<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED June 30, 1998
--------------------
Commission File Number 0-8164
--------------------
MSI HOLDINGS, INC. f/k/a MICRO-MEDIA SOLUTIONS, INC.
(Exact name of registrant as specified in charter)
UTAH 87-0280886
------------------------------ -----------------------
State or other jurisdiction of (IRS Employer I.D. No.)
Incorporation or organization
501 Waller St., Austin, Texas 78702
----------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code (512) 476-6925
------------------------
Securities registered pursuant to section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
None N/A
</TABLE>
Securities registered pursuant to section 12(g) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, None
Par Value $.10
</TABLE>
Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes ( ) No (X) (2) Yes (X) No ( )
Number of shares of common stock outstanding at June 30, 1998: 11,506,846
<PAGE> 2
Part I: Financial Information
ITEM 1: FINANCIAL STATEMENTS
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets (restated) 3
Consolidated Statements of Operation (restated) 4
Consolidated Statements of Stockholders' Equity (restated) 5
Consolidated Statements of Cash Flows (restated) 6
Notes to Consolidated Financial Statement (restated) 8
</TABLE>
<PAGE> 3
MICRO-MEDIA SOLUTIONS, INC.
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR'S REPORT
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
AND YEARS ENDED MARCH 31, 1998 AND 1997
<PAGE> 4
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of Micro-Media Solutions, Inc.,
We have audited the accompanying consolidated balance sheets of Micro-Media
Solutions, Inc. and Subsidiary (the "Company") as of June 30, 1998 and March 31,
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the three months ended June 30, 1998 and year ended
March 31, 1998. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Micro-Media
Solutions, Inc. and Subsidiary as of June 30, 1998 and March 31, 1998, and the
results of their operations and cash flows for the periods then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has a working capital deficit at
March 31, 1998, and has suffered losses from operations for the three months
ended June 30, 1998 and the years ended March 31, 1998 and 1997, which raise
substantial doubt about its ability to continue as a going concern. Management's
plan regarding these matters is presented in Note 1 of these consolidated
financial statements.
/s/ Brown, Graham & Company, P.C.
Georgetown, Texas
October 14, 1998
<PAGE> 5
SALAZAR & ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
JOSE SALAZAR, CPA FRANCES ORTIZ-
SALAZAR, CPA
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of Mountain States Resources Corporation
We have audited the accompanying consolidated statements of operations,
stockholders equity and cash flows of Mountain States Resources Corporation and
subsidiary (the "Company") for the year ended March 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain a
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Mountain State Resources Corporation for the year ended March 31,
1997, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 10 to
the consolidated financial statements, the Company has suffered losses from
operations and has a working capital deficiency, which raises substantial doubt
about its ability to continue as a going concern. Management's plan regarding
these matters is presented in Note 10 of these financial statements.
As more fully described in Note 11 and 12, subsequent to the issuance of the
Company's March 31, 1997 financial statements and our report thereon dated June
22, 1997, we became aware that those financial statements did not reflect
certain adjustments as described in Notes 11 and 12. In our original report we
expressed an unqualified opinion on the March 31, 1997, financial statements as
described in paragraph three above, and our opinion on the revised statements,
as expressed herein, remains unqualified.
/s/ Salazar and Associates
Salazar and Associates,
Austin, Texas
June 22, 1997, except as to the fifth paragraph above and Notes 11 and 12, which
are as of June 10, 1998
2
<PAGE> 6
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Balance Sheets (Restated)
June 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1998
------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 8,084 $ 25,786
Accounts Receivable - Trade 332,738 150,851
Inventory 185,572 285,023
Short-Term Investment (Note 4) 1,350,000 1,350,000
Other Receivables - Advances (Note 2) 178,101 86,961
----------- -----------
Total Current Assets 2,054,495 1,898,621
Property, Plant, and Equipment,
net (Note 3) 940,911 800,831
----------- -----------
TOTAL ASSETS $ 2,995,406 $ 2,699,452
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - Trade $ 189,238 $ 300,035
Other Accrued Expenses 100,647 169,336
Bank Line of Credit (Note 4) 1,070,000 1,228,966
Current Maturities of Notes
payable (Note 5) 112,596 151,267
Current Portion of Obligations Under
Capital Leases (Note 6) 45,517 41,097
Other Notes Payable (Note 14) 200,000 200,000
----------- -----------
Total Current Liabilities 1,717,998 2,090,701
----------- -----------
Long-Term Liabilities
Notes Payable (Note 5) 235,293 367,522
Obligations under Capital
Leases (Note 6) 122,736 149,560
----------- -----------
Total Long-Term Notes 358,029 517,082
----------- -----------
Commitments and Contingencies
(Notes 8, 10 & 14) -- --
----------- -----------
Total liabilities 2,076,027 2,607,783
----------- -----------
Stockholders' Equity (Note 11)
Preferred stock Series B; $5.30
stated value; 490,000 shares
authorized, issued & outstanding 2,597,000 2,597,000
Preferred Stock Series C; $10.60
stated value; 99,057 shares
authorized, issued & outstanding 1,050,004 1,050,004
Preferred Stock Series D; $10.60
stated value; 198,807 shares
authorized, issued & outstanding 2,107,354 --
Common stock at $.10 par value;
50,000,000 authorized, 11,518,571
and 11,506,846 shares issued and
outstanding, respectively 1,151,857 1,150,685
Additional Paid-in Capital 2,397,982 2,666,099
Accumulated Deficit (8,384,818) (7,372,119)
----------- -----------
Total Stockholders' Deficit 919,379 91,669
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,995,406 $ 2,699,452
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 7
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Statements of Operation (Restated)
Three Months Ended June 30, 1998 and 1997, and Years Ended March 31, 1998 and
1997
<TABLE>
<CAPTION>
June 30 March 31
------------------------------ -----------------------------
Unaudited
1998 1997 1998 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Hardware, software and peripherals $ 503,632 $ 818,634 $ 1,350,869 $ 1,440,725
Service, support and integration 74,099 293,147 704,241 457,572
Networks, LAN/WAN 23,898 118,003 685,711 2,767,452
------------- ------------- ------------ -------------
Net revenue 601,629 1,229,784 2,740,821 4,665,749
------------- ------------- ------------ -------------
Cost of goods sold:
Hardware, software and peripherals 419,204 402,204 1,406,612 1,109,354
Service, support and integration 64,735 190,546 656,625 283,724
Networks, LAN/WAN 17,207 80,325 997,397 1,605,157
------------- ------------- ------------ -------------
Total cost of goods sold 501,146 673,075 3,060,634 2,998,235
------------- ------------- ------------ -------------
Gross margin (deficit) 100,483 556,709 (319,813) 1,667,514
------------- ------------- ------------ -------------
Selling, general and administrative expenses:
Salaries and benefits 553,207 307,069 1,825,590 1,202,791
Professional fees and consultants 185,942 51,990 357,174 42,251
Occupancy 89,679 56,658 212,843 185,516
Depreciation 52,991 29,746 178,892 139,443
Vehicle expense 34,610 35,370 126,131 158,765
Other expense 109,375 57,293 379,059 316,820
Interest expense 20,636 22,130 294,198 100,064
Provision for uncollectible
accounts -- 1,284 73,252 4,249
------------- ------------- ------------ -------------
Total selling, general and
administrative expenses 1,046,440 561,540 3,447,137 2,149,899
------------- ------------- ------------ -------------
Net loss (945,957) (4,831) (3,766,950) (482,385)
Plus preferred stock dividends (66,743) -- (3,471,170) --
------------- ------------- ------------ -------------
Net loss available to common stockholders $ (1,012,700) $ (4,831) $ (7,238,120) $ (482,385)
============= ============= ============ =============
Basic and diluted net loss per share $ (0.09) $ (0.00) $ (0.66) $ (0.05)
============= ============= ============ =============
Basic and diluted weighted average
shares outstanding 11,507,002 10,764,733 10,998,874 10,026,400
============= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 8
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998, AND
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Series B Series C Series D Common Stock
------------------------- ------------------------- ------------------------- ------------
Shares Amount Shares Amount Shares Amount Shares
---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance March 31, 1996 0 $ 0 0 $ 0 $ 0 0 9,784,733
Common stock
issued for services 0 0 0 0 0 0 480,000
Common stock options
exercised 0 0 0 0 0 0 500,000
Net loss 0 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance March 31, 1997 0 0 0 0 0 0 10,764,733
Common stock issued:
Interest 0 0 0 0 0 0 10,286
Compensation 0 0 0 0 0 0 414,900
Preferred stock dividend 0 0 0 0 0 0 23,742
Preferred stock issued:
Private Placement 420,000 2,226,000 99,057 1,050,004 0 0 0
Senior Debt 70,000 371,000 0 0 0 0 0
Preferred stock dividend
discount 0 0 0 0 0 0 0
Stock option for:
Compensation 0 0 0 0 0 0 0
Placement agents 0 0 0 0 0 0 0
Cash received for
uncertificated stock 0 0 0 0 0 0 293,185
Common stock-uncertificated
issued for note receivable 0 0 0 0 0 0 0
Note receivable offset against
common stock subscribed 0 0 0 0 0 0 0
Net loss 0 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance March 31, 1998 490,000 2,597,000 99,057 1,050,004 0 0 11,506,846
Preferred stock issued:
Private Placement 0 0 0 0 198,807 2,107,354 0
Common stock issued:
Compensation 0 0 0 0 0 0 1,500
