2
1036-08
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
between
AMERICAN MILLENNIUM CORPORATION, INC.
(the "Company")
and
Rodney R. Schoemann, Sr. and Henry H. Lyon
(the "Purchaser")
Dated as of November 9, 2000
This SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT provides for the offer, sale,
issuance, and delivery of up to $675,000 in principal amount of Series 1
Convertible Notes with Purchase Warrants. In connection with the Closing under
the Agreement, the Company shall issue $675,000 principal amount of Convertible
Notes convertible into 750,000 shares of Common Stock of the Company at $.90 per
share. With such Convertible Notes the Company will issue Purchase Warrants
entitling the holder thereof to purchase up to 750,000 shares of the Common
Stock of the Company at an exercise price of $.90 per share.
Additionally, until May 9, 2001, the Purchaser will have an option to purchase
an additional Convertible Note under the same terms and conditions contained
herein, except that the Company shall issue $600,000 principal amount of
Convertible Notes convertible into 666,667 shares of Common Stock of the Company
at $.90 per share. With such Convertible Notes the Company will issue Purchase
Warrants entitling the holder thereof to purchase up to 666,667 shares of the
Common Stock of the Company at an exercise price of $.90 per share.
These subscription documents do not constitute an offer to sell nor a
solicitation of an offer to buy any security. The securities of the Company (the
"Securities") referred to herein have not been registered under the United
States Securities Act of 1933, as amended (the "Act"), or under the securities
laws of the several states. These Securities may be acquired for investment
purposes only and not with a view to distribution or resale, and may not be
sold, assigned, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such Securities under the Act,
unless exempt under the Act and applicable state securities laws.
THESE MATERIALS HAVE NOT BEEN REVIEWED, APPROVED OR RECOMMENDED BY THE U.S.
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES
ADMINISTRATOR, NOR HAS THE SEC OR ANY STATE SECURITIES ADMINISTRATOR PASSED UPON
THE ACCURACY OR ADEQUACY OF THESE MATERIALS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.
AN INVESTMENT IN THE CORPORATION INVOLVES ALL OF THE RISKS GENERALLY ASSOCIATED
WITH ANY SPECULATIVE BUSINESS VENTURE AND IS OFFERED ONLY TO PERSONS WHO
UNDERSTAND AND WHO CAN AFFORD TO ASSUME SUCH RISKS. SEE "RISK FACTORS".
INVESTORS WILL BE REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND
UNDERSTAND THE TERMS OF THE INVESTMENT. THESE SECURITIES MAY BE OFFERED AND SOLD
BY THE COMPANY ONLY TO ACCREDITED INVESTORS AS DEFINED UNDER FEDERAL AND STATE
SECURITIES LAWS.
TABLE OF SCHEDULES AND EXHIBITS
Exhibit A Form of Series 1 Convertible Note
Exhibit B Form of Warrant
Exhibit C Registration Rights Agreement
<PAGE>
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of this 9th day of November, 2000, by and between AMERICAN
MILLENNIUM CORPORATION, INC., a New Mexico corporation (the "Company"), and
Rodney R. Schoemann, Sr. and Henry H. Lyon (the "Purchaser").
Background
The Company has authorized the issuance, sale, and delivery of up to
$675,000 in original principal amount of the Company's Series 1 Convertible
Notes, in the form attached hereto as Exhibit A (the "Convertible Notes"). The
Convertible Notes are convertible after 30 days following the Closing into
Common Stock of the Company, par value $.001 per share (the "Common Stock"), at
a conversion price as set forth in the Convertible Notes. The shares of Common
Stock issuable upon conversion of the Convertible Notes are hereinafter referred
to as the "Conversion Shares". In connection with the issuance of the
Convertible Notes, the Company has authorized the issuance of Warrants, in the
form attached hereto as Exhibit B (the "Purchase Warrants"), to purchase Common
Stock. The Purchaser will be issued a Purchase Warrant at closing exercisable
after 30 days following the Closing for ONE SHARE (at exercise price of $.90) of
Common Stock for each Ninety Cents ($.90) in principal amount of Convertible
Notes purchased. The Purchase Warrants are hereinafter collectively referred to
as the "Warrants" and individually as a "Warrant". The shares of Common Stock
issuable upon exercise of the Warrants are hereinafter referred to as the
"Warrant Shares". The proceeds of the Convertible Notes will be used for general
working capital. The Purchaser desires to purchase, upon the terms and
conditions stated in this Agreement, up to $675,000 in principal amount of the
Convertible Notes. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights in respect of the Conversion Shares and the Warrant Shares
under the Securities Act of 1993, as amended ("1933 Act"), and the rules and
regulations promulgated thereunder, and applicable state securities laws. The
SB-2 Registration is anticipated to occur on or about November 10, 2000, but in
no instance shall it occur later than November 17, 2000 (Filing Deadline.) The
Company and the Purchaser are executing and delivering this Agreement in
reliance upon the exemption from securities registration pursuant to Section
4(2) and/or Section 4(6) of the 1933 Act.
Agreement
For and in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchaser hereby agree as
follows:
Section 1. Convertible Notes.
Section 1.1 Authorization, Issuance, and Sale of Notes. The Company has
authorized the sale and issuance, in accordance with the terms of this
Agreement, of up to $675,000 in principal amount of its Convertible Notes at one
or more closings. The Company agrees to issue and sell to the Purchaser and the
Purchaser agrees to purchase from the Company, at a Closing, a Convertible Note
in the principal amount (the "Purchased Convertible Notes") set forth adjacent
to the caption "Purchased Convertible Notes" on the signature page to this
Agreement of the Purchaser hereto at a purchase price (the "Purchase Price") of
100% of the principal amount of the Convertible Notes purchased. Additionally,
until May 9, 2001, the Purchaser will hold an Option to purchase an additional
Convertible Note in the amount of $600,000 at $.90/share with accompanying
Warrants at $.90/share under the same terms and conditions of this Agreement.
Section 1.2 Authorization and Issuance of Purchase Warrants. The
Company has authorized the issuance and delivery of Purchase Warrants
exercisable for up to 750,000 shares of Common Stock in connection with the
issuance, sale, and delivery of the Convertible Notes. The Company agrees to
issue and deliver to the Purchaser a Purchase Warrant for ONE SHARE (at exercise
price of $.90) of Common Stock for each Ninety Cents ($.90) in principal amount
of the Convertible Notes purchased by such Purchaser subject to this Section
1.2.
Section 1.3 Form of Payment. On or before the Closing Date, the
Purchaser shall pay the Purchase Price for the Purchased Convertible Notes to be
issued and sold to such Purchaser at the Closing, by wire transfer of
immediately available funds to:
Bank: Wells Fargo Bank West, N.A.
320 Lincoln Ave.
Steamboat Springs, CO 80487
Routing: 102000076
Account #: 644-8014100 American Millennium Corporation, Inc.
Section 1.4 Closing. All closings of the purchase and sale of the
Purchased Convertible Notes shall take place at the offices American Millennium
Corporation, 1010 Tenth Street, Suite 100, Golden, CO. 80401, within five (5)
business days following the date that $675,000 is received by American
Millennium Corporation, Inc. subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Section 5 below (such closing
being called the "First Closing" and such date and time being called the "First
Closing Date"). All such Closings may alternatively be conducted by exchange of
documents and signatures by overnight courier.
Section 1.5 Deliveries at Closing. At the Closing the Company shall deliver to
the Purchaser:
(a) the original of this Agreement;
(b) Convertible Notes in definitive form, each registered in the name
of each Purchaser, or the designee of such Purchaser, representing the
Purchased Convertible Notes purchased by such Purchaser;
(c) Purchase Warrants in definitive form, registered in the name of each
Purchaser, or the designee of such Purchaser; Section 1.6 TERMS OF THE
CONVERTIBLE NOTE PURCHASE AGREEMENT AND OPTION:
This SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT provides for the
offer, sale, issuance, and delivery of up to $675,000 in principal
amount of Series 1 Convertible Notes with Purchase Warrants. In
connection with the Closing under the Agreement, the Company shall
issue $675,000 principal amount of Convertible Notes convertible into
750,000 shares of Common Stock of the Company at $.90 per share. With
such Convertible Notes the Company will issue Purchase Warrants
entitling the holder thereof to purchase up to 750,000 shares of the
Common Stock of the Company at an exercise price of $.90 per share.
Additionally, until May 9, 2001, the Purchaser will have an option to
purchase an additional Convertible Note under the same terms and
conditions contained herein, except that the Company shall issue
$600,000 principal amount of Convertible Notes convertible into 666,667
shares of Common Stock of the Company at $.90 per share. With such
Convertible Notes the Company will issue Purchase Warrants entitling
the holder thereof to purchase up to 666,667 shares of the Common Stock
of the Company at an exercise price of $.90 per share.
Section 2. Representations and Warranties of the Company.
To induce the Purchaser to purchase the Convertible Notes, the Company
represents and warrants to the Purchaser.
<PAGE>
Section 2.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, and has the requisite corporate
power to own its properties and to carry on its business as now being conducted.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company. The Company has no subsidiaries.
Section 2.2 Authorization, Enforcement, Compliance with Other Instruments.
(a) The Company has the requisite corporate power and authority to
enter into and perform each of this Agreement, the Convertible Notes,
the Purchase Warrants, the Registration Rights Agreement, the Escrow
Agreement, the Transfer Agent Instructions, and any related agreements
(collectively, the "Transaction Agreements" and individually a
"Transaction Agreement"), and to issue the Convertible Notes, the
Conversion Shares, the Purchase Warrants and the Warrant Shares in
accordance with the terms hereof and thereof;
(b) the execution and delivery by the Company of each of the
Transaction Agreements and the consummation by it of the transactions
contemplated thereby, including without limitation the issuance of the
Convertible Notes, the Purchase Warrants, and the reservation for
issuance and the issuance of the Conversion Shares upon conversion of
the Convertible Notes, the Warrant Shares upon exercise of the Purchase
Warrants (the Convertible Notes, the Conversion Shares, the Purchase
Warrants, and the Warrant Shares are hereinafter collectively, the
"Securities") have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the
Company, its Board of Directors, or its stockholders for the due and
valid issuance of the Securities;
(c) each of the Transaction Agreements have been duly and validly executed and
delivered by the Company; and
(d) each of the Transaction Agreements constitutes the valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and
remedies.
Section 2.3 Capitalization. Immediately prior to Closing, the
authorized capital stock of the Company consisted of 70,000,000 shares of
capital stock, of which 60,000,000 shares are Common Stock, par value $.001 per
share, and 10,000,000 shares are Preferred Stock, par value $.001 per share
("Preferred Stock") of which no shares are issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. As of the effective date of this
Agreement, (a) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings, or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company, or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, (b) there are no
outstanding debt securities and (c) there are no agreements or arrangements
under which the Company is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights Agreement). There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement. The Company has furnished to the Purchaser true and correct copies of
the Company's Articles of Incorporation, as amended and as in effect on the date
hereof (the "Articles of Incorporation"), and the Company's Bylaws, as in effect
on the date hereof (the "Bylaws"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.
