice describing the proposed transaction,
including the terms and conditions thereof, and providing the
Investor and its affiliates an option (the "Right of First
Refusal") during the ten (10) day period following delivery of
such notice to purchase the securities being offered in such
transaction on the same terms as contemplated by such
transaction.
6.5.3 Exceptions to Capital Raising
Limitations and Rights of First Refusal. Notwithstanding the
above, neither the Capital Raising Limitations nor the Rights of
First Refusal shall apply to any transaction involving issuances
of securities in connection with a merger, consolidation,
acquisition or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of
which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by
the Company or exercise of options by employees, consultants or
directors, or a primary underwritten offering of the Company's
Common Stock, or the transactions set forth on Schedule 6.5.1.
The Capital Raising Limitations and Rights of First Refusal also
shall not apply to (a) the issuance of securities upon exercise
or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof, (b) the
grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or
restricted stock plan for the benefit of the Company's employees,
directors or consultants, or (c) the issuance of debt securities,
with no equity feature, incurred solely for working capital
purposes. If the Investor, at any time, is more than five (5)
business days late in paying any Put Dollar Amounts that are then
due, the Investor shall not be entitled to the benefits of
Sections 6.5.1 and 6.5.2 above until the date that the Investor
has paid all Put Dollar Amounts that are then due.
6.6 Financial 10-KSB Statements, Etc. and Current
Reports on Form 8-K. The Company shall deliver to the Investor
copies of its annual reports on Form 10-KSB, and quarterly
reports on Form 10-QSB and shall deliver to the Investor current
reports on Form 8-K within two (2) days of filing for the Term of
this Agreement.
6.7 Opinion of Counsel. Investor shall, concurrent
with the Investment Commitment Closing, receive an opinion letter
from the Company's legal counsel, in the form attached as Exhibit
B, or in such form as agreed upon by the parties, and shall,
concurrent with each Put Date, receive an opinion letter from the
Company's legal counsel, in the form attached as Exhibit I or in
such form as agreed upon by the parties.
6.8 Removal of Legend. If the certificates
representing any Securities are issued with a restrictive Legend
in accordance with the terms of this Agreement, the Legend shall
be removed and the Company shall issue a certificate without such
Legend to the holder of any Security upon which it is stamped,
and a certificate for a security shall be originally issued
without the Legend, if (a) the sale of such Security is
registered under the Act, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions (the
reasonable cost of which shall be borne by the Investor), to the
effect that a public sale or transfer of such Security may be
made without registration under the Act, or (c) such holder
provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144. Each Investor agrees
to sell all Securities, including those represented by a
certificate(s) from which the Legend has been removed, or which
were originally issued without the Legend, pursuant to an
effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from
the registration requirements of the Act.
6.9 Listing. Subject to the remainder of this Section
6.9, the Company shall ensure that its shares of Common Stock
(including all Warrant Shares and Put Shares) are listed and
available for trading on the O.T.C. Bulletin Board. Thereafter,
the Company shall (i) use its best efforts to continue the
listing and trading of its Common Stock on the O.T.C. Bulletin
Board or to become eligible for and listed and available for
trading on the Nasdaq Small Cap Market, the NMS, or the New York
Stock Exchange ("NYSE"); and (ii) comply in all material respects
with the Company's reporting, filing and other obligations under
the By-Laws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable.
6.10 The Company's Instructions to Transfer Agent. The
Company will instruct the Transfer Agent of the Common Stock (the
"Transfer Agent"), by delivering instructions in the form of
Exhibit T hereto, to issue certificates, registered in the name
of each Investor or its nominee, for the Put Shares and Warrant
Shares in such amounts as specified from time to time by the
Company upon any exercise by the Company of a Put and/or exercise
of the Warrants by the holder thereof. Such certificates shall
not bear a Legend unless issuance with a Legend is permitted by
the terms of this Agreement and Legend removal is not permitted
by Section 6.8 hereof and the Company shall cause the Transfer
Agent to issue such certificates without a Legend. Nothing in
this Section shall affect in any way Investor's obligations and
agreement set forth in Sections 3.3.2 or 3.3.3 hereof to resell
the Securities pursuant to an effective registration statement
and to deliver a prospectus in connection with such sale or in
compliance with an exemption from the registration requirements
of applicable securities laws. If (a) an Investor provides the
Company with an opinion of counsel, which opinion of counsel
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that the
Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) an Investor
transfers Securities, pursuant to Rule 144, to a transferee which
is an accredited investor, the Company shall permit the transfer,
and, in the case of Put Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in
such name and in such denomination as specified by such Investor.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to an Investor by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Section 6.10 will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 6.10,
that an Investor shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other security
being required.