Preferred
Preferred stock dividend 0 0 0 0 0 0 10,225
Stock options for
placement agents
Net loss
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance June 30, 1998 490,000 $2,597,000 99,057 $1,050,004 198,807 $2,107,354 11,518,571
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional
Common Stock Subscribed (Discount on) Accum-
-------------- ---------------------- Paid - In ulated
Amount Shares Amount Capital Deficit Total
-------------- ---------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance March 31, 1996 $ 978,473 0 $ 0 $ (1,046,058) $ 348,386 $ 280,801
Common stock
issued for services 48,000 0 0 0 0 48,000
Common stock options
exercised 50,000 0 0 0 0 50,000
Net loss 0 0 0 0 (482,385) (482,385)
---------- ---------- ---------- ------------- ----------- ----------
Balance March 31, 1997 1,076,473 0 0 (1,046,058) (133,999) (103,584)
Common stock issued:
Interest 1,029 0 0 4,114 0 5,143
Compensation 41,490 0 0 250,367 0 291,857
Preferred stock dividend 2,374 0 0 56,294 (58,668) 0
Preferred stock issued:
Private Placement 0 0 0 (841,547) 0 2,434,457
Senior Debt 0 0 0 0 0 371,000
Preferred stock dividend
discount 0 0 0 3,412,502 (3,412,502) 0
Stock option for:
Compensation 0 0 0 93,750 0 93,750
Placement agents 0 0 0 253,547 0 253,547
Cash received for
uncertificated stock 29,319 0 0 483,130 0 512,449
Common stock-uncertificated
issued for note receivable 0 543,000 407,250 0 0 407,250
Note receivable offset against
common stock subscribed 0 (543,000) (407,250) 0 0 (407,250)
Net loss 0 0 0 0 (3,766,950) (3,766,950)
---------- ---------- ---------- ------------- ----------- ----------
Balance March 31, 1998 1,150,685 0 0 2,666,099 (7,372,119) 91,669
Preferred stock issued:
Private Placement 0 0 0 (874,033) 0 1,233,321
Common stock issued:
Compensation 150 0 0 7,853 0 8,003
Preferred
Preferred stock dividend 1,022 0 0 65,720 (66,742) 0
Stock options for
placement agents 532,343 532,343
Net loss (945,957) (945,957)
---------- ---------- ---------- ------------- ----------- ----------
Balance June 30, 1998 $1,151,857 0 $ 0 $ 2,397,982 $(8,384,818) $ 919,379
========== ========== ========== ============= =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 9
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
----------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (945,957) $ (3,766,950)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 52,991 178,892
Stock issued for compensation 8,002 291,857
Stock options issued for compensation - 93,750
Stock issued for interest - 5,143
Change in trade receivables (181,887) 832,062
Change in inventory 55,430 (19,569)
Change in accounts payable (110,798) (577,325)
Change in accrued expenses (68,689) 57,775
----------------- --------------
Net cash provided by (used by) operating
activities (1,190,908) (2,904,365)
----------------- --------------
Cash flows from investment activities:
Purchase of property & equipment (149,050) (195,685)
Purchase of short term investment - (1,350,000)
Additional notes receivable - (142,265)
Proceeds from notes receivables - 477,645
Proceeds from other receivables - 162,793
Additional other receivables (91,140) (121,341)
----------------- --------------
Net cash used by investing activities (240,190) (1,168,853)
Cash flows from financing activities:
Proceeds from line of credit (net) - 504,076
Proceeds from other notes payable - 200,000
Payments on long-term debt (329,866) (162,153)
Payments on capital lease obligations (22,401) (32,485)
Proceeds from private placement 1,765,664 2,688,004
Proceeds from issuance of common stock - 512,450
Proceeds from senior convertible debt and other
capital transactions - 371,000
----------------- --------------
Net cash provided by financing activities 1,413,397 4,080,892
----------------- --------------
Net increase in cash (17,701) 7,674
Cash at beginning of period 25,785 18,112
----------------- --------------
Cash at end of period $ 8,084 $ 25,786
================= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 10
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
---------- ----------
<S> <C> <C>
Supplemental disclosure:
Cash paid during the year for:
Interest $ 35,789 $ 232,578
========== ==========
Supplemental schedule of non-cash investing
financing activities:
Preferred stock issued for placement
agent fees $ -- $ 156,000
Stock options:
Compensation -- 93,750
Common stock issued for:
Compensation 8,002 291,857
Interest on debt -- 5,143
Preferred stock dividends 66,743 58,668
Common stock subscribed for
note receivable -- 407,250
Debt converted to preferred stock -- 371,000
Inventory received for other notes -- 84,394
receivable
Discount on preferred stock issued for -- 3,412,502
dividend
Inventory converted to equipment 44,021 --
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 11
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION:
Micro-Media Solutions, Inc. (formerly Mountain States Resources Corporation,
("MSRC"), was organized under the laws of the State of Utah on April 15, 1969.
MSRC began operations April 15, 1969, as a mining, mineral extraction and oil
and gas exploration company. MSRC discontinued its operations on 1993 and became
a development stage company as described in the Statement of Financial
Accounting Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises". On June 23, 1997, MSRC entered into an agreement and plan of
reorganization with the shareholders of Micro-Media Solutions, Inc. (a Texas
Corporation), ("MSI-Texas"), in which MSRC acquired 100% of the common stock of
MSI-Texas. As part of the reorganization, MSRC changed its name to Micro-Media
Solutions, Inc., (a Utah Corporation), ("MSI"). Subsequent to June 30, 1998, MSI
changed its name to MSI Holdings, Inc. The transaction was accounted for as a
recapitalization.
MSI-Texas is an Austin, Texas, based technology corporation formed to provide
Computer hardware, software programming, system support, maintenance, media
duplication, and kitting to the public and private sectors. In addition,
MSI-Texas is certified by the State of Texas as a Historically Underutilized
Business (HUB).
MSI-Texas is a business solutions technology integrator with infrastructure
design and implementation services. In addition, MSI-Texas' computer networking
services includes system integration and local wide-area networks.
GOING CONCERN:
As shown in the accompanying consolidated financial statements, the Company has
incurred net losses of $1,478,300 and $3,920,497 for three months ended June 30,
1998, and the year ended March 31, 1998, respectively. As of March 31, 1998, the
Company's current liabilities exceeded its current assets by $192,080 and the
Company owed accounts payable with dates due in excess of thirty (30) days in
the approximates amount of $170,000. These factors create a substantial doubt
about the Company's ability to continue as a going concern. The ability of the
Company to continue as a going concern is dependent on the Company's obtaining
additional financing to fund the expenses related to operations and capital
improvements.
In May 1998, the Company received $2 million in phase III of a private placement
agreement, (see Note 10), which has been used to retire debt, decrease past due
accounts payable and for operating expenses. In addition, the Company is
continuing discussions with private investment groups for a private placement of
a newly created series of preferred stock with net proceeds to the Company of
approximately $2.6 million, and plans a public offering in the year ending March
31, 1999. Management has identified and closed substantial contracts during the
year ended March 31, 1999, and believes it can produce the level of revenue
necessary to return the Company to a positive earnings trend. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements for the three months ended June 30, 1998
and 1997, and years ended March 31, 1998 and 1997, include the accounts and
transactions of the Company and MSI-Texas. All significant inter-company
accounts and transactions have been eliminated in the accompanying consolidated
financial statements. The Company, however, did not have any material asset or
liability accounts or account balances. With the exception of the Company's
equity accounts and a deficit retained earnings, the significant account
balances belong to MSI-Texas.
CASH AND CASH EQUIVALENTS:
Cash equivalents consist primarily of funds invested in short-term
interest-bearing accounts. The Company considers all highly liquid investments
purchased with initial maturities of three months or less to be cash
equivalents.
ACCOUNTS RECEIVABLE:
The Company follows the allowance method of expensing accounts receivable when
considered uncollectible. As of June 30, 1998 and March 31, 1998, management
believes all accounts are collectible; and therefore, no allowance has been
recorded.
8
<PAGE> 12
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVENTORY:
Inventory is valued at lower of cost, using the FIFO method(first-in/first-out),
or market. Inventory consists principally of hardware and software needed for
maintaining and building network technology for customers.
PROPERTY, PLANT, AND EQUIPMENT:
Property and equipment are stated at cost. For financial statement purposes,
depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Amortization of leasehold improvements is
computed using the straight-line method over the shorter of the term of the
related lease or the useful life of the leasehold improvements. Accelerated
depreciation methods are used for tax purposes. Depreciation and amortization
are calculated over the following useful lives stated in years:
<TABLE>
<CAPTION>
Useful
Lives
-----
<S> <C>
Vehicles 5
Furniture and fixtures 5
Equipment 5
Leasehold improvements 20
</TABLE>
REVENUE AND COST RECOGNITION:
Revenue from sales of hardware, software and peripherals is recognized upon
shipment to the customer. Most hardware, software and peripherals sales are made
without the right of return. Product returns which are minimal are recorded as a
reduction of sales upon receipts of the product. Service, support and
integration sales are recognized upon completion of the service and is not
subject to warranty.