Section 2.4 Issuance of Securities. The Convertible Notes have been
duly authorized and are free from all taxes, liens, and charges with respect to
the issue thereof. The Warrants have been duly authorized and are free from all
taxes, liens, and charges with respect to the issuance thereof. The Conversion
Shares issuable upon conversion of the Convertible Notes have been duly
authorized and reserved for issuance. The Warrant Shares issuable upon exercise
of the Warrants have been duly authorized and reserved for issuance. Upon
conversion of the Convertible Notes and exercise of the Warrants, the Conversion
Shares and the Warrant Shares, respectively, will, be duly and validly issued,
fully paid, and nonassessable, and free from all taxes, liens, and charges, with
respect to the issuance thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.
Section 2.5 No Conflicts. The execution, delivery and performance of
this Agreement and the Transaction Agreements by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby,
will not (a) result in a violation of the Articles of Incorporation, any
Certificate of Designations, Preferences, and Rights applicable to any Preferred
Stock of the Company, or the Bylaws of the Company or (b) conflict with,
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration, or cancellation of, any agreement, indenture, or
instrument to which the Company is a party, or result in a violation of any law,
rule, regulation, order, judgment, or decree (including federal and state
securities laws and regulations and the rules and regulations of the principal
market or exchange on which the Common Stock is traded or listed) applicable to
the Company or by which any property or asset of the Company is bound or
affected. The Company is not in violation of any term of, or in default under,
its Articles of Incorporation or Bylaws or their organizational charter or
Bylaws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree, or order or any statute,
rule, or regulation applicable to the Company. The business of the Company is
not being conducted, and shall not be conducted in violation of any law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and the other Transaction Agreements, and as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization, or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver, and perform any of its obligations under or
contemplated by this Agreement and the Transaction Agreements in accordance with
the terms hereof or thereof. All consents, authorizations, orders, filings, and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is unaware of any facts or circumstances which might give rise to any of
the foregoing.
Section 2.6 Financial Statements. Attached is the July 31, 2000
financial statements of the Company together with the audit report dated
November 15, 2000. The Financial Statements (i) are in accordance with the books
and records of the Company, (ii) present fairly the financial condition of the
Company as of the respective dates indicated and the results of operations for
such periods, and (iii) the audited Financial Statements have been prepared with
consistently applied accounting principles throughout the periods involved. The
Financial Statements do not contain any items of special or nonrecurring income,
or other income not earned in the ordinary course of business, except as
specifically set forth in the notes to the Financial Statements. The financial
books, financial records, and financial accounts of the Company shown to the
Purchaser accurately and fairly reflect, in reasonable detail, all transactions,
assets, and liabilities of the Company. The Company has not engaged in any
transaction, maintained any bank account, or used any of the funds of the
Company, except for transactions, bank accounts, and funds which have been and
are reflected in the normally maintained books and records of the Company. There
is no liability or indebtedness of the Company for dividends or other
distributions declared or accumulated but unpaid with respect to the Common
Stock or the Purchased Convertible Notes. No other information provided by or on
behalf of the Company to the Purchaser which is not included in the Financial
Statements, including, without limitation, information referred to in Section
2.4 of this Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made, not misleading.
Section 2.7 Absence of Certain Changes. Since the date of the most
recent audited Balance Sheet included in the Financial Statements, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations, or
prospects of the Company. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings.
Section 2.8 Absence of Litigation. There is no action, suit,
proceeding, inquiry, or investigation before or by any court, public board,
government agency, self-regulatory organization, or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, the
Convertible Notes, the Common Stock, wherein an unfavorable decision, ruling or
finding would (a) have a material adverse effect on the transactions
contemplated hereby, (b) adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under the
Transaction Agreements, or any of the other documents contemplated therein, or
have a material adverse effect on the business, operations, properties,
financial condition, or results of operation of the Company taken as a whole.
Section 2.9 Purchase of Purchased Convertible Notes. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
an arm's length purchaser with respect to this Agreement and the other
Transaction Agreements and the transactions contemplated hereby and thereby. The
Company further acknowledges that the Purchaser is not acting as a financial
advisor or agent or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
advice given by such Purchaser or any of their respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to such Purchaser's purchase of the Securities. The
Company further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its representatives.
Section 2.10 No Undisclosed Events, Liabilities, Developments, or
Circumstances. No event , liability, development, or circumstance has occurred
or exists, or is contemplated to occur, with respect to the Company or its
business, properties, prospects, operations, or financial condition, which could
be material but which has not been publicly announced or disclosed in writing to
the Purchaser.
Section 2.11 No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities. The Company represents that it has not offered the Securities to
Purchasers in the U.S. or, to the best knowledge of the Company, to any person
in the United States or any U.S. person.
Section 2.12 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 security or solicited any offers to
buy any security, under circumstances that would require registration of the
Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions.
Section 2.13 Employee Relations. The Company is not involved in any
labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union and the
Company believes that its relations with its employees are good.
Section 2.14 Intellectual Property Rights. The Company owns or
possesses adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets, and rights necessary to conduct its business as
now conducted. None of the Company's trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets, or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate in the near future. The Company does not have any
knowledge of any infringement by the Company of the trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret, or other similar rights
of others, or of any such development of similar or identical trade secrets, or
technical information by others and, there is no claim, action, or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret, or other infringement, and the Company is unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality, and value of all of its intellectual properties.
Section 2.15 Environmental Laws. The Company is in compliance with any
and all applicable foreign, federal, state, and local laws and regulations
relating to the protection of human health and safety, the environment, or
hazardous, toxic substances, wastes, pollutants, or contaminants ("Environmental
Laws"), (b) has received all permits, licenses, or other approvals required of
it under applicable Environmental Laws to conduct its business, and (c) is in
compliance with all terms and conditions of any such permit, license, or
approval.
Section 2.16 Title. The Company has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company, in each
case free and clear of all liens, encumbrances, and defects, or as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company. Any real property
and facilities held under lease by the Company is held by it under valid,
subsisting, and enforceable leases with such exceptions as are not material, and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company.
Section 2.17 Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks, and in such
amounts, as management of the Company believes to be prudent and customary in
the business in which the Company is engaged. The Company has been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial, or otherwise, or the earnings,
business, or operations of the Company.
Section 2.18 Regulatory Permits. The Company possesses all
certificates, authorizations, and permits issued by the appropriate federal,
state, or foreign regulatory authorities necessary to conduct its business, and
the Company has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization, or permit.
Section 2.19 Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management's
general or specific authorizations, (b) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (c) access
to assets is permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
Section 2.20 No Materially Adverse Contracts, Etc. The Company is not
subject to any charter, corporate, or other legal restriction, or any judgment,
decree, order, rule, or regulation which in the judgment of the Company's
officers has, or is expected in the future to have, a material adverse effect on
the business, properties, operations, financial condition, results of
operations, or prospects of the Company. The Company is not a party to any
contract or agreement which in the judgment of the Company's officers has, or is
expected to have, a material adverse effect on the business, properties,
operations, financial condition, results of operations, or prospects of the
Company.
Section 2.21 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 has 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.
Section 2.22 Certain Transactions. Except as set forth in Section 2.22
of this Agreement and in the SEC Documents, and except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
third parties, and 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.
Section 2.23 Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Convertible
Notes will increase in certain circumstances. The Company understands and
acknowledges that the number of Warrant Shares issuable upon exercise or
conversion of the Purchase Warrants will increase in certain circumstances. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Convertible Notes and Warrant Shares upon exercise or
conversion of the Purchase Warrants in accordance with this Agreement, the
Convertible Notes and the Purchase Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
Section 2.24 Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents, or other
third parties.
Section 2.25 Disclosure. Neither this Agreement nor any Schedule or
Exhibit hereto, contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
Section 2.26 Cashless Exercise. The Company will have the all shares of
common stock underlying the warrants registered under the Securities Act of
1933, as amended. The warrant holder, whether the undersigned or otherwise, in
lieu of any cash payment required hereunder, shall have the right to exercise
the warrants in whole or in part by surrendering the warrants in exchange for
the number of shares of the Company's common stock equal to (x) the number of
shares as to which the warrants are being exercised multiplied by (y) a
fraction, the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised, and the
denominator of which is such Market Price. The term "Market Price" means the
closing ask price per share of the common stock on the principal stock exchange
or market on which the common stock is then quoted or traded on the day
preceding the date on which written notice of election to exercise the warrants
has been given to the Company (a "cashless exercise"). If the warrant holder
opts for a cashless exercise of the warrants, no other consideration shall be
paid to the Company, other than surrendering the warrant itself, nor will there
be paid any commission or other remuneration to any other person or entity by
the warrant holder. In the event that the warrant holder is not permitted to
"tack" the holding period of the warrants to the holding period of the common
stock received upon the cashless exercise for purposes of satisfaction of the
holding period requirements of Rules 144(d)(3)(ii) and 144(k) under the
Securities Act of 1933, as amended, for whatever reason and there is no
presently filed registration statement effective as to the shares received or to
be received through the cashless exercise of this Warrant, the Company shall,
upon receipt of the written request of the warrant holder, promptly prepare and
file a registration statement with the U.S. Securities and Exchange Commission
with respect to all of the shares underlying this warrants.
Section 3. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company that:
Section 3.1 Investment Purpose. Purchaser is acquiring the Securities
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided however,
that by making the representations herein, Purchaser does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
Section 3.2 Accredited Investor Status. Purchaser is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
Section 3.3 Reliance on Exemptions. Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments, and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire such securities.
Section 3.4 Information. Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances, and operations
of the Company and materials relating to the offer and sale of the Securities,
which have been requested by such Purchaser. Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by Purchaser or
its advisors, if any, or its representatives shall modify, amend, or affect such
Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 hereof. Purchaser understands that its investment in the
Securities involves a high degree of risk. Purchaser has sought such accounting,
legal, and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities. Purchaser
has performed such due diligence as Purchaser has desired prior to purchase of
the Securities and is not relying on the recommendation of Jack Augsback &
Associates, Inc. in making its investment decision.
Section 3.5 No Governmental Review. Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities, or the fairness or suitability of the investment in the Securities,
nor have such authorities passed upon or endorsed the merits of the offering of
the Securities.
Section 3.6 Transfer or Resale; Restricted Securities. Purchaser understands
that except as provided in the Registration Rights Agreement:
(a) the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale,
sold, assigned, or transferred unless;
(i) subsequently registered thereunder;
(ii) Purchaser shall have delivered to the Company an opinion
of counsel, in a generally acceptable form, to the effect that
such securities to be sold, assigned, or transferred may be
sold, assigned, or transferred pursuant to an exemption from
such registration; or
(iii) Purchaser provides the Company with reasonable assurance
that such securities can be sold, assigned, or transferred
pursuant to Rule 144 or promulgated under the 1933 Act (or a
successor rule thereto);
(b) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule
144") may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of such securities
under circumstances in which the seller (or the person through whom the
sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and
(c) neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder.