6.11 Stockholder 20% Approval. Prior to the closing of
any Put that would cause the Aggregate Issued Shares to exceed
the Cap Amount, if required by the rules of NASDAQ because the
Company's Common Stock is listed on NASDAQ, the Company shall
obtain approval of its stockholders to authorize (i) the issuance
of the full number of shares of Common Stock which would be
issuable pursuant to this Agreement but for the Cap Amount and
eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system
or other self-regulatory organization with jurisdiction over the
Company or any of its securities with respect to the Company's
ability to issue shares of Common Stock in excess of the Cap
Amount (such approvals being the "Stockholder 20% Approval").
6.12 Press Release. The Company agrees that the
Investor shall have the right to review and comment upon any
press release issued by the Company in connection with the
Offering which approval shall not be unreasonably withheld by
Investor.
6.13 Change in Law or Policy. In the event of a change
in law, or policy of the SEC, as evidenced by a No-Action letter
or other written statements of the SEC or the NASD which causes
the Investor to be unable to perform its obligations hereunder,
this Agreement shall be automatically terminated and no
Termination Fee shall be due, provided that notwithstanding any
termination under this section 6.13, the Investor shall retain
full ownership of the Commitment Warrant as partial consideration
for its commitment hereunder.
6.14 Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put. The Company shall immediately
notify the Investor, but in no event later than two (2) business
days by facsimile and by overnight courier, upon the occurrence
of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the SEC or
any other deferral or state governmental authority of any stop
order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(iv) the happening of any event that makes any statement made in
such Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or
documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that
in the case of the related prospectus, it will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; (v) the declaration by the SEC of
the effectiveness of a Registration Statement; and (vi) the
Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate, and
the Company shall promptly make available to the Investor any
such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during
the continuation of any of the foregoing events.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the
Closing; Severability. Investor's and the Company's
representations and warranties shall survive the Investment Date
and any Put Closing contemplated by this Agreement
notwithstanding any due diligence investigation made by or on
behalf of the party seeking to rely thereon. In the event that
any provision of this Agreement becomes or is declared by a court
of competent jurisdiction to be illegal, unenforceable or void,
or is altered by a term required by the Securities Exchange
Commission to be included in the Registration Statement, this
Agreement shall continue in full force and effect without said
provision; provided that if the removal of such provision
materially changes the economic benefit of this Agreement to the
Investor, this Agreement shall terminate.
7.2 Successors and Assigns. This Agreement shall not
be assignable without the Company's written consent. If
assigned, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors
and assigns of the parties. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this
Agreement. Investor may assign Investor's rights hereunder, in
connection with any private sale of the Common Stock of such
Investor, so long as, as a condition precedent to such transfer,
the transferee executes an acknowledgment agreeing to be bound by
the applicable provisions of this Agreement in a form acceptable
to the Company and provides an original copy of such
acknowledgment to the Company.
7.3 Execution in Counterparts Permitted. This
Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing
such counterparts, and all of which together shall constitute one
(1) instrument.
7.4 Titles and Subtitles; Gender. The titles and
subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this
Agreement. The use in this Agreement of a masculine, feminine or
neuter pronoun shall be deemed to include a reference to the
others.
7.5 Written Notices, Etc. Any notice, demand or
request required or permitted to be given by the Company or
Investor pursuant to the terms of this Agreement shall be in
writing and shall be deemed given when delivered personally, or
by facsimile or upon receipt if by overnight or two (2) day
courier, addressed to the parties at the addresses and/or
facsimile telephone number of the parties set forth at the end of
this Agreement or such other address as a party may request by
notifying the other in writing; provided, however, that in order
for any notice to be effective as to the Investor such notice
shall be delivered and sent, as specified herein, to all the
addresses and facsimile telephone numbers of the Investor set
forth at the end of this Agreement or such other address and/or
facsimile telephone number as Investor may request in writing.