Revenue from fixed priced contracts is recognized on the
percentage-of-completion method of accounting, measured by the cost-to-cost
method. This method is used because management considers total costs incurred to
be the best available measure of progress on contracts.
Contract costs include all direct costs and those indirect costs related to
contract performance. Changes in job performance, job conditions, and estimated
profitability and final contract settlements may result in revisions to costs
and revenue and are recognized in the period in which the revisions are
determined.
The asset, "Costs and Estimated Earnings in Excess of Billings Uncompleted
Contracts", represents revenue earned in excess of amounts billed. The liability
"Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts"
represents billings in excess of amounts earned.
Revenue and contract costs from fixed priced contracts are included in the
various categories of revenue and cost of goods sold in the accompanying
financial statements. As of June 30, 1998 and March 31, 1998, there were no
contracts in progress.
FEDERAL INCOME TAX:
The Company uses the liability method of accounting for income taxes as
prescribed by the Financial Accounting Standard Board Statement No. 109.
Deferred tax liabilities and assets are determined based on differences between
the financial statement and tax basis of assets and liabilities using enacted
tax rates expected to be in effect for the year in which the differences are
expected to reverse. The net change in deferred tax assets and liabilities is
reflected in the statement of operations.
NEW ACCOUNTING PRONOUNCEMENTS:
The Company accounts for stock options and warrants issued to employees in
accordance with APB 25, "Accounting for Stock Issued to Employees". The Company
follows FASB Statement 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123") for financial statement disclosure purposes and issuance of options and
warrants to non-employees for services rendered.
9
<PAGE> 13
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", management reviews long-lived
assets and intangible assets for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be fully
recoverable. As part of this assessment, management prepares an analysis of the
undiscounted cash flows for each product that has significant long-lived or
intangible asset values associated with it. This analysis for the asset values
as of June 30, 1998 and March 31, 1998, indicated there was no impairment to the
carrying value of these assets.
SFAS No. 130, "Reporting Comprehensive Income", effective for fiscal years
beginning after December 15, 1997, establishes standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company has addressed the
requirements of SFAS No. 130 and there is no material impact on the financial
statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", effective for fiscal years beginning after December 15, 1997,
establishes standards for reporting information about operating segments in
annual financial statements and interim financial reports issued to
shareholders. Generally, certain financial information is required to be
reported on the basis that is used internally for evaluating performance or an
allocation of resources to operating segments. The Company has adopted the
requirements of SFAS No. 131 and there is no material impact on the financial
statements.
USE OF ESTIMATES AND CERTAIN CONCENTRATIONS:
Management of the Company has made a number of estimates and assumptions
relating to the valuation and reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Although actual results could differ from those estimates,
management believes its estimates are reasonable. Certain components,
subassemblies and software included in the Company's computer systems are
obtained from sole suppliers or a limited number of suppliers. The Company
relies, to a certain extent, upon the ability of its suppliers' to enhance
existing products in a timely and cost-effective manner, to develop new products
to meet changing customer needs and to respond to emerging standards and other
technological developments in the computer industry. The Company's reliance on a
limited number of suppliers involves several risks, including the possibility of
shortages and/or increases in costs of components and subassemblies, and the
risk of reduced control over delivery schedules.
FINANCIAL INSTRUMENTS:
Cash equivalents include highly liquid short-term investments with original
maturities of three months or less, readily convertible to known amounts of
cash. The amounts reported as cash equivalents, receivables, other assets,
accounts payable and accrued expenses and debt are considered by the Company to
be reasonable approximations of their fair values, based on market information
available to management as of June 30, 1998 and March 31, 998. The use of
different market assumptions and estimation methodologies could have a material
effect on the estimated fair value amounts. The reported fair values do not take
into consideration potential taxes or other expenses that would be incurred in
an actual settlement.
Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of cash and cash equivalents and trade accounts
receivable. A concentration of credit risk may exist with respect to trade
receivables, as many of the Company's customers are in the computer and
telecommunications industries. The Company has a large number of customers on
which it performs ongoing credit evaluations and generally does not require
collateral from its customers. Historically, the Company has not experienced
significant losses related to receivables from individual customers or groups of
customers in any particular industry or geographic area.
10
<PAGE> 14
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 2 - OTHER RECEIVABLES
Other receivables include employee advances for travel and lodging for out of
town projects in the amount of $30,000 as well as $65,000 of cost paid by the
Company to the third parties in satisfaction of obligations of Argus Management,
Inc. Also included is a deposit to Exceptional Services in the amount of
$64,082, lease prepayment of $14,940, and accrued interest receivable of $4,079.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
A summary of the Company's investment in property, plant and equipment at June
30, 1998, and March 31, 1998, is as follows (see Note 6):
<TABLE>
<CAPTION>
June 30 March 31
--------- ---------
<S> <C> <C>
Equipment, Furniture and Fixtures $ 802,714 $ 613,184
Transportation Equipment 253,204 253,204
Leasehold Improvements 311,331 307,790
--------- ---------
1,367,249 1,174,178
Less Accumulated Depreciation 426,338 373,347
--------- ---------
Net Property, Plant and Equipment $ 940,911 $ 800,831
========= =========
</TABLE>
Depreciation charged against income for the three months ended June 30, 1998 and
1997, was $52,991 and $29,746, respectively. Depreciation charged against income
for the years ended March 31, 1998 and 1997, was $178,892 and 139,443,
respectively.
NOTE 4 - BANK LINE OF CREDIT
The Company was in default on a secured line of credit agreement with Bank One
Texas, N.A. providing for borrowings of up to $725,000 based on the amount of
the Company's eligible receivables. As of March 31, 1998, the Company owed
$208,966 plus accrued interest at 18% in the amount of $19,219 secured by
accounts receivable. This amount was paid in full in April 1998 and was not
renewed. Under the agreement, the Company was subject to covenants including
certain financial ratios.
The Company has a secured line of credit agreement maturing February 5, 1999,
with Compass Bank for $1,350,000 secured by two certificates of deposit
aggregating $1,350,000 held in the Company's name by Compass Bank and payable in
monthly installments of interest only. The balance at June 30, 1998 and March
31, 1998, was $1,070,000 and $1,020,000, respectively, plus accrued interest at
7.25% and 8% per annum in the amount of $3,573 and $4,893, respectively. There
are no additional loan covenants associated with this line of credit.
NOTE 5 - NOTES PAYABLE
Long-term notes payable consists of the following amounts at June 30, 1998 and
March 31, 1998:
<TABLE>
<CAPTION>
June 30 March 31
------- --------
<S> <C> <C>
Austin Community Development Corporation, $100,000 equipment loan dated May 29,
1996, secured by equipment and accounts receivable. Loan requires interest
payments at 9% for the first six months, principal and interest payments
thereafter of $2,224 beginning in February 1997. Loan will mature
over a 60 month period ending January 2002. $ 77,062 $ 81,327
Austin Community Development Corporation, $100,000 working capital loan dated
June 14, 1995, secured by equipment and accounts receivable. Loan is due in 48
monthly principal installments of $2,083 along with interest of 9%
beginning in July 1996. Loan will mature in June 2000. 52,330 56,497
</TABLE>
11
<PAGE> 15
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED MARCH 31, 1998 AND
1997
NOTE 5 - NOTES PAYABLE - CONTINUED
<TABLE>
<S> <C> <C>
Neighborhood Commercial Management Program, $75,000 loan from City of Austin
dated June 8, 1995, secured by second lien on equipment and accounts receivable.
Loan is due in 60 monthly installments of principal and interest of $1,347
beginning January 1996. Interest rate of 0% until December 1995, thereafter 3%
rate to maturity. Loan will mature over a 60
month period ending December 2000. 39,375 43,104
Neighborhood Commercial Management Program, $250,000 loan from City of Austin
dated August 12, 1996, secured by second lien on equipment and accounts
receivable. Loan is due in 60 monthly installments of principal and interest of
$4,492 beginning January 1997. Interest rate of 0% until December 1996,
thereafter 3% rate to maturity. Loan will mature over a 60
month period ending December 2001. 179,122 191,194
Bank One Texas, N.A., $200,000 loan dated June 26, 1996, secured by a first lien
on equipment and leasehold improvements, loan is due in 60 monthly installments
of $3,333 along with interest equal to the Bank One Texas, N.A., base rate plus
2%, loan was paid in full during quarter ended June 30, 1998 - 146,667
------- -------
347,889 518,789
Less current portion (112,596) (151,267)
------- -------
$ 235,293 $ 367,522
======= =======
</TABLE>
Following are maturities of long-term debt for each of the next five years:
<TABLE>
<CAPTION>
Period ended: June 30 March 31
--------- --------
<S> <C> <C>
1999 $ 112,596 $ 151,267
2000 114,061 153,067
2001 85,074 134,348
2002 33,932 80,107
Thereafter 2,226 -
========= =========
</TABLE>
Certain officers of the Company have personally guaranteed all notes.
NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES
The Company is lessee of transportation and telephone equipment under capital
leases expiring in various years through September 2001. The asset and
liabilities under capital leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the assets. The assets are
depreciated over the lower of their related lease terms or their estimated
productive lives. Depreciation of assets under capital leases is included in
depreciation expense (see Note 3).