Section 3.7 Legends. Purchaser understands that the certificates or
other instruments representing the Convertible Notes and the Warrants shall bear
a restrictive legend in substantially the following form (and a stop transfer
order may be placed against transfer of the Convertible Notes and the Warrants):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Convertible Notes and the
Warrants, unless otherwise required by state securities laws if, (a) the sale of
the Convertible Notes and or the Warrants is registered under the 1933 Act, (b)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment, or transfer of the Convertible Notes and or the Warrants may
be made without registration under the 1933 Act, or (c) such holder provides the
Company with reasonable assurances that the Convertible Notes and the Warrants
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold.
Section 3.8 Authorization Enforcement. This Agreement has been duly and
validly authorized, executed, and delivered on behalf of Purchaser and is a
valid and binding agreement of Purchaser enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
Section 3.9 Residence. Purchaser is a resident of the jurisdiction specified in
its address on the Purchaser Signature Page of such Purchaser.
Section 3.10 No Scheme to Evade Registration. Purchaser represents and
warrants to the Company, as to itself only, that the acquisition of the
Securities is not a transaction (or any element of a series of transactions)
that is part of a plan or scheme by the Purchaser to evade the registration
provisions of the 1933 Act and that
(a) such Purchaser has sufficient knowledge and experience to evaluate the risks
and merits of its investment in the Company and it is able financially to bear
the risks thereof;
(b) such Purchaser has had an opportunity to ask questions of and receive
answers from and to discuss the Company's business, management, and financial
affairs with the Company's management;
(c) the Securities are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof;
(d) such Purchaser was not offered nor made aware of the Company's interest in
issuing the Convertible Notes by any means of public advertisement or
solicitation;
(e) in connection with such Purchaser's purchase of the Securities, it
has been solely responsible for its own (i) due diligence investigation
of the Company and (ii) investment decision, and has not engaged or
relied upon any agent or "purchaser representative" to review or
analyze the Company's business and affairs or advise Purchaser with
respect to the merits of the investment;
(f) such Purchaser has full power and authority to execute, deliver,
and perform this Agreement; and this Agreement constitutes the legal,
valid, and binding obligation of such Purchaser, enforceable against it
in accordance with their respective terms; and agrees that if such
Purchaser proposes to sell the Securities pursuant to Rule 144A under
the Securities Act, it will (A) take reasonable steps to obtain the
information required by such Rule to establish a reasonable belief that
the prospective purchaser is a "qualified institutional buyer" as such
term is defined in Rule 144A and (B) advise the prospective purchaser
that the Purchaser is relying on the exemption from the registration
provisions of the Securities Act available pursuant to Rule 144A.
Section 4. Conditions of Initial Closing.
The Purchaser's obligation to purchase and pay for the Securities is
subject to the satisfaction prior to or at the Closing of the following
conditions:
Section 4.1 Transaction Agreements. The Company shall have delivered to
Purchaser the Transaction Agreements as provided in Section 1.5, above, executed
by all the parties thereto.
Section 4.2 Opinion of Counsel. Purchaser shall have received from
counsel for the Company, an opinion in the form of Exhibit E, addressed to
Purchaser, dated the Closing Date. To the extent that the opinion referred to in
the preceding sentence is rendered in reliance upon the opinion of any other
counsel, Purchaser shall have received a copy of such opinion of such other
counsel, dated the Closing Date and addressed to Purchaser, or a letter from
such other counsel, dated the Closing Date and addressed to Purchaser,
authorizing Purchaser to rely on such other counsel's opinion.
Section 4.3 Representations and Warranties; No Default. The
representations and warranties of the Company contained in this Agreement and
those otherwise made in writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement shall be true in all
material respects, except to the extent of changes caused by the transactions
contemplated herein; provided however, that there shall exist at the time of the
Closing and after giving effect to such transactions no Event of Default (as
such term is defined in the Convertible Notes hereinafter an "Event of
Default"), nor any event which with notice, the passage of time, or both would
constitute an Event of Default.
Section 4.4 Purchase and Loan Permitted by Applicable Laws. The
purchase of, and payment for, all the Securities evidenced by or attendant to
the Convertible Notes shall not violate any applicable domestic law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act) and shall not subject Purchaser to any tax, penalty, liability,
or other onerous condition under, or pursuant to, any applicable law or
governmental regulation or order.
Section 4.5 No Adverse Litigation. There shall be no action, suit,
arbitration, investigation, or proceeding, pending or, to the best of
Purchaser's or the Company's knowledge, threatened, against or affecting
Purchaser, the Company, any of Purchaser's or the Company's properties or
rights, or any of Purchaser's or the Company's Affiliates, officers, or
directors, by or before any court, arbitrator, or administrative or governmental
body which (i) seeks to restrain, enjoin, prevent the consummation of, or
otherwise affect the transactions contemplated by this Agreement or (ii)
questions the validity or legality of any such transactions, or (iii) seeks to
recover damages or obtain other relief in connection with any such transactions,
and, to the best of Purchaser's and the Company's knowledge, there shall be no
valid basis for any such action, proceeding, or investigation, and Purchaser
shall have received a certificate executed by the chief executive officer of the
Company, dated the Closing Date, to such effect.
Section 4.6 Approvals and Consents. The Company shall have duly
received all authorizations, waivers, consents, approvals, licenses, franchises,
permits, and certificates (collectively, "Consents") by or of all federal,
state, and local governmental authorities and all material consents by or of all
other persons necessary or advisable for the issuance of the Convertible Notes,
all such consents shall be in full force and effect at the time of Closing, and
Purchaser shall have received a certificate executed by the chief executive
officer of the Company, dated the Closing Date, to such effect.
Section 4.7 No Material Adverse Change. Since November 9, 2000, there
shall not have been any material adverse change in the business, condition
(financial or other), assets, properties, operations, or prospects of the
Company, and Purchaser shall have received a certificate executed by the chief
executive officer of the Company, dated the Closing Date, to such effect. Since
November 9, 2000, there shall have been no amendment to the Charter or Bylaws
except as described in the Disclosure Schedule.
Section 4.8 Proceedings. All proceedings taken or to be taken in
connection with the transactions contemplated hereby, and all documents incident
thereto shall be reasonably satisfactory in form and substance to Purchaser and
Purchasers counsel, and Purchaser and Purchasers counsel shall have received all
such counterpart originals or certified or other copies of such documents as the
Purchaser or Purchasers' counsel may reasonably request.
Section 4.9 Secretary Certificate. Purchaser shall have received a
Secretary Certificate from the Secretary or an Assistant Secretary of the
Company dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the Articles of Incorporation as then in effect,
certified or bearing evidence of filing by the Corporation Commission of the
State of New Mexico, and (B) a certificate of said Corporation Commission of the
State of New Mexico, dated as of a recent date as to the due incorporation and
good standing of the Company, the payment of all franchise taxes by the Company,
and listing all documents of the Company on file with said Corporation
Commission of the State of New Mexico; (C) that attached thereto is a true and
complete copy of the Bylaws of the Company as in effect on the date of such
certification; (D) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the shareholders of the Company
authorizing the execution, delivery, and performance of Transaction Agreements
and the issuance, sale, and delivery of the Securities, and that all such
resolutions are in full force and effect and are all the resolutions adopted in
connection with the foregoing agreements and the transactions contemplated
thereby; (E) that the Charter has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (A) above;
and (F) to the incumbency and specimen signature of each officer of the Company
executing all Transaction Agreements and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate.
Section 4.10 Transfer Agent Instructions. The Transfer Agent
Instructions, in form and substance satisfactory to the Purchaser, shall have
been delivered to and acknowledged in writing by the Company's transfer agent.
Section 5. Conditions to Subsequent Closings.
Section 5.1 Representations and Warranties; No Default The
representations and the warranties of the Company contained in this Agreement
and those otherwise made in writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement shall be true in all
material respects, except to the extent of changes caused by the transactions
contemplated herein; provided however, that there shall exist no Event of
Default nor any event which with notice, lapse of time, or both would constitute
an Event of Default under the Convertible Notes at the time of the Subsequent
Closing.
Section 5.2 No Suspensions. There shall be no suspensions of trading in or in
delisting (or pending delisting) of the Common Stock.
Section 5.3 Opinion of Counsel. Purchaser shall have received from
counsel for the Company, addressed to Purchaser, dated as of each Additional
Closing Date. To the extent that the opinion referred to in the preceding
sentence is rendered in reliance upon the opinion of any other counsel,
Purchaser shall have received a copy of such opinion of such other counsel,
dated the Additional Closing Date and addressed to Purchaser, or a letter from
such other counsel, dated the Additional Closing Date and addressed to
Purchaser, authorizing Purchaser to rely on such other counsel's opinion.
Section 5.4 Due Diligence. Purchaser shall be satisfied with the
results of periodic due diligence investigations and shall have received a
"comfort" letter from the Company's auditors with respect to the financial
statements filed by the Company in its quarterly and annual securities filings.
Section 5.5 Shareholder Approval. The Company, if required, must obtain
shareholder approval on placement so as to address the NASD 20% rule. As of the
date of the First Closing, no such shareholder approval is required.
Section 5.6 No Material Adverse Change. Since the date hereof, there
shall not have been any material adverse change in the business, condition
(financial or other), assets, properties, operations, or prospects of the
Company, and Purchaser.
Section 6. Affirmative Covenants.
The Company covenants that from and after the date of this Agreement
through the Closing and thereafter so long as any of the Convertible Notes
remain outstanding:
Section 6.1 Financial Information. The Company shall furnish to Purchaser the
information required below, at the times required below:
(a) within five (5) days after the filing thereof with the SEC, a copy
of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q,
any Current Reports on Form 8-K, and any registration statements or
amendments filed pursuant to the 1933 Act;
(b) within one (1) day after release thereof, copies of all press releases
issued by the Company; (c) copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders;
(d) promptly upon any officer of the Company obtaining knowledge (i) of
any condition or event which constitutes an Event of Default, (ii) that
the holder of any Convertible Notes has given any notice or taken any
other action with respect to a claimed Event of Default under this
Agreement, (iii) of any condition or event which, in the opinion of
management of the Company would have a material adverse effect on the
business, condition (financial or other), assets, properties,
operations, or prospects of the Company, other than conditions or
events applicable to the economy as a whole, (iv) that any person has
given any notice to the Company or taken any other action with respect
to a claimed Event of Default, or (v) of the institution of any
litigation involving claims against the Company, unless such litigation
is defended by the insurance carrier without any reservation of rights
and is reasonably expected to be fully covered by a creditworthy
insurer, in an amount equal to or greater than $250,000 with respect to
any single cause of action or of any adverse determination in any
litigation involving a potential liability to the Company equal to or
greater than $100,000 with respect to any single cause of action, a
certificate executed by the chief executive officer of the Company
specifying the nature and period of existence of any such condition or
event, or specifying the notice given or action taken by such holder or
person and the nature of such claimed Event of Default, event or
condition, and what action the Company has taken, is taking, or
proposes to take with respect thereto; and
(e) with reasonable promptness, such other information and data with
respect to the Company as Purchaser may reasonably request.