7.6 Expenses. Except as set forth in the Registration
Rights Agreement, each of the Company and Investor shall pay all
costs and expenses that it respectively incurs, with respect to
the negotiation, execution, delivery and performance of this
Agreement.
7.7 Entire Agreement; Written Amendments Required.
This Agreement, including the Exhibits attached hereto, the
Common Stock certificates, the Warrants, the Registration Rights
Agreement, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party
in any manner by any warranties, representations or covenants,
whether oral, written, or otherwise except as specifically set
forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any
such amendment, waiver, discharge or termination is sought.
7.8 Actions at Law or Equity; Jurisdiction and Venue.
The parties acknowledge that any and all actions, whether at law
or at equity, and whether or not said actions are based upon this
Agreement between the parties hereto, shall be filed in any state
or federal court sitting in Atlanta, Georgia. Georgia law shall
govern both the proceeding as well as the interpretation and
construction of the Transaction Documents and the transaction as
a whole. In any litigation between the parties hereto, the
prevailing party, as found by the court, shall be entitled to an
award of all attorney's fees and costs of court. Should the
court refuse to find a prevailing party, each party shall bear
its own legal fees and costs.
7.9 Reporting Entity for the Common Stock. The
reporting entity relied upon for the determination of the trading
price or trading volume of the Common Stock on the Principal
Market on any given Trading Day for the purposes of this
Agreement shall be the Bloomberg L.P. The written mutual
consent of the Investor and the Company shall be required to
employ any other reporting entity.
8. Subscription and Wiring Instructions; Irrevocability.
(a) Wire transfer of Subscription Funds. Investor
shall deliver Put Dollar Amounts (as payment towards any Put
Share Price) by wire transfer, to the Company pursuant to a wire
instruction letter to be provided by the Company, and signed by
the Company.
(b) Irrevocable Subscription. Investor hereby
acknowledges and agrees, subject to the provisions of any
applicable laws providing for the refund of subscription amounts
submitted by Investor, that this Agreement is irrevocable and
that Investor is not entitled to cancel, terminate or revoke this
Agreement or any other agreements executed by such Investor and
delivered pursuant hereto, and that this Agreement and such other
agreements shall survive the death or disability of such Investor
and shall be binding upon and inure to the benefit of the parties
and their heirs, executors, administrators, successors, legal
representatives and assigns. If the Securities subscribed for
are to be owned by more than one person, the obligations of all
such owners under this Agreement shall be joint and several, and
the agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be binding
upon each such person and his heirs, executors, administrators,
successors, legal representatives and assigns.
9. Indemnification and Reimbursement.
(a) Indemnification. In consideration of the
Investor's execution and delivery of the Investment Agreement,
the Registration Rights Agreement and the Warrants (the
"Transaction Documents") and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless Investor and all of its stockholders,
officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents, members, partners or
other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorney's fees and
disbursements (the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty
made by the Company in the Transaction Documents or any other
certificate, instrument or documents contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or
thereby, (c) any cause of action, suit or claim, derivative or
otherwise, by any stockholder of the Company based on a breach or
alleged breach by the Company or any of its officers or directors
of their fiduciary or other obligations to the stockholders of
the Company, or (d) claims made by third parties against any of
the Indemnitees based on a violation of Section 5 of the
Securities Act caused by the integration of the private sale of
common stock to the Investor and the public offering pursuant to
the Registration Statement.
To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which it would be required to make if
such foregoing undertaking was enforceable which is permissible
under applicable law.