Following is a summary of property held under capital leases:
<TABLE>
<CAPTION>
June 30 March 31
------- --------
<S> <C> <C>
Transportation Equipment $ 234,456 $ 218,055
Communication Equipment 56,014 56,014
</TABLE>
12
<PAGE> 16
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES - CONTINUED
Minimum future lease payments under capital leases as of June 30, 1998 and March
31, 1998, for each of the next five years and in the aggregate are:
Period ended:
<TABLE>
<CAPTION>
June 30 March 31
--------- ---------
<S> <C> <C>
1999 $ 61,924 $ 68,077
2000 60,343 60,343
2001 87,600 74,985
--------- ---------
Total minimum lease payments 209,867 203,405
Less: Amount representing interest (41,614) (12,748)
--------- ---------
168,253 190,657
Less current portion (45,517) (41,097)
--------- ---------
Long-term obligations under capital leases $ 122,736 $ 149,560
========= =========
</TABLE>
NOTE 7 - FEDERAL INCOME TAXES
A reconciliation of income tax at the statutory rate to the Company's effective
rate is as follows:
<TABLE>
<CAPTION>
June 30 March 31
----------- -----------
<S> <C> <C>
Computed at the expected statutory rate $ (322,000) $(1,281,000)
Non-deductible items 3,000 40,000
Valuation allowance 319,000 1,241,000
----------- -----------
Income tax $ - $ -
=========== ===========
Deferred tax assets are as follows:
Deferred tax asset $ 1,394,000 $ 1,285,000
Valuation allowance (1,394,000) (1,285,000)
----------- -----------
$ - $ -
=========== ===========
</TABLE>
The Company has available at March 31, 1998, $3,782,000 of unused operating loss
carryforwards that may be applied against future taxable income and that expire
in various years through 2013.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company had notes receivable from certain related parties at March 31,1997,
in the amount of $419,774. These related parties are owned and controlled by
majority stockholders of the Company. During the year ended March 31, 1998, the
Company loaned an additional $142,265 to these related entities and received
payments in the amount of $562,039. At June 30, 1998 and March 31, 1998, the
Company did not have any notes receivables or payables to related parties. The
Company did not have sales or purchases with the related parties for the three
months ended June 30, 1998 or 1997 or the years ended March 31, 1998 or 1997.
NOTE 9 - COMMITMENTS
The Company leases its principal general offices and warehouse facilities. The
leases expire at May 31, 2008. Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
<S> <C>
1999 $ 133,296
2000 142,464
2001 149,340
2002 168,480
2003 179,010
2004 189,540
2005 200,070
2006 210,600
2007 221,070
2008 231,660
2009 40,365
------------
TOTAL $ 1,865,895
============
</TABLE>
The total rental obligation under the above contract for the quarters ended June
30, 1998 and 1997, was $32,364 and $27,495, respectively and for the years ended
March 31, 1998 and 1997 was $109,980 and $82,255, respectively.
13
<PAGE> 17
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 10 - STOCKHOLDERS' EQUITY
In October 1997, the Company completed a Private Placement Agreement, (the
"Agreement") with a group of accredited investors. The Agreement provides for
three "Phases" of financing.
Phase I of the Agreement was funded in November 1997. The Company received
$2,120,000 in exchange for 400,000 shares of series B preferred stock (5%
cumulative, convertible, non-voting, stated value $5.30) ,(the "Series B
Stock"). Each share of preferred stock is initially convertible into 10 shares
of the Company's common stock subject to adjustment and six warrants, (the
"Warrants") for the purchase of six shares of common stock at $1.50 per share.
The Company paid $302,000 and issued 20,000 shares of series B preferred stock
for placement agent fees in Phase I. Also options to purchase 400,000 shares of
common stock at $1.50 per share were issued as a part of the agreement. The
common stock had a fair value of $0.57 per share at the grant date of the
options resulting in $226,800 in placement agent fees. The Agreement states that
conversion of the preferred stock will not occur to the extent that the HUB
status of the Company is compromised. An additional 4,348,738 shares could be
converted before the HUB status would be lost.
The series B preferred stock can be converted to common stock. Therefore, a
discount in the amount of $6,151,978 has been realized. The discount is the
difference in the intrinsic value of the common stock and warrants less the net
proceeds from the series B preferred stock. The discount is accreted from the
date of issuance of the preferred stock to the date the stock can be converted.
Due to the limitation on the number of shares of stock that can be issued to
retain the HUB status, $3,412,502 has been recorded as dividends and as an
increase in additional paid-in capital in the accompanying financial statements.
The unrecognized portion of the discount in the amount of $2,796,524 will be
recorded if and when the preferred stock is converted or the HUB status changes.
Phase II of the Agreement was funded in February 1998. The Company received
$1,000,004 in exchange for 94,340 shares of series C preferred stock (6%
cumulative, convertible, non-voting, stated value, $10.60), (the "Series C
Stock"). Each share of preferred stock is initially convertible into 10 shares
of the Company's common stock, subject to adjustment. The Company paid $130,000
and issued 4,717 shares of series C preferred stock for placement agent fees.
Also options to purchase 47,170 shares of common stock at $4.00 per share were
issued as a part of the agreement. The common stock had a fair value of $0.57
per share at the grant date resulting in $26,747 in placement agent fees. The
Agreement states that conversion of the preferred stock will not occur to the
extent that the HUB status of the Company is compromised.
The series C preferred stock can be converted to common stock. Therefore, a
discount in the amount of $615,851 has been realized. The discount is the
difference in the intrinsic value of the common stock less the net proceeds from
the series C preferred stock. Due to the limitation on the number of shares of
stock that can be issued to retain the HUB status, the unrecognized discount in
the amount of $615,851 will be recorded if and when the preferred stock is
converted or the HUB status changes.
Phase III of the Agreement was funded in May through July 1998. The Company
received $2,923,204 in exchange for 266,340 shares of series D preferred stock
(6% cumulative, convertible, non-voting, stated value, $10.60), (the "Series D
Stock"). Each share of preferred stock is initially convertible into 10 shares
of the Company's common stock, subject to adjustment. The Company paid $349,318
and issued 13,317 shares of series D preferred stock for placement agent fees.
Also options to purchase 250,850 shares of common stock at $1.59 per share were
issued as a part of the agreement. The common stock had a fair value of $1.81 to
$3.05 per share at the grant date resulting in $532,343 in placement agent fees.
The Agreement states that conversion of the preferred stock will not occur to
the extent that the HUB status of the Company is compromised.
The Series D preferred stock can be converted to common stock. Therefore, a
discount in the amount of $4,781,739 at June 30, 1998 has been realized. The
discount is the difference in the intrinsic value of the common stock less the
net proceeds from the series D preferred stock. Due to the limitation on the
number of shares of stock that can be issued to retain the HUB status, the
unrecognized discount in the amount of $4,781,739 will be recorded if and when
the preferred stock is converted or the HUB status changes.
14
<PAGE> 18
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS
ENDED MARCH 31, 1998 AND 1997
NOTE 10 - STOCKHOLDERS' EQUITY - CONTINUED
Senior convertible debt in the amount of $371,000 was issued for cash in
November 1997. This debt was converted to 70,000 shares of series B preferred
stock (5% cumulative, convertible, non-voting, stated value, $5.30), in February
1998. Accrued interest in the amount of $5,143 was paid with the issuance of
10,286 shares of common stock. The discount on this issue of series B preferred
stock is included in the total series B discount detailed above.
Preferred stock dividends were paid with the issuance of common stock valued at
the previous thirty day average closing bid price per share of common stock as
follows:
<TABLE>
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
June 30, 1998 10,224 $ 66,743
March 31, 1998 23,742 58,668
</TABLE>
NOTE 11 - STOCK OPTIONS AND WARRANTS
A summary of the status of the Company's stock options as of June 30, 1998 and
March 31, 1998, is presented below:
<TABLE>
<CAPTION>
June 30 March 31
--------- ---------
<S> <C> <C>
Options outstanding at beginning of period 622,170 -
Options granted 250,850 622,710
Options exercised - -
Options canceled - -
Less: options not exercisable at end of period 473,020 222,710
--------- ---------
Options outstanding and
exercisable 400,000 400,000
========= =========
Weighted Average Exercise Price per Share $ 1.50 $ 1.50
========= =========
</TABLE>
The following table summarizes the information about the stock options as of
June 30, 1998, and March 31, 1998:
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstand- Remaining Exercise Exercisable Exercise
Exercise ing at Contractual Price At Price
Price June 30 Life (Total Shares) June 30 (Exer. Shares)
------------- ------------- --------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 1.50 50,000 (1) 5 years $ 1.50 - $ 1.50
2.25 25,000 (1) 5 years 2.25 - 2.25
1.50 100,000 (1) 5 years 1.50 - 1.50
1.50 400,000 (2) 5 years 1.50 400,000 1.50
4.00 47,170 (2) 6 years 4.00 - 4.00
1.59 250,850 (2) 5 years 1.59 - 1.59
------------- ------------- --------------- ----------------- -------------- -----------------
$ 4.00 873,020 5 years $ 1.68 400,000 $ 1.50
============= ============= =============== ================= ============== =================
</TABLE>
(1) Options to employees for past services.
(2) Options granted for placement agent fees (Note 10).