Section 6.2 SB-2. The Company agrees to file an SB-2 Registration
Statement with respect to the Securities and Warrants described herein as
required under SEC Regulation, and to provide a copy thereof to each Purchaser
promptly after such filing. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary to
qualify the Securities for, or obtain exemption for the Securities for, sale to
the Purchaser at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Purchaser on or prior to the
Closing Date.
Section 6.3 Reporting Status. Until the earlier of (a) the date as of
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and Warrant Shares without
restriction pursuant to Rule l44(k) promulgated under the 1933 Act (or successor
thereto), or (b) the date on which (i) the Investors shall have sold all the
Conversion Shares and Warrant Shares and (ii) none of the Convertible Notes is
outstanding (the "Registration Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
Section 6.4 Inspection of Property. The Company will permit any Person
designated by any Purchaser in writing, at Purchaser's expense, to visit and
inspect any of the properties of the Company, to examine the books and financial
records of the Company and make copies thereof or extracts therefrom and to
discuss its affairs, finances, and accounts with its officers and its
independent public accountants, all at reasonable times and upon reasonable
prior notice to the Company.
Section 6.5 Maintenance of Properties; Insurance. The Company will
maintain or cause to be maintained in good repair, working order, and condition
all properties used or useful in the business of the Company, and from time to
time will make or cause to be made all appropriate repairs, renewals, and
replacements thereof. The Company will maintain or cause to be maintained, with
financially sound and reputable insurers (or, as to workers' compensation or
similar insurance, in an insurance fund or by self-insurance authorized by the
laws of the jurisdiction in question), insurance with respect to their
respective properties and businesses against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar businesses and similarly situated, of such type and in such
amounts as are customarily carried under similar circumstances by such other
corporations and as are in good faith believed by the Company to be sufficient
to prevent the Company from becoming a co-insurer within the terms of the
policies in question.
Section 6.6 Expenses. The Company shall pay all costs and expenses
incurred by such party in connection with the negotiation, investigation,
preparation, execution, and delivery of this Agreement, the Convertible Notes,
the Escrow Agreement, the Registration Rights Agreement, and other documents
executed in connection with the issuance of the Convertible Notes. The costs and
expenses of Purchaser, including all legal fees and expenses of the Purchaser,
shall be paid for by the Company at the First Closing and the fees and expenses
for all subsequent Closings shall be paid at each subsequent Closing.
Section 6.7 Authorized Shares of Common Stock, Reservation of Shares.
The Company shall at all times, so long as any of the Convertible Notes are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Convertible Notes and the exercise of the Purchase Warrants, such number of
shares of Common Stock equal to or greater than 150% of the number of Conversion
Shares and Warrant Shares issuable upon conversion of the Convertible Notes and
the conversion or exercise of the Warrants which are then outstanding or which
could be issued at any time in the transactions contemplated by this Agreement.
Section 6.8 Corporate Existence, Etc. The Company s will at all times
preserve and keep in full force and effect its corporate existence, and rights,
licenses, and franchises material to its business, and will qualify to do
business as a foreign corporation in each jurisdiction where the failure to so
qualify would have a material adverse effect on the business, condition
(financial or other), assets, properties, or operations of the Company.
Section 6.9 Transfer Agents. The Company covenants and agrees that, in
the event that the Company's agency relationship with the transfer agent should
be terminated for any reason prior to a date which is three (3) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the transfer agent execute and agree to be bound by the terms
of the Irrevocable Instructions to Transfer Agent.
Section 6.10 Shareholder Approval; Proxy. The Company covenants to
ratify the issuance of the Convertible Notes and Warrants, if and as required by
the rules of the National Association of Securities Dealers, Inc. (the "NASD")
applicable to the transaction (collectively the "Shareholder Proposals"). All
officers and directors will execute a proxy authorizing Andrew F. Cauthen or
Stephen F. Watwood or either of them to vote and exercise all consensual rights
in respect of all shares of Common Stock, the voting of which is controlled by
such officer or director, at any meeting (or any adjournment thereof) at which
Shareholder action is proposed to effect the Shareholder Proposals.
Section 6.11 Transfer Agent Instructions. The Company shall issue
Transfer Agent Instructions to its transfer agent to issue certificates,
registered in the name of the Purchaser or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by the Purchaser to the Company upon conversion of the Convertible Notes
and the conversion or exercise of the Warrants, except as provided in Section
6.7 of this Agreement. Prior to registration of the Conversion Shares and the
Warrant Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 3.7 of this Agreement. The Company
warrants that no instruction other than the Transfer Agent Instructions referred
to in this Section 6.11, and stop transfer instructions to give effect to
Section 3.7 hereof (in the case of the Conversion Shares and the Warrant Shares,
prior to registration of such shares under the 1933 Act) will be given by the
Company to its transfer agent and that the Conversion Shares and the Warrant
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 6.11 shall affect in any way the
Purchaser's obligations and agreement to comply with all applicable securities
laws upon resale of the Convertible Notes, the Conversion Shares or the Warrant
Shares. If the Purchaser provides the Company with an opinion of counsel,
reasonably satisfactory in form, and substance to the Company, that registration
of a resale by the Purchaser of any of the Convertible Notes, the Conversion
Shares or the Warrant Shares is not required under the 1933 Act, the Company
shall permit the transfer, and, in the case of the Conversion Shares and the
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the
Purchaser. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Purchaser 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 6.11 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 6.11, that
the Purchaser 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.
Section 6.12 Payment of Taxes. The Company will pay all taxes,
assessments, and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business, income,
or properties before any penalty or significant interest accrues thereon, and
all claims (including, without limitation, claims for labor, services,
materials, and supplies) for sums which have become due and payable and which by
law have or may become a lien upon any of its properties or assets, provided
that no such charge or claim need be paid if such claim is (i) being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted, and (ii) the amount of such claim is accrued on the financial
statements of the Company or other appropriate provision is made as shall be
required by generally accepted accounting principles.
Section 6.13 Compliance with Laws, Etc. The Company will comply with
the requirements of all applicable laws, rules, regulations, and orders of any
court or other governmental authority (including, without limitation, those
related to environmental or ERISA compliance), noncompliance with which could
materially adversely affect the business, condition (financial or other),
assets, property, operations, or prospects of the Company.
Section 6.14 Use of Proceeds. The Company will use the proceeds from
the sale and issuance of the Convertible Notes for general corporate purposes
only.
Section 6.15 Registration Statement. The Company shall (a) file an SB-2
Registration Statement covering the Conversion Shares and the Warrant Shares,
and additionally the option to purchase an additional Convertible Note in the
amount of $600,000 at $.90/share with accompanying Warrants at $.90/share, under
the same terms and conditions contained herein, by the Filing Deadline (as such
term is defined in the Registration Rights Agreement) The SB-2 Registration is
anticipated to occur on or about November 10, 2000, but in no instance shall it
occur later than November 17, 2000., (b) use its best efforts to have the
Registration Statement declared effective by the Effective Date (as such term is
defined in the Registration Rights Agreement), and (c) keep such Registration
Statement current and effective for a period twelve (12) months from the
Effective Date of such Registration Statement. In the Registration Rights
Agreement, the Company has agreed that if it does not file a Registration
Statement covering the Conversion Shares and the Warrant Shares on or before the
Filing Deadline (as defined in the Registration Rights Agreement), that it will
forfeit certain shares of the Common Stock to the Purchasers as a penalty as
provided in Section 11 of the Registration Rights Agreement.
Cashless Exercise. The Company will have the all shares of common stock
underlying the warrants registered under the Securities Act of 1933, as amended.
The warrant holder, whether the undersigned or otherwise, in lieu of any cash
payment required hereunder, shall have the right to exercise the warrants in
whole or in part by surrendering the warrants in exchange for the number of
shares of the Company's common stock equal to (x) the number of shares as to
which the warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined below) of the common stock
less the exercise price of the warrants being exercised, and the denominator of
which is such Market Price. The term "Market Price" means the closing ask price
per share of the common stock on the principal stock exchange or market on which
the common stock is then quoted or traded on the day preceding the date on which
written notice of election to exercise the warrants has been given to the
Company (a "cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the Company,
other than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the warrant
holder. In the event that the warrant holder is not permitted to "tack" the
holding period of the warrants to the holding period of the common stock
received upon the cashless exercise for purposes of satisfaction of the holding
period requirements of Rules 144(d)(3)(ii) and 144(k) under the Securities Act
of 1933, as amended, for whatever reason and there is no presently filed
registration statement effective as to the shares received or to be received
through the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file a
registration statement with the U.S. Securities and Exchange Commission with
respect to all of the shares underlying this warrants.
Section 6.16 Listings. The Company shall promptly after the effective
date of the Registration Statement secure the listing of the Conversion Shares
and the Warrant Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listings of all Conversion
Shares from time to time issuable pursuant to terms of the Convertible Notes and
Warrant Shares from time to time issuable under the terms of the Warrants, and
the Registration Rights Agreement. The Company shall maintain the Common Stock's
authorization for quotation in the over-the-counter market. The Company shall
promptly provide to Purchaser copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading in the over-the-counter
market.
Section 6.17 Indemnification. In consideration of the Purchaser's
execution and delivery of this Agreement and acquiring the Securities hereunder
and in addition to all of the Company's other obligations under this Agreement,
the Company shall defend, protect, indemnify, and hold harmless each Purchaser
and each other holder of the Securities and each officer, director, employee,
and agent of each Purchaser (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 attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Indemnitees or any of them 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 any Transaction Agreement or
any other certificate, instrument, or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement, or obligation of the Company
contained in the Transaction Agreements, or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit, or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance, or enforcement of this Agreement or
any other instrument, document, or agreement executed pursuant hereto by any of
the Indemnitees, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Convertible
Notes, or the status of the Purchaser or holder of the Convertible Notes, the
Conversion Shares, the Warrants or the Warrant Shares, as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
Section 6.18 Inspection, Consultation, and Advice. The Company shall
permit any holder of at least $100,000 in principal amount of Convertible Notes
(a "Significant Holder") and such persons as a Significant Holder may designate,
to visit and inspect any of the properties of the Company, examine its books and
take copies and extracts therefrom, discuss the affairs, finances, and accounts
of the Company with their officers, employees, and public accountants (and the
Company hereby authorizes said accountants to discuss with any Significant
Holder and the representatives of any Significant Holder such affairs, finances,
and accounts), and consult with and advise the management of the Company as to
their affairs, finances, and accounts, all at reasonable times, upon reasonable
notice and as is reasonably necessary to permit any such Significant Investor to
monitor its investment in the Company. Each party shall bear their own expenses
in connection with the above activities.
Section 7. Negative Covenants.
The provisions of this Section 7 shall remain in effect so long as any
of the Convertible Notes shall remain outstanding.