Promptly after receipt by an Indemnified Party of notice of
the commencement of any action pursuant to which indemnification
may be sought, such Indemnified Party will, if a claim in respect
thereof is to be made against the other party (hereinafter
"Indemnitor") under this Section 9, deliver to the Indemnitor a
written notice of the commencement thereof and the Indemnitor
shall have the right to participate in and to assume the defense
thereof with counsel reasonably selected by the Indemnitor,
provided, however, that an Indemnified Party shall have the right
to retain its own counsel, with the reasonably incurred fees and
expenses of such counsel to be paid by the Indemnitor, if
representation of such Indemnified Party by the counsel retained
by the Indemnitor would be inappropriate due to actual or
potential conflicts of interest between such Indemnified Party
and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
Indemnitor within a reasonable time of the commencement of any
such action, if prejudicial to the Indemnitor's ability to defend
such action, shall relieve the Indemnitor of any liability to the
Indemnified Party under this Section 9, but the omission to so
deliver written notice to the Indemnitor will not relieve it of
any liability that it may have to any Indemnified Party other
than under this Section 9 to the extent it is prejudicial.
(b) Reimbursement. If (i) Investor, other than by
reason of its gross negligence or willful misconduct, becomes
involved in any capacity in any action, proceeding or
investigation brought by any stockholder of the Company, in
connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if
Investor is impleaded in any such action, proceeding or
investigation by any Person, or (ii) Investor, other than by
reason of its gross negligence or willful misconduct, becomes
involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if
Investor is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company
will reimburse Investor for its reasonable legal and other
expenses (including the cost of any investigation and preparation
) incurred in connection therewith, as such expenses are
incurred. In addition, other than with respect to any matter in
which Investor is a named party, the Company will pay Investor
the charges, as reasonably determined by Investor, for the time
of any officers or employees of Investor devoted to appearing and
preparing to appear as witnesses, assisting in preparation for
hearing, trials or pretrial matters, or otherwise with respect to
inquiries, hearing, trials, and other proceedings relating to the
subject matter of this Agreement. The reimbursement obligations
of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon
the same terms and conditions to any affiliates of Investor
("Affiliates") who are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of Investor
and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal
representatives of the Company, Investor and any such Affiliate
and any such Person. The Company also agrees that neither any
Investor nor any such Affiliate, partners, directors, agents,
employees or controlling persons shall have any liability to the
Company or any person asserting claims on behalf of or in right
of the Company in connection with or as a result of the
consummation of the Transaction Documents except to the extent
that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or
willful misconduct of Investor or any inaccuracy in any
representation or warranty of Investor contained herein or any
breach by Investor of any of the provisions hereof.
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10. Accredited Investor. Investor is an "accredited
investor" because (check all applicable boxes):
(a) [ ] it is an organization described in Section
501(c)(3) of the Internal Revenue Code, or a
corporation, limited duration company,
limited liability company, business trust, or
partnership not formed for the specific
purpose of acquiring the securities offered,
with total assets in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of
$5,000,000, not formed for the specific
purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated
person who has such knowledge and experience
in financial and business matters that he is
capable of evaluating the merits and risks of
the prospective investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general
partner of the issuer of the securities being
offered or sold or a director, executive
officer or general partner of a general
partner of that issuer.
[ ] has an individual net worth, or joint net
worth with that person's spouse, at the time
of his purchase exceeding $1,000,000.
[ ] had an individual income in excess of
$200,000 in each of the two most recent years
or joint income with that person's spouse in
excess of $300,000 in each of those years and
has a reasonable expectation of reaching the
same income level in the current year.
(d) [ ] an entity each equity owner of which is an
entity described in a - b above or is an
individual who could check one (1) of the
last three (3) boxes under subparagraph (c)
above.
(e) [ ] other [specify]_____________________________.
The undersigned hereby subscribes the Maximum Offering
Amount and acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the
Company as indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent
and certify under penalty of perjury that the foregoing
statements are true and correct and that Investor by the
following signature(s) executed this Agreement.
Dated this 8th day of September, 2000.
SWARTZ PRIVATE EQUITY, LLC
By: ____________________________________
Eric S. Swartz, Manager
SECURITY DELIVERY INSTRUCTIONS:
Swartz Private Equity, LLC
C/o Eric S. Swartz
200 Roswell Summit, Suite 285
1080 Holcomb Bridge Road
Roswell, GA 30076
Telephone: (770) 640-8130
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE
MAXIMUM OFFERING AMOUNT ON THE 8TH DAY OF SEPTEMBER, 2000.