15
<PAGE> 19
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (RESTATED) THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 11 - STOCK OPTIONS AND WARRANTS - CONTINUED
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstand- Remaining Exercise Exercisable Exercise
Exercise ing at Contractual Price At Price
Price March 31 Life (Total Shares) March 31 (Exer. Shares)
------------- ------------- --------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.50 50,000 (1) 5 years $ 1.50 - $ 1.50
2.25 25,000 (1) 2 years 2.25 - 2.25
1.50 100,000 (1) 5 years 1.50 - 1.50
1.50 400,000 (2) 5 years 1.50 400,000 1.50
4.50 47,170 (2) 6 years 4.00 - 4.00
------------- ------------- --------------- ----------------- -------------- -----------------
1.50-
$ 4.00 622,170 5 years $ 1.72 400,000 $ 1.50
============= ============= =============== ================= ============== =================
</TABLE>
(1) Options issued to employees for past services.
(2) Options granted for placement agency fees (Note 10).
Stock options to employees for the year ended March 31, 1998, have been recorded
as compensation as applied under APB No. 25 in the amount of $93,750.
SFAS No. 123 requires the Company to provide pro forma information regarding net
income (loss) applicable to common stockholders and income (loss) per share as
if compensation cost for the Company's stock options granted to employees had
been determined in accordance with the fair value based method prescribed in
that Statement.
The Company estimated the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants as follows:
<TABLE>
<CAPTION>
March 31
--------
<S> <C>
Dividend yield 0%
Expected volatility 16.46%
Risk-free interest rate 8.54%
Expected lives 5 Years
Net (loss) applicable to common stockholders:
As reported $(7,238,120)
===========
Pro forma $(7,142,870)
===========
Net (loss) per share:
As reported $ (.66)
===========
Pro forma $ (.65)
===========
</TABLE>
At March 31, 1998 and June 30, 1998, the Company had warrants outstanding to
acquire 2,940,000 shares of common stock. All of the warrants were eligible to
be exercised at year end. The following table summarizes the information about
the warrants:
<TABLE>
<CAPTION>
Number
Outstanding
Exercise Mar. 31 Expiration
Price and June 30 Date
-------- ----------- -----------
<S> <C> <C>
$1.50 120,000 1/31/2000
$1.50 2,400,000 1/31/2000
$0.795 300,000 1/31/2000
$0.795 120,000 1/31/2000
---------
2,940,000
=========
</TABLE>
16
<PAGE> 20
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997
NOTE 11 - STOCK OPTIONS AND WARRANTS - CONTINUED
In addition, all of the warrant contracts prohibit exercise of the warrants if
the HUB status of the Company is compromised upon such exercise.
NOTE 12 - EARNINGS PER SHARE
The following data details the amounts used in computing earnings per share
(EPS) and the effect on income and the weighted average number of shares of
dilutive potential common stock.
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
---- ----
<S> <C> <C>
Loss from continuing operations $ (945,957) $(3,766,950)
Less: Preferred dividends (66,743) (3,471,170)
---------- ---------
Loss available to common shareholders
used in basic EPS $ (1,012,700) $(7,238,120)
========== =========
Weighted average number of common shares
used in basic EPS 11,507,002 10,998,874
Effect of dilutive securities:
Stock options - -
Warrants - -
---------- ----------
Weighted number of common shares and
dilutive potential common stock used
in diluted EPS 11,507,002 10,998,874
========== ==========
</TABLE>
In addition, options on 873,020 shares of common stock and warrants on 2,940,000
shares of common stock were not included in computing diluted EPS for the three
months ended June 30, 1998, because their effects were antidilutive. Options on
622,170 shares of common stock and warrants on 2,940,000 shares of common stock
were not included in computing diluted EPS for the year ended March 31, 1998,
because their effects were antidilutive.
NOTE 13 - CONTINGENCY
On December 18, 1997, Argus Management, Inc. filed Plaintiff's Original Petition
in the 216th District Court of Kerr County, Texas. Argus claims the Company and
Mr. Jose G. Chavez, as joint obligors, defaulted on their obligation to Argus
pursuant to two promissory notes for $100,000 each, both dated June 2, 1997.
Argus is seeking a judgment for $200,000, together with interest on the notes at
the rate of 20% per annum from June 2, 1997, through the date the notes are
satisfied. As of March 31, 1998, $65,000 had been disbursed to third parties in
satisfaction of obligations of Argus Management, Inc. The $65,000 has been
recorded in other receivables in the accompanying financial statements.
On February 6, 1998, the Company filed Plaintiff's Original Petition in the
above-referenced case. The Company asserts breach of contract, fraud,
defamation, usury, and civil conspiracy claims against Argus Management, Inc.
The Company strongly disagrees with Argus' contentions and denies liability to
Argus under the notes and plans to oppose vigorously Argus' claims and recover
the amounts disbursed to third parties.
A lawsuit was filed by Manpower, Inc. to preserve its claims for certain
delinquent obligations that were reduced to approximately $38,000 which is
included in accounts payable at March 31, 1998. The full amount of the principal
and interest was paid on April 29, 1998, and a Notice of Dismissal was filed on
May 8, 1998.
On January 22, 1998, the Company filed a lawsuit against Bits Technical
Corporation for damages attributable to a breach of commitment. This matter is
still pending. On August 17, 1998, Bits Technical Corporation ("BTC") filed a
counterclaim against the Company in connection with the above case. In the
counterclaim, BTC asserts the Company fraudulently induced BTC to promise to
loan money to the Company. In particular, BTC claims the Company promised
certain contracts and business opportunities to BTC that the Company was
unwilling or unable to deliver.
17
<PAGE> 21
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED MARCH 31, 1998 AND
1997
NOTE 13 - CONTINGENCY - CONTINUED
Bank One, Texas, NA filed a lawsuit against the Company for the collection of
approximately $355,633 of principal plus interest $29,289 as well as attorney
fees and court costs $10,000. The bank was paid in full in April 1998. The bank
then executed a Notice of Nonsuit to dismiss with prejudice the lawsuit on April
29, 1998.
On November 20, 1996, MCA Communications, Inc. ("MCA") filed a lawsuit against
the Company in County Court at Law No. 2 in Harris County, Texas. MCA claims the
Company owes $12,485 for certain goods and services that MCA claims to have
provided to MSI in connection with various projects for the Texas Department of
Health. MCA also seeks interest, costs, and attorneys' fees. On January 6, 1997,
the Company filed its answer and denied the above-referenced claim in its
entirety.
18
<PAGE> 22
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SECTION AND OTHER PARTS OF THIS PROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW AND IN "RISK FACTORS" AND "BUSINESS."
Overview
Micro-Media Solutions, Inc. ("MSI"), the operating subsidiary of MSHI was
created in 1993 in Austin, Texas, to provide computer hardware, software
programming, system installation and support, maintenance, and media duplication
to the public and private sectors. MSI maintains certification as a
minority-owned business enterprise and status as a Historically Underutilized
Business ("HUB"). On June 23, 1997, the then shareholders of MSI entered into an
agreement and plan of reorganization (the "Combination Agreement") with Mountain
States Resources Corporation (now known as MSI Holdings, Inc.), whereby the
Company acquired all of the issued and outstanding stock of MSI in exchange for
9,310,000 shares of the Common Stock of the Company (the "Combination"). The
Combination was accounted for as a recapitalization.
Among the principal costs to market and sell the Company's products are
advertising and promotion costs, salaries and commissions, and general and
administrative expenses. MSHI's operating results may be subject to fluctuations
on a quarterly and an annual basis as a result of various factors, including,
but not limited to, fluctuating market pricing for computer and semiconductor
memory products, industry competition, seasonal government purchasing cycles,
and working capital restrictions on manufacturing and production. Therefore, the
operating results for any particular period are not necessarily indicative of
the results that may occur in any future period.
The Company's revenues consist of hardware sales, software sales and the
delivery of technical services, including installing and maintaining networks
system. The technical service sales of the Company typically yield a higher
gross margin than the hardware and software sales of the Company. This is due,
in part, to the intense competition in the hardware and software sales sector
from Original Equipment Manufactures ("OEM's") and distributors. As a result,
the Company, is attempting to strategically reposition itself from emphasizing
hardware sales to intensifying sales of technical services. See Management's
Discussion and Analysis of Financial Conditions and Results of Operations
- -Results of Operations.
<PAGE> 23
Recent Developments
On July 27, 1998, MSI entered into a renewable 10 year sublease with GTE
Intelligent Network Services, Inc. ("GTE") under which MSI agreed to lease a
portion of their east Austin facilities to GTE for installation of GTE's Point
of Presence ("POP") equipment (the "Sublease"). On May 29, 1998, MSI entered
into a 3 year subscription to GTE's Internet Advantage version 5.1 Connection
Service granting MSI access to GTE's POP (the "Connection Service")(the Sublease
and Connection Service are collectively referred to as the "GTE Agreement").
GTE's establishment, management and monitoring of multiple domains on behalf of
MSI is included in the Connection Service. The Connection Service was upgraded
to GTE's Internet Advantage version 6.0 on September 29, 1998. MSI will lease
connections to the POP for access to the GTE Internet network to other
businesses. MSI will target companies that need direct, high-speed access to the
Internet through turn-key collocation services for high volume (known as
bandwidth) Internet web applications. Collocation is a service that provides a
high speed, high bandwidth connection to the Internet backbone using various
backup systems to increase the connection's fault tolerance. By connecting
directly to Internet via the POP, MSI is able to eliminate the local loop, the
weakest component in localized Internet connections. MSI will have the capacity
to support over four thousand collocation rack spaces. These rack spaces will be
used to host the net servers for MSI clients and provide those clients with
direct access to the Internet. When fully implemented, these collocation
services are expected to significantly increase MSHI's revenues over the term of
the Connection Service. The GTE Agreements provide the potential for MSHI to
increase revenue by selling Internet access to various high Internet demand
entities for such activities as commerce and academics. It is anticipated that
the requisite hardware will be operational in January 1999.