Section 7.1 Restrictions on Dividends. The Company will not (a) pay any
dividends, in cash or otherwise, on, (b) make any distributions to holders of,
or (c) purchase, redeem, or otherwise acquire any of its outstanding Common
Stock or Preferred Stock or set apart assets for a sinking or other analogous
fund for the purchase, redemption, retirement, or other acquisition of, any
shares of its Common Stock or Preferred Stock; provided however, that the
Company may, so long as at the time of and after giving effect thereof no Event
of Default has occurred and is continuing: (i) pay dividends on its outstanding
Preferred Stock in accordance with the Charter; (ii) with prior written approval
of each Purchaser, repurchase shares of its Common Stock issued or to be issued
by the Company upon exercise of stock options granted to employees and directors
of the Company pursuant to the terms of plans adopted by the Board of Directors
of the Company; and (iii) pay cash in lieu of fractional shares of its Common
Stock on the exercise of outstanding warrants to purchase its Common Stock,
pursuant to the terms of such warrants.
Section 8. Miscellaneous.
Section 8.1 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
Section 8.2 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 8.3 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 8.4 Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Purchaser, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant, or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 8.5 Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (a) upon
receipt, when delivered personally, (b) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested, (c)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (d) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
American Millennium Corporation, Inc.
1010 Tenth Street, Suite 100
Golden, CO 80401
Attention: Andrew F. Cauthen
President and Chief Executive Officer
Telephone: (303) 279-2002
Facsimile: (303) 271-9777
If to the Purchaser, to its address and facsimile number on the signature page
of such Purchaser hereto, with copies to such Purchaser's counsel as set forth
on the signature page of such Purchaser hereto. Each party shall provide five
(5) days prior written notice to the other party of any change in address or
facsimile number.
Section 8.6 Interest. In no event shall the amount of interest due or
payable hereunder or under the Convertible Notes exceed the maximum rate of
interest allowed by applicable law, and if any such payment is inadvertently
made by the Company or is inadvertently received by any holder of Convertible
Notes, then such excess sum shall be credited as a payment of principal, unless
the applicable holder of a Convertible Notes shall notify the Company in writing
that it elects to have such excess sum returned forthwith. It is the express
intent hereof that the Company not pay and the holder of the Convertible Notes
not receive, directly or indirectly in any manner whatsoever, interest in excess
of that which may legally be paid by the Company under applicable law.
Section 8.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers. Any
Purchaser may assign its rights hereunder without the consent of the Company,
provided however, that any such assignment shall not release such Purchaser from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption.
Section 8.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9 Publicity. The Company and Purchasers shall have the right
to approve, before issuance, any press releases or any other public statements
with respect to the transactions contemplated hereby; provided however, that the
Company shall be entitled, without the prior approval of Purchasers, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
Section 8.10 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments, and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 8.11 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 8.12 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Mexico without
regard to the principles of conflict of laws.
Section 8.13 Joint, Several and In Solido Liability. If Purchasers
consist of more than one person and/or entity, each such person and/or entity
agrees that its liability herein is joint, several and In Solido.
COMPANY SIGNATURE PAGE
TO
SERIES 1 CONVERTIBLE NOTE
Purchase agreement
IN WITNESS WHEREOF, Purchaser and the Company have caused this Series 1
Convertible Note Purchase Agreement to be duly executed as of the date first
written above.
COMPANY
AMERICAN MILLENNIUM CORPORATION, INC.
By:
------------------------------------------------
Andrew F. Cauthen
President and Chief Executive Officer
[Signature of Purchaser on following page]
purchaser signature page
to
SERIES 1 CONVERTIBLE NOTE
Purchase agreement
PURCHASER
Rodney R. Schoemenn, Sr.
By: ----------------------------------------------------
PURCHASER
Henry H. Lyon
By: ----------------------------------------------------
===================================== ==========================================
Purchaser Name ("Purchaser") Rodney R. Schoemenn, Sr.
Address and
Facsimile Number 3904 Wheat DriveMetairie, LA 70002
and
Henry H. Lyon
319 Fifth Street
Paintsville, KY 41240
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------
Securities Purchased Convertible Note
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------
Purchase Price $675,000
===================================== ==========================================
Exhibit A
CONVERTIBLE NOTE
AMENDMENT NO. 1
TO
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
between
AMERICAN MILLENNIUM CORPORATION, INC.
(the "Company")
and
Rodney R. Schoemann, Sr. and Henry H. Lyon
(the "Purchaser")
Exhibit B
to
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
AMERICAN MILLENNIUM CORPORATION, INC.
COMMON STOCK PURCHASE WARRANT
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
TO
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
between
AMERICAN MILLENNIUM CORPORATION, INC.
(the "Company")
and
Rodney R. Schoemann, Sr. and Henry H. Lyon
(the "Purchaser")
3
1036-08/Series 1/2nd Closing
CONVERTIBLE NOTE
TO
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
between
AMERICAN MILLENNIUM CORPORATION, INC.
(the "Company")
and
Rodney R. Schoemann, Sr. and Henry H. Lyon
(the "Purchaser")
Dated as of November 9, 2000
This AMENDMENT NO. 1 TO SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT sets forth
certain amendments to the Series 1 Convertible Note Purchase Agreement, dated as
of November 9, 2000, between the parties hereto, which provides for the offer,
sale, issuance and delivery of up to $675,000 in principal amount of Series 1
Convertible Notes of the Company with Purchase Warrants. All of the definitions
contained in the original Agreement shall have the same meanings in this
Amendment No. 1.
Amendment
The Note Purchase Agreement is hereby amended as follows:
1. In connection with the Closing under the Agreement, the Company shall issue
$675,000 principal amount of Convertible Notes convertible into 750,000 shares
of Common Stock of the Company at $.90 per share. With such Convertible Notes
the Company will issue Purchase Warrants entitling the holder thereof to
purchase up to 750,000 shares of the Common Stock of the Company at an exercise
price of $.90 per share.
2. The Agreement and all documents executed and delivered in connection
therewith are hereby amended to the extent necessary to reflect the change in
the conversion price of the Convertible Notes and the exercise price of the
Purchase Warrants and in all other respects required to carry out the intention
of the parties. For all purposes, the subject offering of the Convertible Notes
and related Purchase Warrants shall be as provided in the Agreement, as so
amended.
[Signatures on following pages]
<PAGE>
COMPANY SIGNATURE PAGE
TO
AMENDMENT NO. 1
TO
SERIES 1 CONVERTIBLE NOTE PURCHASE AGREEMENT
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Amendment No. 1 to Series 1 Convertible Note Purchase Agreement to be duly
executed as of the date first written above.
COMPANY
AMERICAN MILLENNIUM CORPORATION, INC.
By:
---------------------------------------------
Andrew F. Cauthen
President and Chief Executive Officer
purchaser signature page
to
AMENDMENT NO. 1
TO
SERIES 1 CONVERTIBLE NOTE Purchase agreement
PURCHASER
Rodney R. Schoemenn, Sr. By:
---------------------------------------------------- PURCHASER Henry H. H.Lyon
By: ----------------------------------------------------
===================================== ==========================================
Purchaser Name ("Purchaser") Rodney R. Schoemenn, Sr.
Address and
Facsimile Number 3904 Wheat DriveMetairie, LA 70002
and
Henry H. Lyon
319 Fifth Street
Paintsville, KY 41240
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------
Securities Purchased Convertible Note
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------
Purchase Price $675,000
===================================== ==========================================
1036-08/Series 1
2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), is made and entered into as of
the 9th day of November, 2000, by and among AMERICAN MILLENNIUM CORPORATION,
INC., a New Mexico corporation (the "Company"), and Rodney R. Schoemann, Sr. and
Henry H. Lyon (the "Purchaser").
Background
In connection with the consummation of the transaction contemplated by
that Series 1 Convertible Note Purchase Agreement (the "Purchase Agreement") of
even date herewith by and among the Company and the Purchaser, the Company has
agreed, upon the terms and subject to the conditions of the Purchase Agreement,
to issue and sell to the Purchaser from time to time up to $1,275,000 principal
amount of Series 1 Convertible Notes which are convertible into Common Stock of
the Company (the "Purchased Convertible Notes") together with Common Stock
Purchase Warrants (the "Purchaser Warrants"). The Purchased Convertible Notes
and the Purchaser Warrants are hereinafter collectively referred to as the
"Purchased Securities"). The Common Stock issuable upon conversion of the
Purchased Convertible Notes is hereinafter referred to as the "Purchaser Common
Shares". The Common Stock issuable upon exercise of the Purchase Warrants is
hereinafter referred to as the "Purchase Warrant Shares". To induce Purchaser to
execute and deliver the Purchase Agreement, the Company has agreed to file a
SB-2 Registration Statement on or about November, but no later than November 17,
2000, covering the Purchaser Common Shares and the Purchaser Warrant Shares
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
Agreement
For and in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following capitalized
terms are used with the meanings there after ascribed:
(a) "Investor" means the Purchaser and any transferee or
assignee thereof to whom the Purchaser assigns its rights under this
Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.
(b) "Person" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof, or a
governmental agency.
(c) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the
United States Securities and Exchange Commission (the "SEC").
(d) "Registrable Securities" means the Purchaser Common
Shares, the Purchaser Warrant Shares and any shares of capital stock
issued or issuable with respect to the Purchaser Common Shares or
Purchaser Warrant Shares as a result of any stock split, stock
dividend, recapitalization, exchange, or similar event.
(e) "Registration Statement" means a registration statement of the Company filed
under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Purchase Agreement.
Section 2. registration.
(a) Mandatory Registration. The Company shall prepare and file
with the SEC a Registration Statement or Registration Statements (as is
necessary) on Form S-3 (or, if such form is unavailable for such a
registration, on such other form as is available for such a
registration, subject to the consent of each Purchaser and the
provisions of Section 2(e), which consent will not be unreasonably
withheld), covering the resale the Registrable Securities, or shall
include such Registrable Securities in an open Registration Statement
of the Company on or before November 17, 2000 (the "Filing Deadline").
The SB-2 Registration is anticipated to occur on or about November 10,
2000, but in no instance shall it occur later than November 17, 2000
(Filing Deadline.) The Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such
Registration Statement(s) also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon
conversion of the Purchased Convertible Notes or the exercise of the
Purchaser Warrants to prevent dilution resulting from stock splits,
stock dividends, or similar transactions. Such Registration Statement
shall initially register for resale at least 100% of the Purchaser
Common Shares and the Purchaser Warrant Shares, subject to adjustment
as provided in Section 3(b) hereof, and such registered shares of
Common Stock shall be allocated among the Investors pro rata based on
the total number of Registrable Securities issued or issuable as of
each date that a Registration Statement, as amended, relating to the
resale of the Registrable Securities is declared effective by the SEC.
The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC (the "Effective Date") within
sixty (60) days after the Filing Deadline, but cannot warrant or
guarantee any such declaration of effectiveness. The Company shall
permit the registration statement to become effective within five (5)
business days after receipt of a "no review" notice from the SEC. Such
Registration Statement shall be kept current and effective for a period
of twelve (12) months from the Closing Date.