MENTOR ON CALL, INC.
By:_______________________________
James N. Rodgers, President
Address: Attn: James N. Rodgers, President
Scotia Plaza, 40 King Street West
Suite 4900
Telephone (604) 532-5357
Facsimile (604) 532-5662
<PAGE>
ADVANCE PUT NOTICE
MENTOR ON CALL, INC. (the "Company") hereby intends, subject to
the Individual Put Limit (as defined in the Investment
Agreement), to elect to exercise a Put to sell the number of
shares of Common Stock of the Company specified below, to
_____________________________, the Investor, as of the Intended
Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company
and Swartz Private Equity, LLC dated on or about September 8,
2000.
Date of Advance Put Notice: _________________
Intended Put Date: __________________________
Intended Put Share Amount: __________________
Company Designation Maximum Put Dollar Amount
(Optional):_________________________________.
Company Designation Minimum Put Share Price
(Optional):_________________________________.
MENTOR ON CALL, INC.
By:________________________________
James N. Rodgers, President
Address: Attn: James N. Rodgers, President
Scotia Plaza, 40 King Street West
Suite 4900
Telephone (604) 532-5357
Facsimile (604) 532-5662
<PAGE>
CONFIRMATION of ADVANCE PUT NOTICE
_________________________________, the Investor, hereby confirms
receipt of MENTOR ON CALL, INC.'s (the "Company") Advance Put
Notice on the Advance Put Date written below, and its intention
to elect to exercise a Put to sell shares of common stock
("Intended Put Share Amount") of the Company to the Investor, as
of the intended Put Date written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and
between the Company and Swartz Private Equity, LLC dated on or
about September 8, 2000.
Date of Confirmation: ____________________
Date of Advance Put Notice: _______________
Intended Put Date: ________________________
Intended Put Share Amount: ________________
Company Designation Maximum Put Dollar Amount
(Optional):_________________________________.
Company Designation Minimum Put Share Price
(Optional):_________________________________.
INVESTOR(S)
___________________________________
Investor's Name
By: _______________________________
(Signature)
Address: ___________________________________
___________________________________
___________________________________
Telephone No.:_______________________________
Facsimile No.:_______________________________
<PAGE>
PUT NOTICE
MENTOR ON CALL, INC. (the "Company") hereby elects to exercise a
Put to sell shares of common stock ("Common Stock") of the
Company to _____________________________, the Investor, as of the
Put Date, at the Put Share Price and for the number of Put Shares
written below, all pursuant to that certain Investment Agreement
(the "Investment Agreement") by and between the Company and
Swartz Private Equity, LLC dated on or about September 8, 2000.
Put Date: _________________
Intended Put Share Amount (from Advance Put
Notice): _________________ Common Shares
Company Designation Maximum Put Dollar Amount
(Optional):_________________________________.
Company Designation Minimum Put Share Price
(Optional):_________________________________.
Note: Capitalized terms shall have the meanings ascribed to them
in this Investment Agreement.
MENTOR ON CALL, INC.
By:________________________________
James N. Rodgers, President
Address: Attn: James N. Rodgers, President
Scotia Plaza, 40 King Street West
Suite 4900
Telephone (604) 532-5357
Facsimile (604) 532-5662
<PAGE>
CONFIRMATION of PUT NOTICE
_________________________________, the Investor, hereby confirms
receipt of Mentor On Call, Inc. (the "Company") Put Notice and
election to exercise a Put to sell ___________________________
shares of common stock ("Common Stock") of the Company to
Investor, as of the Put Date, all pursuant to that certain
Investment Agreement (the "Investment Agreement") by and between
the Company and Swartz Private Equity, LLC dated on or about
September 8, 2000.