In July 1998, MSI began providing systems integration, warehousing, systems
configuration and other fulfillment services for Siemens-Nixdorf Information
Systems, Inc. ("Siemens-Nixdorf") for Point of Sale ("POS") systems and
Automated Teller Machines for Siemens-Nixdorf's customers such as Sears-Roebuck,
and Bealls department stores (the "Siemens-Nixdorf Agreement"). This agreement
provides that Siemens-Nixdorf will store its inventory at MSI, and MSI will
charge Siemens-Nixdorf for various systems integration services. This
arrangement provides MSHI with a revenue stream without a significant working
capital commitment.
MSHI formed TeleVista, Inc., a wholly owned subsidiary ("TVI") in September of
1998 to run the electronic commerce business for the on-line sale of hardware
and software over the Internet through the use of a secure server. Secure
servers allow for the accelerated receipt of funds through credit card payments
for hardware and software purchases made through their web sites operated by it.
<PAGE> 24
Results of Operations
Three Months Ended June 30, 1998 Compared with the Three Months Ended
June 30, 1997
Revenues for the quarter ended June 30, 1998 of $601,629 decreased $627,555 or
(51.1%) from the $1,229,184 recorded in the quarter ended June 30, 1997. This
reduction in 1998 occurred as a result of management's attention being focused
on seeking a stable source for financing the Company's expansion, conversion to
a publicly traded company, development of longer term service contracts,
expansion of the technical staff to service the expanded service contracts and
identification of appropriate investors for the Company.
Cost of goods sold for the quarter ended June 30, 1998 declined $171,929 or
(25.5%) from the quarter ended June 30, 1997. Cost of goods sold for 1998 of
$501,146 or 83.3% of net revenue is extraordinarily high, resulting in a gross
margin of $100,483 or 16.7% of revenues for the quarter. The gross margin for
the quarter ended June 30, 1997 was $556,709 or 45.3% of revenues. Gross margin
percentages experienced in 1997 more closely represent the margins management is
working to attain.
Selling, General and Administrative Expenses the quarter ended June 30, 1998 of
$1,046,440 represents 173.9% of Revenues. The 1998 figure represents an
increase over the quarter ended June 30, 1997 of $484,900 or 86.4%.
Approximately $246,000 of the increase represents the increase in staff salaries
and benefits. Staff additions include service technicians, sales staff,
accounting staff and middle management to enable the Company to work on larger
service contracts. Other increases include professional fees, which increased
approximately $133,952 due to additional legal, accounting and other consulting
fees associated with the Combination and reporting requirements attendant to
being a publicly traded company. The majority of the remaining increase in
expenses is attributable to training for expansion, marketing cost associated
with new service contracts, and other expenses associated with the start up of
new service contracts.
Going Concern Issues
The Company's significant historical losses raise a doubt as to the Company's
ability to continue as a going concern. The Company plans to address the going
concern issues described elsewhere in this Prospectus through an additional
private placement and a possible $20 million debt issue. However, there can be
no assurance that the Company will be able to secure such additional capital.
Subsequent to March 31, 1998, the Company received $2 million dollars in
proceeds from Private Placement Phase III (as defined) that have been used to
retire debt, decrease past due accounts payable and for operating expenses. As a
result, the Company's current ratio has improved and its cash position has
increased The Company is in the process of consummating a private placement of a
newly created series of preferred stock with net proceeds to the Company of
approximately $2.6 million (the "Proposed Private Placement"). In the event the
Proposed Private Placement is not consummated in the near future, the Company
will experience significant cash flow and working capital restraints sufficient
to create a likelihood that the Company will not continue as a going concern.
<PAGE> 25
Management believes that its contracts with GTE and Siemens Nixdorf have the
possibility of producing revenues of approximately $3 million in 1999. The
Company's ability to fulfill its obligations under the Switching Agreement is
contingent upon the successful consummation of the Proposed Private Placement
and obtaining the working capital contemplated by the debt issue described in
the preceding paragraph.
Potential Loss of Hub Status
MSI is currently qualified in Texas as a "Historically Underutilized Business"
("HUB"). As long as MSI maintains its status as a HUB, it will continue to
receive favorable treatment by certain governmental entities in their granting
of contracts. The Company generated revenues of approximately $414,000 and
$919,000 during the years ended March 31,1998 and 1997, respectively, from HUB
related contracts, or 15% and 20% of its gross revenues, respectively. MSI will
graduate from its HUB status upon the happening of any of the following events:
(i) less than 51% of the Company's voting stock is owned by minorities; (ii)
such minority owners are not active participants in the day-to-day operations
and management of the business; (iii) the four year average of gross revenues of
MSI exceeds certain levels based on the MSI's Standard Industrial Classification
Code ("SIC Code"); or (iv) the four year average of total employment levels of
MSI exceeds the Small Business Administration established levels for businesses
with a similar four-digit SIC Code. Under the current SIC Code applicable to
MSI, MSI must not exceed 500 employees, it currently has 79 employees. The
current SIC Code classification does not impose a revenue ceiling, however, some
SIC Code classifications under which MSI operated placed a three year or a four
year average of gross revenue limitation. The potential loss of HUB status may
also be contingent upon the SIC Code under which MSI operates in the future.
Future changes in operations may require the MSI to change its SIC Code, which
could alter the employee ceiling and impose revenue restrictions as low as $5
million per year, averaged over periods as short as three years. There can be no
assurance that MSI will continue to qualify for HUB status. Further, there is no
assurance that HUB-type programs will not be eliminated by the state or federal
governments. If MSI's HUB status is lost, the Company anticipates a significant
loss of revenues.
Liquidity and Capital Resources
On November 18, 1997, the Company received $2,120,000 upon completion of a
private placement whereby 400,000 of Series B Preferred were sold to
Entrepreneurial Investors, Ltd. ("EIL") for $5.30 per share ("Private Placement
Phase I"). The Company also issued 20,000 shares of Series B Preferred to Equity
Services, Ltd. ("ESL") as a commission for the completion of Private Placement
Phase I. The Company received $371,000 in October 1997 from two individuals
pursuant to two senior convertible notes (the "Notes"), which are secured by an
aggregate of 1,050,000 shares of Common Stock of the Company. The Notes were
subsequently converted into an aggregate of 70,000 shares of Series B Preferred.
On February 4, 1998, the Company received $1,000,000 completing a second private
placement whereby 94,340 shares of Series C Preferred were sold to EIL for a
purchase price of $10.60 per share ("Private Placement Phase II"). As commission
for the completion of Private Placement Phase II, the Company issued 4,717
shares of Series C Preferred to ESL. By July, 1998, the Company received
$2,964,364
<PAGE> 26
completing a third private placement, whereby 279,657 shares of Series D
Preferred were sold to fourteen investors for a purchase price of $10.60 per
share ("Private Placement Phase III"). The expenses for Private Placement Phase
I, Private Placement Phase II, and Private Placement Phase III, including broker
fees, commissions and legal and accounting expenses totaled $634,800, $206,747,
and $1,022,821 respectively.
For the three months ended June 30, 1998 and 1997, the Company's total assets
were $2,995,406 and $3,480,777, respectively, with liabilities of $2,076,027 and
$3,5789,192, respectively. Current assets of $2,054,495 and $2,287,975 represent
119.6% and 79.9% of current liabilities of $1,717,998 and $2,962,498.
Improvements in the Company's cash position are a result of the collection of
accounts receivable and funds from increases in shareholders equity resulting
from the previously consummated private placements more particularly described
above. Reductions in accounts receivable between 1998 and 1997 are a direct
reflection of the reduced level of sales experienced in 1998. The Company's
liabilities of $2,076,027 at June 30,1998 consist of $1,070,000 of a fully
secured credit line, $647,998 of current liabilities and $358,029 of long-term
liabilities.
The Company, subsequent to the end of 1998, paid its Bank One Texas, NA loans in
full and substantially reduced the borrowings under its fully secured line of
credit (see Notes 4, 5 and 13 to the consolidated financial statements). Net
shareholders equity (deficit) as of June 30, 1998 and 1997 was $919,379 and
($108,415), respectively. During the year ended March 31, 1998, the Company
completed Private Placement Phase I and Private Placement Phase II (See Note 10
to the consolidated financial statements). Subsequent to June 30, 1998, the
Company finalized funding of Private Placement Phase III with additional
proceeds totaling $857,010. Receipt of these funds enabled the Company to reduce
its outstanding debt and pay off the past due accounts payable.
During the three months ended June 30, 1998, working capital increased
$1,011,020 from the prior year and the balances of its accounts payables and
accrued expenses were reduced as a result of the application of the proceeds
from the completion of Private Placement Phase I, Private Placement Phase II and
Private Placement Phase III. At June 30, 1998, the Company had a working capital
of $336,497 compared to a working capital deficit of ($674,523) at June 30,
1997. At June 30, 1998 the Company's accounts payable decreased by $1,198,413 or
86.4% a compared to June 30, 1997.