(b) Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) involves an
underwritten offering, the Purchaser shall have the right to select one
legal counsel and an investment banker or bankers and manager or
managers to administer their interest in the offering, which investment
banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
(c) Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the
Company proposes to file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the
1933 Act of any of its securities (other than on Form S-4 or Form S-8
or their then equivalents relating to securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee
benefit plans) the Company shall promptly send to each Investor who is
entitled to registration rights under this Section 2(c) written notice
of the Company's intention to file a Registration Statement and of such
Investor's rights under this Section 2(c) and, if within twenty (20)
days after receipt of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, subject to the priorities set forth in Section 2(d) below.
No right to registration of Registrable Securities under this Section
2(c) shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this Section
2(c) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is
entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included
in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
(d) Priority in Piggy-Back Registration Rights in connection
with Registrations for Company Account. If the registration referred to
in Section 2(c) is to be an underwritten public offering for the
account of the Company and the managing underwriter(s) advise the
Company in writing, that in their reasonable good faith opinion,
marketing or other factors dictate that a limitation on the number of
shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the
proposed offering, then the Company shall include in such registration:
(i) first, all securities the Company proposes to sell for its own
account, (ii) second, up to the full number of securities proposed to
be registered for the account of the holders of securities entitled to
inclusion of their securities in the Registration Statement by reason
of demand registration rights, and (iii) third, the securities
requested to be registered by the Investors and other holders of
securities entitled to participate in the registration, drawn from them
pro rata based on the number each has requested to be included in such
registration.
(e) Eligibility for Form S-3. The Company represents, warrants
and covenants that it has filed and shall file all reports required to
be filed by the Company with the SEC in a timely manner so as to obtain
and maintain such eligibility for the use of Form S-3. In the event
that Form S-3 is not available for sale by the Investors of the
Registrable Securities, then (i) the Company, with the consent of each
Investor pursuant to Section 2(a), shall register the sale of the
Registrable Securities on another appropriate form, such as Form SB-2
and (ii) the Company shall undertake to register the Registrable
Securities on Form S-3 as soon as such form is available.
Section 3. Related Obligations. Whenever an Investor has requested that
any Registrable Securities be registered pursuant to Section 2(c) hereof, or at
such time as the Company is obligated to file a Registration Statement with the
SEC pursuant to Section 2(a) hereof, the Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
(a) The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on
or prior to the Filing Deadline), for the registration of Registrable
Securities pursuant to Section 2(a) and use its best efforts to cause
such Registration Statement(s) relating to Registrable Securities to
become effective as soon as possible after such filing and in any event
by the Registration Date, and keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the later of (i) the
date as of which the Investors may sell all of the Registrable
Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which (A)
the Investors shall have sold all the Registrable Securities and (B)
none of the Purchased Common Shares are outstanding (the "Registration
Period"), which Registration Statement(s) (including any amendments or
supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection
with the Registration Statement(s), which prospectus(es) are to be
filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep the Registration Statement(s) effective at all times
during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement(s). In the event the number of shares available
under a Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities, the Company
shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case,
as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common
Stock and other relevant factors on which the Company reasonably elects
to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon
as practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of
the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon sale and delivery of the Purchased
Common Shares and exercise of the Purchaser Warrants is greater than
the quotient determined by dividing (i) the number of shares of Common
Stock available for resale under such Registration Statement by (ii)
1.0. For purposes of the calculation set forth in the foregoing
sentence, any restrictions on the exercise of the Purchaser Warrants
shall be disregarded and such calculation shall assume that the
Purchaser Warrants are exercised at the then current exercise price.
(c) The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s)
and its legal counsel, without charge, (i) promptly after the same is
prepared and filed with the SEC at least one copy of the Registration
Statement and any amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference, and all
exhibits, the prospectus (es) included in such Registration
Statement(s) (including each preliminary prospectus) and all
correspondence by or on behalf of the Company to the SEC or the staff
of the SEC and all correspondence from the SEC or the staff of the SEC
to the Company or its representatives, related to such Registration
Statement(s), (ii) upon the effectiveness of any Registration
Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or
such other number of copies as such Investor may reasonably request),
and (iii) such other documents, including any preliminary prospectus,
as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
(d) The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as any Investor reasonably requests,
(ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period,
and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions;
provided however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d) hereof, (B) subject itself to general
taxation in any such jurisdiction, or (C) file a general consent to
service of process in any such jurisdiction. The Company shall promptly
notify each Investor who holds Registrable Securities of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the
United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e) In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select
underwriters for the offering, the Company shall enter into and perform
its obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
(f) As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor in writing of the
happening of any event, of which the Company has knowledge, as a result
of which, the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission
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, and promptly prepare a supplement or
amendment to the Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement
or amendment to each Investor (or such other number of copies as such
Investor may reasonably request). The Company shall also promptly
notify each Investor in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to
each Investor by facsimile on the same day of such effectiveness and by
overnight mail), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
(g) The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction and, if such
an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment, and to notify each
Investor who holds Registrable Securities being sold (and, in the event
of an underwritten offering, the managing underwriters) of the issuance
of such order and the resolution thereof, or its receipt of actual
notice of the initiation, or threatened initiation of any proceeding
for such purpose.
(h) The Company shall permit each Investor a single firm of
counsel or such other counsel as thereafter designated as selling
stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto at
least seven (7) days prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects. The
Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement(s) or any amendment or
supplement thereto without the prior approval of such counsel, which
consent shall not be unreasonably withheld.
(i) At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if
any, for sale in connection with the Registration Statement (i) if
required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope, and substance as is customarily
given in an underwritten public offering, addressed to the underwriters
and the Investors.
(j) The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys and
one firm of accountants or other agents retained by the Investors, and
(iv) one firm of attorneys retained by all such underwriters
(collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its
due diligence responsibility, and cause the Company's officers,
directors, and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence provided
however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (A) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (B) the release
of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or
(C) the information in such Records has been made generally available
to the public other than by disclosure in violation of this or any
other agreement. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
(k) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Investor and allow such
Investor, at the Investor's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such
information.
(l) The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which securities of
the same class or series issued by the Company are then listed, if any,
if the listing of such Registrable Securities is then permitted under
the rules of such exchange, (ii) to secure designation and quotation of
all the Registrable Securities covered by the Registration Statement on
the Nasdaq Small Cap Market, (iii) if, despite the Company's best
efforts to satisfy the preceding clause (i) or (ii), the Company is
unsuccessful in satisfying the preceding clause (i) or (ii) to secure
the inclusion for quotation on the Nasdaq Small Cap Market for such
Registrable Securities or, (iv) if, despite the Company's best efforts
to satisfy the preceding clause (iii), the Company is unsuccessful in
satisfying the preceding clause (iii), to secure the inclusion for
quotation on the over-the-counter market for such Registrable
Securities, and, without limiting the generality of the foregoing, in
the case of clause (iii) or (iv), to arrange for at least two market
makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying
its obligation under this Section 3(1).
(m) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant
to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters,
if any, or the Investors may request. Not later than the date on which
any Registration Statement registering the resale of Registrable
Securities is declared effective, the Company shall deliver to its
transfer agent instructions, accompanied by any reasonably required
opinion of counsel, that permit sales of unlegended securities in a
timely fashion that complies with then mandated securities settlement
procedures for regular way market transactions.
(n) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
(o) The Company shall provide a transfer agent and registrar
of all such Registrable Securities not later than the effective date of
such Registration Statement.
(p) If requested by the managing underwriters or an Investor,
the Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters
and the Investors agree should be included therein relating to the sale
and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being
paid therefor by such underwriters, and with respect to any other terms
of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by a shareholder
or any underwriter of such Registrable Securities.
(q) The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement
to be registered with or approved by such other governmental agencies
or authorities as may be necessary to consummate the disposition of
such Registrable Securities.
(r) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
Section 4. Obligations of the Investors.
(a) At least seven (7) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in the Registration
Statement. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that
such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method
of disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable
Securities, and shall execute such documents in connection with such
registration as the Company may reasonably request.
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation
and filing of the Registration Statement(s) hereunder, unless such
Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from
the Registration Statement.
(c) In the event Investors holding a majority of the
Registrable Securities being registered determine to engage the
services of an underwriter, each Investor agrees to enter into and
perform such Investor's obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement(s).
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant
to the Registration Statement(s) covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(g) or the first sentence
of 3(f) and, if so directed by the Company, such Investor shall deliver
to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Investors entitled hereunder
to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of
such underwriting arrangements, and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions.
Section 5. expenses of registration. All reasonable expenses, other
than underwriting discounts and commissions, incurred in connection with
registrations, filings, or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and printing fees, accounting fees, and fees and disbursements of
counsel for the Company shall be borne by the Company.
Section 6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless, and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents, and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), and any underwriter (as defined in
the 1933 Act) for the Investors, and the directors and officers of, and
each Person, if any, who controls, any such underwriter within the
meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing, or defending any action, claim,
suit, inquiry, proceeding, investigation, or appeal taken from the
foregoing by or before any court or governmental, administrative, or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party
thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky"
laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, not misleading, (ii) any untrue statement
or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements
therein were made, not misleading, or, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6(d) with respect to
the number of legal counsel, the Company shall reimburse the Investors
and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained
in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified
Person or underwriter for such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c); (ii)
with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
statement or mission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a violation and such Indemnified Person,
notwithstanding such advice, used (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or
to cause to be delivered the prospectus made available by the Company,
and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent and
in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration
Statement, each Person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act (collectively and together with
an Indemnified Person, an "Indemnified Party"), against any Claim or
Indemnified Damages to which any of them may become subject, under the
1933 Act, the 1934 Act, or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section
6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such Claim; provided however, that the indemnity
agreement contained in this Section 6(b) and Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided further however,
that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the
transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration
Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of
any action or proceeding (including any governmental action or
proceeding) involving a Claim such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the
Indemnified Person or the Indemnified Party, as the case may be;
provided however, that an Indemnified Person or Indemnified Party shall
have the right to retain its own counsel with the fees and expenses to
be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified
Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate
legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding a majority in interest of the
Registrable Securities included in the Registration Statement to which
the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying
party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person
which relates to such action or claim. The indemnifying party shall
keep the Indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement negotiations
with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its
written consent, provided however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified Party
or Indemnified Person, consent to entry of any judgment or enter into
any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party or Indemnified Person of a release from all
liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall
be subrogated to all rights of the Indemnified Party or Indemnified
Person with respect to all third parties, firms, or corporations
relating to the matter for which indemnification has been made. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such
action.
(e) The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
(f) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified
Party or Indemnified Person against the indemnifying party or others,
and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
Section 7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided however, that: (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of fraudulent misrepresentation, and
(iii) contribution by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
Section 8. reports under the 1934 act. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any
other similar rule or regulation of the SEC that may at any time permit the
investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) Make and keep public information available, as those terms are understood
and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations
under Section 4.3 of the Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions
of Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act, and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the investors to sell such
securities pursuant to Rule 144 without registration.