Date of this Confirmation:______________
Put Date: ______________________________
Number of Put Shares of
Common Stock to be Issued: _____________
Volume Evaluation Period: _____ Business
Days
Pricing Period: _____ Business Days
INVESTOR(S)
________________________________________
Investor's Name
By: ____________________________________
(Signature)
Address: ________________________________________
________________________________________
________________________________________
Telephone No.: ___________________________________
Facsimile No.:____________________________________
<PAGE>
PUT CANCELLATION NOTICE
MENTOR ON CALL, INC. (the "Company") hereby cancels the Put
specified below, pursuant to that certain Investment Agreement
(the "Investment Agreement") by and between the Company and
Swartz Private Equity, LLC dated on or about September 8, 2000,
as of the close of trading on the date specified below (the
"Cancellation Date," which date must be on or after the date that
this notice is delivered to the Investor), provided that such
cancellation shall not apply to the number of shares of Common
Stock equal to the Truncated Put Share Amount (as defined in the
Investment Agreement).
Cancellation Date: __________________________
Put Date of Put Being Canceled:______________
Number of Shares Put on Put Date:____________
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective
Registration Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give
twenty (20) Business Days advance written notice to the Investor
before effecting the next Put.
MENTOR ON CALL, INC.
By:________________________________
James N. Rodgers, President
Address: Attn: James N. Rodgers, President
Scotia Plaza, 40 King Street West
Suite 4900
Telephone (604) 532-5357
Facsimile (604) 532-5662
<PAGE>
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement
(the "Investment Agreement") by and between the Mentor On Call,
Inc.'s, and Swartz Private Equity, LLC dated on or about
September 8, 2000, hereby confirms receipt of Mentor On Call,
Inc.'s (the "Company") Put Cancellation Notice, and confirms the
following:
Date of this Confirmation:______________
Put Cancellation Date:__________________
INVESTOR(S)
___________________________________
Investor's Name
By:________________________________
(Signature)
Address: ___________________________________
___________________________________
___________________________________
Telephone No.:_______________________________
Facsimile No.:_______________________________
<PAGE>
<PAGE>
EXHIBIT 10.9 ACKNOWLEDGMENT AND AGREEMENT, dated
September 8, 2000
ACKNOWLEDGMENT AND AGREEMENT
With respect to the Investment Agreement entered into as of
September 8, 2000, by and among Mentor On Call, Inc., a
corporation duly incorporated and existing under the laws of the
State of Nevada (the "Company") and Swartz Private Equity, LLC
(hereinafter referred to as "Swartz"), the Company hereby agrees
and acknowledges the following:
The Company acknowledges that the Investor may sell the Put
Shares any time, and from time to time, after the Put Date
for such shares, and that such sales may occur during a
Pricing Period or Pricing Periods and may have the effect of
reducing the Purchase Price.
Furthermore, the Company agrees to present the proposed
final registration statement to be filed pursuant to the terms of
the Registration Rights Agreement entered into in conjunction
with the Investment Agreement to Swartz for its review at least
five (5) business days prior to the proposed filing date, and to
obtain Swartz's final comments to the registration statement
before filing it with the SEC.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of this 8th day of September, 2000.
MENTOR ON CALL, INC. INVESTOR:
SWARTZ PRIVATE EQUITY, LLC.
By: ____________________________ By: __________________________
James N. Rodgers, President Eric S. Swartz, Manager
Mentor On Call, Inc.
Scotia Plaza, 40 King Street West, 1080 Holcomb Bridge Road
Suite 4900 Bldg. 200, Suite 285
Toronto Ontario, Canada M5H 4A2 Roswell, GA 30076
Telephone: (604) 532-5357 Telephone: (770) 640-8130
Facsimile: (604) 532-5662 Facsimile: (770) 640-7150
<PAGE>
<PAGE>
EXHIBIT 23.2 CONSENT OF ROBISON, HILL & CO.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated April 11, 2000, accompanying the
financial statements of Mentor On Call, Inc. (formerly PSM Corp.)
(a development stage company) as of and for the year ended
December 31, 1999, contained in the Registration Statement and
Prospectus. We consent to the use of the aforementioned report
in the Registration Statement and Prospectus, and to the use of
our name as it appears under the caption "Experts."
Respectfully submitted
/s/ ROBISON, HILL & CO
Certified Public Accountants
Salt Lake City, Utah
January 11, 2001