The Company has a critical need for additional working capital to meet
contractual obligations under the GTE Agreements. Management believes that the
GTE Agreements with Siemens Nixdorf Agreements have the potential to increase
revenue levels, provided that sufficient working capital is obtained. See
Management's Discussion and Analysis of Financial Conditions and Results of
Operations and Going Concern Issues.
<PAGE> 27
Year 2000 Issues.
As with other companies, the Company has initiated a program to study the impact
on its computer system in order to be Year 2000 compliant. This study involved
identifying any modifications or replacements of certain hardware and software
maintained by the Company. The study has been completed. The company has
identified the computer systems that will require either modification, upgrade
or replacement. Implementation of the Company's Year 2000 plan should be
completed by March 31, 1999. The Company anticipates that in-house personnel
will be primarily responsible for completing these tasks and that the costs will
be insignificant. As such, the Company believes that the planned modifications,
upgrades and replacements of existing systems will be completed in a timely
fashion to assure Year 2000 compliance, and any related cost will not have a
material impact on the Company's results of operations, cash flows, or financial
conditions in future periods. The Company has budgeted for $25,000 to address
these expenses. In addition, the Company is also taking actions to assure that
its customers and vendors are taking steps to remedy their Year 2000 issues.
The Company is not incurring any unique risks in connection with Year 2000
issues. It is however subject to the risk that information and financial
resources may be temporarily unavailable. This societal risk may temporarily
disrupt cash flows worldwide. The Company believes that by becoming, and
assisting its clients and vendors to become, Year 2000 compliant it is likely to
circumvent that threat. The Company expects to be Year 2000 compliant March 31,
1999. If compliance is not achieved by that date, the Company will reallocate
resources, as necessary, to ensure compliance within six months, thereafter.
Inflation.
Management does not believe that inflation will have a material impact on the
Company's pricing of goods or services since the Company, generally, has the
ability to adjust prices to meet the current market conditions.
PART II: Other Information
ITEM 1: LEGAL PROCEEDINGS
For a discussion of Legal Proceedings, refer to Note 13, Contingencies, in the
Notes to Consolidated Financial Statements in Part I
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
For a discussion of Changes in Securities and Use of Proceeds, refer to Note 10,
Stockholders' Equity, in the Notes to Consolidated Financial Statements in Part
I
<PAGE> 28
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
INDEX
(A) EXHIBITS
3.1 ARTICLE OF AMENDMENT
4.1 CERTIFICATE OF DESIGNATION FOR SERIES B PREFERRED SHARES
4.2 FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES B PREFERRED
STOCK
4.3 CERTIFICATE OF DESIGNATION FOR SERIES C PREFERRED SHARES
4.4 CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED SHARES
4.5 FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED
STOCK
4.6 SECOND AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
PREFERRED STOCK
4.7 THIRD AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED
STOCK
4.8 CERTIFICATE OF DESIGNATION FOR SERIES E PREFERRED SHARES
10.1 LEASE AGREEMENT FOR FACILITIES
10.2 SUBLEASE DATED JULY 27, 1998 BETWEEN GTE INTELLIGENT NETWORK SERVICES,
INC AND MSI
10.3 MSI PURCHASE ORDER DATED MAY 29,1998 FOR GTE INTERNETWORKING'S INTERNET
ADVANTAGE VERSION 5.1 (QUOTE NUMBER 38561.9719.1)
10.4 MSI PURCHASE ORDER DATED SEPTEMBER 30, 1998 FOR GTE INTERNETWORKING'S
INTERNET ADVANTAGE VERSION 6.0 (QUOTE NUMBER 76512.9719.1)
10.5 MASTER AGREEMENT for INTERNETWORKING SERVICES DATED MAY 29, 1998 BETWEEN
GTE INTERNETWORKING AND MSI
10.6 QUOTATION FOR GTE INTERNETWORKING DIALINX SERVICE DATRE OCTOBER 29, 1998
BETWEEN GTE INTERNETWORKING AND MSI
<PAGE> 29
10.7 BASIC AGREEMENT BETWEEN SIEMENS NIXDORF INFORMATION SYSTEMS, INC. AND
MSI
10.8 ADDENDUM TO LEASE AGREEMENT ON 501 WALLER AUSTIN, TEXAS DATED JUNE 6,
1998 BETWEEN WBH, LTD AND MSI
10.9 VALUE ADDED RESELLER'S AGREEMENT BETWEEN MSI AND HEWLETT-PACKARD, INC.
DATED JUNE 1, 1995
10.10 PLACEMENT AGREEMENT DATED NOVEMBER 11, 1997, BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
10.11 PLACEMENT AGREEMENT DATED JANUARY 31, 1998 BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
10.12 PLACEMENT AGREEMENT DATED APRIL 30, 1998 BY AND BETWEEN EQUITY SERVICES,
LTD AND MSHI.
10.13 FIRST AMENDMENT TO THE PLACEMENT AGREEMENT DATED APRIL 30, 1998, BY AND
BETWEEN EQUITY SERVICES, LTD AND MSHI.
10.14 PLACEMENT AGREEMENT DATED OCTOBER 13, 1998, BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
(B) REPORTS ON FORM 8-K
16.1 FORM 8-K/A, FILED SEPTEMBER 25, 1998
16.2 FORM 8-K, FILED SEPTEMBER 17, 1998
16.3 FORM 8-K, FILED SEPTEMBER 17, 1998
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date 11/6/1998 By /s/ Jose G Chavez
Jose G. Chavez, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of this
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ Jose G Chavez 11/6/1998
Jose G. Chavez Chairman of the Board of
Directors and President
/s/ Mitchell Kettrick 11/6/1998
Mitchell Kettrick Vice-President and Director
/s/ David Hill 11/6/1998
David Hill Chief Financial Officer
/s/ Ernesto Chavarria 11/6/1998
Ernesto Chavarria Director
</TABLE>
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 ARTICLE OF AMENDMENT
4.1 CERTIFICATE OF DESIGNATION FOR SERIES B PREFERRED SHARES
4.2 FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES B
PREFERRED STOCK
4.3 CERTIFICATE OF DESIGNATION FOR SERIES C PREFERRED SHARES
4.4 CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED SHARES
4.5 FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
PREFERRED STOCK
4.6 SECOND AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
PREFERRED STOCK
4.7 THIRD AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
PREFERRED STOCK
4.8 CERTIFICATE OF DESIGNATION FOR SERIES E PREFERRED SHARES
10.1 LEASE AGREEMENT FOR FACILITIES
10.2 SUBLEASE DATED JULY 27, 1998 BETWEEN GTE INTELLIGENT NETWORK
SERVICES, INC AND MSI
10.3 MSI PURCHASE ORDER DATED MAY 29,1998 FOR GTE INTERNETWORKING'S
INTERNET ADVANTAGE VERSION 5.1 (QUOTE NUMBER 38561.9719.1)
10.4 MSI PURCHASE ORDER DATED SEPTEMBER 30, 1998 FOR GTE
INTERNETWORKING'S INTERNET ADVANTAGE VERSION 6.0 (QUOTE NUMBER
76512.9719.1)
10.5 MASTER AGREEMENT for INTERNETWORKING SERVICES DATED MAY 29, 1998
BETWEEN GTE INTERNETWORKING AND MSI
10.6 QUOTATION FOR GTE INTERNETWORKING DIALINX SERVICE DATRE OCTOBER
29, 1998 BETWEEN GTE INTERNETWORKING AND MSI
</TABLE>
<PAGE> 32
<TABLE>
<S> <C>
10.7 BASIC AGREEMENT BETWEEN SIEMENS NIXDORF INFORMATION SYSTEMS, INC.
AND MSI
10.8 ADDENDUM TO LEASE AGREEMENT ON 501 WALLER AUSTIN, TEXAS DATED JUNE
6, 1998 BETWEEN WBH, LTD AND MSI
10.9 VALUE ADDED RESELLER'S AGREEMENT BETWEEN MSI AND HEWLETT-PACKARD,
INC. DATED JUNE 1, 1995
10.10 PLACEMENT AGREEMENT DATED NOVEMBER 11, 1997, BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
10.11 PLACEMENT AGREEMENT DATED JANUARY 31, 1998 BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
10.12 PLACEMENT AGREEMENT DATED APRIL 30, 1998 BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
10.13 FIRST AMENDMENT TO THE PLACEMENT AGREEMENT DATED APRIL 30, 1998,
BY AND BETWEEN EQUITY SERVICES, LTD AND MSHI.
10.14 PLACEMENT AGREEMENT DATED OCTOBER 13, 1998, BY AND BETWEEN EQUITY
SERVICES, LTD AND MSHI.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
(A) EXHIBITS
ARTICLES OF AMENDMENT
MICRO-MEDIA SOLUTIONS, INC.
Pursuant to the provisions of Utah law, the undersigned corporation hereby
amends its Articles of Incorporation, and for that purpose, submits the
following statement:
1. The name of the corporation is: Micro-Media Solutions, Inc.
2. The text of the amendment is:
Article One of the Articles of Incorporation is hereby amended to read in its
entirety as follows:
"The name of the corporation is MSI Holdings, Inc."