Section 9. assignment of registration rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of all or any
portion of Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (A) the name and address of such transferee or
assignee, and (B) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; (v) such
transfer shall have been made in accordance with the applicable requirements of
the Purchase Agreement; (vi) such transferee shall be an "accredited investor"
as that term is defined in Rule 501 of Regulation D promulgated under the 1933
Act; and (vii) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), the transferee agrees to pay all reasonable expenses of amending
or supplementing such Registration Statement to reflect such assignment.
Section 10. amendment of registration rights. Provisions 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 Investors who
hold two-thirds of the Registrable Securities. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon each Investor and the
Company.
Section 11. Penalty for Failure to Register the Conversion Shares and Warrant
Shares.
(a) In the event the Company fails to timely file a
Registration Statement on or prior to the Registration Deadline, or
have the Registration declared effective by the SEC within 120 days of
the date of the filing, Purchaser shall be entitled to additional
shares of restricted common stock of the Company amounting to thirty
percent (30%) of the total number of shares to which the Purchased
Convertible Notes may be converted (the "Penalty Shares").
Simultaneously with the execution and delivery of this Agreement, the
Company shall deposit with the Company's counsel in connection with the
purchase of the Purchased Convertible Notes, specific transfer agent
instructions and the Corporate Resolutions authorizing and instructing
the immediate issuance of the Penalty Shares. In the event the Company
fails to achieve registration of the Purchaser Conversion Shares and
any Purchaser Warrant Shares by the Filing Deadline, the Company's
counsel shall immediately release and forward the escrowed transfer
agent instructions and authorizing Corporate Resolution of American
Millennium to the transfer agent for the issuance of the Penalty Shares
to Purchaser. The purpose of the escrow of the transfer agent
instructions and Corporate Resolutions authorizing the Penalty Shares
is to secure the commitment of the Company under this Registration
Rights Agreement to file a Registration Statement covering the
Conversion Shares and the Warrant Shares by the Filing Deadline.
(b) . It is acknowledged by the Purchaser that the Penalty
Shares will be "restricted securities" as such term is defined in
Section 1(a) of Rule 144 promulgated by the Securities and Exchange
Commission and it is agreed that they will have the same status as the
Conversion Shares and the Warrant Shares. The Company agrees that in
the event that such shares are distributed to the Purchaser, they shall
be registered pursuant to this Registration Rights Agreement in
accordance with all of its provisions (assuming that the Filing
Deadline has not been met). They shall be treated for all purposes as
Conversion Shares and Warrant Shares and shall be owned free and clear
by the Purchasers to whom they are issued.
Section 12. Cashless Exercise. The Company will have the all
shares of common stock underlying the warrants registered under the
Securities Act of 1933, as amended. The warrant holder, whether the
undersigned or otherwise, in lieu of any cash payment required
hereunder, shall have the right to exercise the warrants in whole or in
part by surrendering the warrants in exchange for the number of shares
of the Company's common stock equal to (x) the number of shares as to
which the warrants are being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) of the
common stock less the exercise price of the warrants being exercised,
and the denominator of which is such Market Price. The term "Market
Price" means the closing ask price per share of the common stock on the
principal stock exchange or market on which the common stock is then
quoted or traded on the day preceding the date on which written notice
of election to exercise the warrants has been given to the Company (a
"cashless exercise"). If the warrant holder opts for a cashless
exercise of the warrants, no other consideration shall be paid to the
Company, other than surrendering the warrant itself, nor will there be
paid any commission or other remuneration to any other person or entity
by the warrant holder. In the event that the warrant holder is not
permitted to "tack" the holding period of the warrants to the holding
period of the common stock received upon the cashless exercise for
purposes of satisfaction of the holding period requirements of Rules
144(d)(3)(ii) and 144(k) under the Securities Act of 1933, as amended,
for whatever reason and there is no presently filed registration
statement effective as to the shares received or to be received through
the cashless exercise of this Warrant, the Company shall, upon receipt
of the written request of the warrant holder, promptly prepare and file
a registration statement with the U.S. Securities and Exchange
Commission with respect to all of the shares underlying this warrants.
Section 13. miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices, or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice, or election received
from the registered owner of such Registrable Securities.
(b) Any notices consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile, provided a copy is mailed by U.S. certified mail, return
receipt requested; (iii) three (3) days after being sent by U.S.
certified mall, return receipt requested, or (iv) one (1) day after
deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
American Millennium Corporation, Inc.
1010 Tenth Street
Suite 100
Golden, CO 80401
Attn: Andrew F. Cauthen, President and
Chief Executive Officer
Telephone: (303) 279-2002
Facsimile: (303) 271-9777
If to the Purchaser, to its address and facsimile number on
the Schedule of Purchasers, with copies to such Purchaser's counsel as
set forth on the Schedule of Purchasers. Each party shall provide five
(5) days prior written notice to the other party of any change in
address or facsimile number.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Mexico. If any provision
of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) This Agreement and the Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises,
warranties, or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject
matter hereof.
(f) Subject to the requirements of Section 9, this Agreement
shall inure to the benefit and of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
(h) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments, and
documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
<PAGE>
company signature page
to
registration rights agreement
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
AMERICAN MILLENNIUM CORPORATION, INC.
-------------------------------------------
Andrew F. Cauthen, President and
Chief Executive Officer
[Purchasers Signature on Following Pages]
<PAGE>
purchaser signature page
to
registration rights agreement
Purchase agreement
PURCHASER
Rodney R. Schoemenn, Sr.
By:
-----------------------------------
PURCHASER
Henry Lyon
By:
-----------------------------------
===================================== ==========================================
Purchaser Name Rodney R. Schoemenn, Sr.
("Purchaser")
Address and 3904 Wheat Drive, Metairie, LA 70002
Facsimile Number
and
Henry Lyon
319 Fifth Street
Paintsville, KY 41240
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------
Securities Purchased Convertible Note
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------
Purchase Price $675,000
===================================== ==========================================
1
1036-08
neither this warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the securities act of 1933,
as amended, or any applicable state securities law and neither may be
sold or otherwise transferred until (i) a registration statement under
such securities act and such applicable state securities laws shall
have become effective with regard thereto, or (ii) the company shall
have received a written opinion of counsel acceptable to the company to
the effect that registration under such securities act and such
applicable state securities laws is not required in connection with
such proposed transfer.
AMERICAN MILLENNIUM CORPORATION, INC.
COMMON STOCK PURCHASE WARRANT
Warrant 750,000 shares
Original Issue Date: November 9, 2000
THIS CERTIFIES THAT, FOR VALUE RECEIVED, Rodney R. Schoemenn, Sr. and
Henry Lyon or its assigns (the "Holder") is entitled to purchase, on the terms
and conditions hereinafter set forth, at any time or from time to time from a
date no sooner than 30 days after the date hereof until 5:00 p.m., Eastern Time,
on the third (3rd) anniversary of the Original Issue Date set forth above, or if
such date is not a day on which the Company is open for business, then the next
succeeding day on which the Company is open for business (such date is the
"Expiration Date"), but not thereafter, to purchase up to Seven Hundred and
Fifty Thousand (750,000) shares of the Common Stock, par value $.001 per share
(the "Common Stock"), of AMERICAN MILLENNIUM CORPORATION, INC., a New Mexico
corporation (the "Company"), at a price of $.90 per share (the "Exercise
Price"), such number of shares and Exercise Price being subject to adjustment
upon the occurrence of the contingencies set forth in this Warrant. Each share
of Common Stock as to which this Warrant is exercisable is a "Warrant Share" and
all such shares are collectively referred to as the "Warrant Shares".
Section 1. Exercise of Warrant; Conversion of Warrant.
(a) This Warrant may, at the option of the Holder, be
exercised in whole or in part from time to time no sooner than 30 days
after the date hereof by delivery to the Company at its office at 1010
Tenth Street, Suite 100, Golden, CO 80401, Attention: President, or to
any transfer agent for the Common Stock, on or before 5:00 p.m.,
Eastern Time, on the Expiration Date, (i) a written notice of such
registered Holder's election to exercise this Warrant (the "Exercise
Notice"), which notice may be in the form of the Notice of Exercise
attached hereto, properly executed and completed by the registered
Holder or an authorized officer thereof, (ii) a check payable to the
order of the Company, in an amount equal to the product of the Exercise
Price multiplied by the number of Warrant Shares specified in the
Exercise Notice, and (iii) this Warrant (the items specified in (i),
(ii), and (iii) are collectively the "Exercise Materials").
(b) Upon timely receipt of the Exercise Materials (whichever
is applicable), the Company shall, as promptly as practicable, and in
any event within five (5) business days after its receipt of the
Exercise Materials or Conversion Materials, execute or cause to be
executed and delivered to Holder a certificate or certificates
representing the number of Warrant Shares specified in the Exercise
Notice , together with cash in lieu of any fraction of a share, and,
(x) if the Warrant is exercised in full, a copy of this Warrant marked
"Exercised", or (y) if the Warrant is partially exercised, a copy of
this Warrant marked "Partially Exercised" together with a new Warrant
on the same terms for the unexercised balance of the Warrant Shares.
The stock certificate or certificates shall be registered in the name
of the registered Holder of this Warrant or such other name or names as
shall be designated in the Exercise Notice . The date on which the
Warrant shall be deemed to have been exercised (the "Effective Date"),
and the date the person in whose name any certificate evidencing the
Common Stock issued upon the exercise hereof is issued shall be deemed
to have become the holder of record of such shares, shall be the date
the Company receives the Exercise Materials, irrespective of the date
of delivery of a certificate or certificates evidencing the Common
Stock issued upon the exercise hereof, except that, if the date on
which the Exercise Materials are received by the Company is a date on
which the stock transfer books of the Company are closed, the Effective
Date shall be the date the Company receives the Exercise Materials, and
the date such person shall be deemed to have become the holder of the
Common Stock issued upon the exercise hereof shall be the next
succeeding date on which the stock transfer books are open. All shares
of Common Stock issued upon the exercise or conversion of this Warrant
will, upon issuance, be fully paid and nonassessable and free from all
taxes, liens, and charges with respect thereto.
(c) If the Company shall fail to issue to Holder within five
(5) business days following the Effective Date a certificate for the
number of shares of Common Stock to which such holder is entitled upon
such holder's exercise or conversion of this Warrant, in addition to
all other available remedies which such holder may pursue hereunder and
the Series 1 Convertible Note Purchase Agreement between the Company
and the initial holder of the Warrant (the "Securities Purchase
Agreement") including indemnification pursuant to Section 7 thereof
(all of which shall be cumulative), the Company shall pay additional
damages to such holder on each day after the Effective Date, an amount
equal to 1.0% of the product of (A) the number of Warrant Shares not
issued to Holder and to which Holder is entitled multiplied by (B) the
Closing Bid Price of the Common Stock on the Effective Date. Such
damages shall be computed daily and are due and payable daily.
(d) Cashless Exercise. The Company will have the all shares of
common stock underlying the warrants registered under the Securities
Act of 1933, as amended. The warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have
the right to exercise the warrants in whole or in part by surrendering
the warrants in exchange for the number of shares of the Company's
common stock equal to (x) the number of shares as to which the warrants
are being exercised multiplied by (y) a fraction, the numerator of
which is the Market Price (as defined below) of the common stock less
the exercise price of the warrants being exercised, and the denominator
of which is such Market Price. The term "Market Price" means the
closing ask price per share of the common stock on the principal stock
exchange or market on which the common stock is then quoted or traded
on the day preceding the date on which written notice of election to
exercise the warrants has been given to the Company (a "cashless
exercise"). If the warrant holder opts for a cashless exercise of the
warrants, no other consideration shall be paid to the Company, other
than surrendering the warrant itself, nor will there be paid any
commission or other remuneration to any other person or entity by the
warrant holder. In the event that the warrant holder is not permitted
to "tack" the holding period of the warrants to the holding period of
the common stock received upon the cashless exercise for purposes of
satisfaction of the holding period requirements of Rules 144(d)(3)(ii)
and 144(k) under the Securities Act of 1933, as amended, for whatever
reason and there is no presently filed registration statement effective
as to the shares received or to be received through the cashless
exercise of this Warrant, the Company shall, upon receipt of the
written request of the warrant holder, promptly prepare and file a
registration statement with the U.S. Securities and Exchange Commission
with respect to all of the shares underlying this warrants.
Section 2. Adjustments to Warrant Shares. The number of Warrant Shares issuable
upon the exercise hereof shall be subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation,
share exchange, or merger, or the sale of all or substantially all of
the assets of the Company to, any person, or in the case of any
consolidation or merger of another corporation into the Company in
which the Company is the surviving corporation, and in which there is a
reclassification or change of the shares of Common Stock of the
Company, this Warrant shall after such consolidation, share exchange,
merger, or sale be exercisable for the kind and number of securities or
amount and kind of property of the Company or the corporation or other
entity resulting from such share exchange, merger, or consolidation, or
to which such sale shall be made, as the case may be (the "Successor
Company"), to which a holder of the number of shares of Common Stock
deliverable upon the exercise (immediately prior to the time of such
consolidation, share exchange, merger, or sale) of this Warrant would
have been entitled upon such consolidation, share exchange, merger, or
sale; and in any such case appropriate adjustments shall be made in the
application of the provisions set forth herein with respect to the
rights and interests of the registered Holder of this Warrant, such
that the provisions set forth herein shall thereafter correspondingly
be made applicable, as nearly as may reasonably be, in relation to the
number and kind of securities or the type and amount of property
thereafter deliverable upon the exercise of this Warrant. The above
provisions shall similarly apply to successive consolidations, share
exchanges, mergers, and sales. Any adjustment required by this Section
2 (a) because of a consolidation, share exchange, merger, or sale shall
be set forth in an undertaking delivered to the registered Holder of
this Warrant and executed by the Successor Company which provides that
the Holder of this Warrant shall have the right to exercise this
Warrant for the kind and number of securities or amount and kind of
property of the Successor Company or to which the holder of a number of
shares of Common Stock deliverable upon exercise (immediately prior to
the time of such consolidation, share exchange, merger, or sale) of
this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale. Such undertaking shall also provide for
future adjustments to the number of Warrant Shares and the Exercise
Price in accordance with the provisions set forth in Section 2 hereof.
(b) In the event the Company should at any time, or from time
to time after the Original Issue Date, fix a record date for the
effectuation of a stock split or subdivision of the outstanding shares
of Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in
additional shares of Common Stock, or securities or rights convertible
into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to
as "Common Stock Equivalents") without payment of any consideration by
such holder for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or exercise thereof), then, as of such record
date (or the date of such dividend, distribution, split, or subdivision
if no record date is fixed), the number of Warrant Shares issuable upon
the exercise hereof shall be proportionately increased and the Exercise
Price shall be appropriately decreased by the same proportion as the
increase in the number of outstanding Common Stock Equivalents of the
Company resulting from the dividend, distribution, split, or
subdivision. Notwithstanding the preceding sentence, no adjustment
shall be made to decrease the Exercise Price below $.001 per Share.
(c) In the event the Company should at any time or from time
to time after the Original Issue Date, fix a record date for the
effectuation of a reverse stock split, or a transaction having a
similar effect on the number of outstanding shares of Common Stock of
the Company, then, as of such record date (or the date of such reverse
stock split or similar transaction if no record date is fixed), the
number of Warrant Shares issuable upon the exercise hereof shall be
proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of
outstanding Common Stock Equivalents resulting from the reverse stock
split or similar transaction.
(d) In the event the Company should at any time or from time
to time after the Original Issue Date, fix a record date for a
reclassification of its Common Stock, then, as of such record date (or
the date of the reclassification if no record date is set), this
Warrant shall thereafter be convertible into such number and kind of
securities as would have been issuable as the result of such
reclassification to a holder of a number of shares of Common Stock
equal to the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such reclassification, and the Exercise
Price shall be unchanged.
(e) The Company will not, by amendment of its Articles of
Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other
voluntary action, void or seek to avoid the observance or performance
of any of the terms of the Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the
rights of the Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (x) will not
create a par value of any share of stock receivable upon the exercise
of the Warrant above the amount payable therefor upon such exercise,
and (y) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
non-assessable shares upon the exercise of the Warrant.
(f) When any adjustment is required to be made in the number
or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Company shall promptly and in no event later than
twenty (20) days notify the Holder of such event and of the number of
shares of Common Stock or other securities or property thereafter
purchasable upon exercise of the Warrants and of the Exercise Price,
together with the computation resulting in such adjustment.
(g) The Company covenants and agrees that all Warrant Shares
that may be issued will, upon issuance, be validly issued, fully paid,
and nonassessable. The Company further covenants and agrees that the
Company will at all times have authorized and reserved, free from
preemptive rights, a sufficient number of shares of its Common Stock to
provide for the exercise of the Warrant in full.
Section 3. No Stockholder Rights. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company.
Section 4. Transfer of Securities.
(a) This Warrant and the Warrant Shares and any shares of
capital stock received in respect thereof, whether by reason of a stock
split or share reclassification thereof, a stock dividend thereon, or
otherwise, shall not be transferable except upon compliance with the
provisions of the Securities Act of 1933, as amended (the "Securities
Act") and applicable state securities laws with respect to the transfer
of such securities. The Holder of this Warrant, by acceptance of this
Warrant, agrees to be bound by the provisions of Section 4 hereof and
to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Warrant
Shares issuable upon exercise hereof or any interest in either thereof
in violation of the provisions of this Warrant.
(b) Each certificate for the Warrant Shares and any shares of
capital stock received in respect thereof, whether by reason of a stock
split or share reclassification thereof, a stock dividend thereon or
otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions hereof) be stamped or otherwise imprinted
with a legend in substantially the following form:
Legend for Warrant Shares or other shares of capital stock:
neither this warrant nor the shares of Common Stock issuable
upon exercise hereof have been registered under the securities
act of 1933, as amended, or any applicable state securities
law and neither may be sold or otherwise transferred until (i)
a registration statement under such securities act and such
applicable state securities laws shall have become effective
with regard thereto, or (ii) the company shall have received a
written opinion of counsel acceptable to the company to the
effect that registration under such securities act and such
applicable state securities laws is not required in connection
with such proposed transfer.
Section 5. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of
the holder or holders hereof and of the Common Stock issued or issuable
upon the exercise hereof.
(b) Except as otherwise provided herein, this Warrant and all
rights hereunder are transferable by the registered holder hereof in
person or by duly authorized attorney on the books of the Company upon
surrender of this Warrant, properly endorsed, to the Company. The
Company may deem and treat the registered holder of this Warrant at any
time as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary.
(c) Notwithstanding any provision herein to the contrary,
Holder hereof may not exercise, sell, transfer, or otherwise assign
this Warrant unless the Company is provided with an opinion of counsel
satisfactory in form and substance to the Company, to the effect that
such exercise, sale, transfer, or assignment would not violate the
Securities Act or applicable state securities laws.
(d) This Warrant may be divided into separate Warrants
covering one share of Common Stock or any whole multiple thereof, for
the total number of shares of Common Stock then subject to this Warrant
at any time, or from time to time, upon the request of the registered
holder of this Warrant and the surrender of the same to the Company for
such purpose. Such subdivided Warrants shall be issued promptly by the
Company following any such request and shall be of the same form and
tenor as this Warrant, except for any requested change in the name of
the registered holder stated herein.
(e) All notices, requests, demands, and other communications
required or permitted under this Warrant and the transactions
contemplated herein shall be in writing and shall be deemed to have
been duly given, made, and received when personally delivered the day
after deposited with a recognized national overnight delivery service
prior to its dead-line for receiving packages for next day delivery or
upon the fifth day after deposited in the United States registered or
certified mail with postage prepaid, return receipt requested, in each
case addressed as set forth below:
If to the Company:
American Millennium Corporation, Inc.
1010 Tenth Street
Suite 100
Golden, CO 80401
Attn: Andrew F. Cauthen
Telephone: (303) 279-2002
Facsimile: 271-9777
If to the Holder hereof, to the address of such Holder
appearing on the books of the Company.
(f) This Agreement shall be governed by and construed in accordance with the
laws of the State of New Mexico.
[Remainder of page intentionally left blank; signatures on the following page]
<PAGE>
signature page
to
COMPANY
common stock purchase warrant
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed
in its name by its duly authorized officers under its corporate seal, and to be
dated as of the date first above written.
AMERICAN MILLENNIUM CORPORATION, INC.
By:
---------------------------------------
Andrew F. Cauthen
President and
Chief Executive Officer
ASSIGNMENT
(To be Executed by the Registered Holder to effect a Transfer of the foregoing
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and
transfers unto
___________________________________________________________________________ the
foregoing Warrant and the rights represented thereto to purchase shares of
Common Stock of American Millennium Corporation, Inc. in accordance with terms
and conditions thereof, and does hereby irrevocably constitute and appoint
________________ Attorney to transfer the said Warrant on the books of the
Company, with full power of substitution.
Holder:
Address
Dated: __________________, 200__
In the presence of:
-------------------------------
<PAGE>
FORM OF NOTICE OF EXERCISE or conversion
[To be signed only upon exercise of Warrant]
To: AMERICAN MILLENNIUM CORPORATION, INC.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
__________ shares of Common Stock of American Millennium Corporation, Inc.,
issuable upon exercise of said Warrant and hereby surrenders said Warrant.
The Holder herewith delivers to American Millennium Corporation, Inc., a check
in the amount of $______ representing the Exercise Price for such shares.
The undersigned herewith requests that the certificates for such shares
be issued in the name of, and delivered to the undersigned, whose address is
________________________________.
Dated: ___________________
Holder:
------------------------------------
------------------------------------
By:
-------------------------------------
------------------
NOTICE
The signature above must correspond to the name as written upon the
face of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