3. The date of adoption of the amendment is: September 21, 1998.
4. The amendment was adopted by a vote of the shareholders as set forth below:
Common Stock
<TABLE>
<S> <C>
Total Shares Represented: 9,276,060
Total Shares Entitled to Vote: 11,285,954
% Represented: 82.19%
</TABLE>
Vote the Change Name:
<TABLE>
<S> <C> <C>
For 9,263,346 (99.86%)
Against 694 (0.007%)
Abstain 12,020 (0.133%)
</TABLE>
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
Jose Chavez, President
Date October 13, 1998
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF THE DESIGNATION, PREFERENCES
RIGHTS AND LIMITATIONS OF
SERIES B CUMULATIVE PREFERRED STOCK
OF
MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc., hereinafter called the "Corporation", a
corporation organized and existing under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, and pursuant to Section
16-10a-602 of the Utah Business Corporation Act, such Board of Directors by the
unanimous written consent of its members dated effective November 10, 1997
adopted a resolution providing for the issuance of a series of Four Hundred
Twenty Thousand (420,000) shares of Series B 5% Cumulative Convertible
Non-Voting Preferred Stock, $5.30 stated value per share, which resolution is as
follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Series B 5% Cumulative
Convertible Non-Voting Preferred Stock, $5.30 stated value per share ("Series B
Preferred Stock"), is hereby authorized and created, said series to consist of
up to Four Hundred Twenty Thousand (420,000) shares of Series B Preferred Stock.
The voting powers, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof
shall be as follows:
1. Stock or Cash Dividends on Series B Preferred Stock
a. The dividends are payable in cash or shares of the Corporation's common
stock, $.10 par value ("Common Stock"), at the option of each of the holders of
the Series B Preferred Stock. The holders of the Series B Preferred Stock shall
be entitled to receive cumulative dividends at the annual rate of 5% of the
Liquidation Amount (defined hereafter) per share, payable quarterly on the last
day of March, June, September, and December, in arrears, commencing December 31,
1997 (each a "Dividend Payment Date"). Notwithstanding the foregoing, if any
Dividend Payment Date is not a Business Day (as hereinafter defined), such
dividend shall be paid on the next succeeding Business Day. "Business Day" shall
mean any day that is not a Saturday, Sunday or a day on which banks in Austin,
Texas, are obligated or permitted by law or executive order to close.
"Liquidation Amount" with respect to any Share of Series B Preferred Stock on
any date shall mean the sum of (i) $5.30 and (ii) the amount of any accrued and
unpaid dividends with respect to such share on such date. Dividends on each
share of Series B Preferred Stock shall begin to accrue and shall cumulate from
the date of original issue of such share ("Issue Date"), whether or not
declared, and shall be payable to the holder of such share on the record date
(as defined in Section 1(b) below). Dividends on account of arrears for any past
dividend periods may be declared and paid at any time, without reference to any
<PAGE> 2
regular dividend payment date, to holders of record on a record date fixed for
such payment by the Board of Directors of the Corporation or by a committee of
such Board duly authorized to fix such date by resolution designating such
committee. To the extent not paid on a Dividend Payment Date, all dividends
which have accrued on each share outstanding during the Dividend Period (as
defined below) ending on such Dividend Payment Date shall be added to the
Liquidation Amount of such share and shall remain a part thereof until such
dividends are paid. When the Board of Directors declares a dividend, such
dividend shall be payable in shares of its Common Stock and the number of shares
to be issued shall be based on "Current Market Price" of the Common Stock. The
"Current Market Price" of the Common Stock shall be deemed to be the average of
the daily "Closing Prices" for the thirty (30) consecutive trading days
preceding the payment date. The "Current Market Price" of the Common Stock or
other class of capital stock or securities of the Corporation or any other
issuer which is not publicly traded shall mean the fair value thereof as
determined by an independent investment banking firm or appraisal firm
experienced in the valuation of such securities or properties selected in good
faith by the Board of Directors of the Corporation or a committee thereof or, if
no such investment banking or appraisal firm is, in the good faith judgment of
the Board of Directors of the Corporation or such committee, available to make
such determination, as determined in good faith judgment of the Board of
Directors or such committee. The "Closing Price" shall mean the last reported
sales price on the principal securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the National Association of Securities Dealers
Automatic Quotations System, or if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotations System, in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation for that purpose.
a. Dividends on the Series B Preferred Stock shall be payable to holders of
record as they appear on the books of the Corporation as of the close of
business on any record date for the payment of dividends. The record dates for
payment of dividends shall be the 15th day of March, June, September and
December.
a. Dividends payable on the Conversion Date (as defined in Section 2(b) below)
of the Series B Preferred Stock shall be calculated on the basis of the actual
number of days elapsed (including the Conversion Date) over a 365-day year.
1. Conversion of Series B Preferred Stock into Common Stock
a. At any time on or after tbe issuance, each holder of shares of Series B
Preferred Stock may, at his option, convert any or all such shares on the terms
and conditions set forth in this Section 2, into fully paid and non-assessable
shares of the Corporation's Common Stock. The number of shares of Common Stock
into which each share of Series B Preferred Stock may be converted shall be
determined by dividing the Liquidation Amount by the Conversion Price (as
defined herein) in effect at the time of conversion. The Conversion Price per
share at which shares of Common Stock shall be initially issuable upon
conversion of any shares of Series B Preferred Stock shall be $0.53, subject so
adjustment provided below.
<PAGE> 3
a. To exercise his conversion privilege, the holder of any shares of Series B
Preferred Stock shall surrender to the Corporation during regular business hours
at the principal executive offices of the Corporation or the offices of the
transfer agent for the Series B Preferred Stock or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted, duly endorsed for transfer to the Corporation (if required by it),
accompanied by written notice stating that the holder irrevocably elects to
convert such shares. Conversion shall be deemed to have been effected on the
date when such delivery is made, and such date is referred to herein as the
"Conversion Date". Within three (3) business days after she date on which such
delivery is made, the Corporation shall issue and send (with receipt to be
acknowledged) to the holder thereof or the holder's designee, at the address
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which the holder is entitled as a result of such
conversion, and cash with respect to any fractional interest of a share of
Common Stock as provided in paragraph (d) of this Section 2. The holder shall be
deemed to have become a stockholder of record of the number of shares of Common
Stock into which the shares of Series B Preferred Stock have been converted on
the applicable Conversion Date unless the transfer books of the Corporation are
closed on that date, in which event he shall be deemed to have become a
stockholder of record of such shares on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in effect on the
Conversion Date. Upon conversion of only a portion of the number of shares of
Series B Preferred Stock represented by a certificate or certificates
surrendered for conversion, the Corporation shall within three (3) business days
after the date on which such delivery is made, issue and send (with receipt to
be acknowledged) to the holder thereof or the holder's designee, at the address
designated by such holder, a new certificate covering the number of shares of
Series B Preferred Stock representing the unconverted portion of the certificate
or certificates so surrendered.
a. No fractional shares of Common Stock or scrip shall be issued upon conversion
of shares of Series B Preferred Stock. If more than one share of Series B
Preferred Stock shall be surrendered for conversion at any one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series B Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any shares of
Series B Preferred Stock, the Corporation shall make an adjustment in respect of
such fractional interest equal to the fair market value of such fractional
interest, to the nearest 1/100th of a share of Common Stock, in cash at the
Current Market Price (as defined in section 1(a)) on the business day preceding
the effective date of the conversion.
a. The Corporation shall pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series B Preferred Stock pursuant hereto. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Series B Preferred Stock is converted were
registered, and no such issue and delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established, to the satisfaction of the Corporation, that such tax
has been paid.
<PAGE> 4
a. The Corporation shall at all times reserve for issuance and maintain
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of the Series B Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all Series B
Preferred Stock from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and stockholder action), in
accordance with the laws of the State of Utah, increase the authorized number of
shares of its Common Stock if at any time the authorized number of shares of its
Common Stock remaining unissued shall not be sufficient to permit the conversion
of all of the shares of Series B Preferred Stock at the time outstanding.
a. If any shares of Common Stock to be reserved for the purpose of conversion of
shares of Series B Preferred Stock require registration or listing with, or
approval of, any governmental authority, stock exchange or other regulatory body
under any federal or state law or regulation or otherwise, including
registration under the Securities Act of 1933, as amended, and appropriate state
securities laws, before such shares may be validly issued or delivered upon
conversion, the Corporation will in good faith and at its expense and as
expeditiously as possible meet such registration, listing or approval, as the
case may be.
a. All shares of Common Stock which may be issued upon conversion of the shares
of Series B Preferred Stock will upon issuance by the Corporation be validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issuance thereof.
a. The Conversion Price in effect shall be subject to adjustment from time to
time as follows:
i. Stock Splits, Dividends and Combinations. In the event that the Corporation
shall at any time subdivide the outstanding shares of Common Stock, or shall pay
or make a dividend or distribution on any class of capital stock of the
Corporation in Common Stock, the Conversion Price in effect immediately prior to
such subdivision or the issuance of such dividend shall be proportionately
decreased, and in case the Corporation shall at any time combine the outstanding
shares of Common Stock the Conversion Price in effect immediately prior to such
combination shall be proportionately increased, effective at the close of
business on the date of such subdivision, dividend or combination as the case
may be.
ii. Non-Cash Dividends, Stock Purchase Rights, Capital Reorganizations and
Dissolutions. In the event:
a. that the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash or shares of Common Stock; or
b. that the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to subscribe for or purchase any shares of
stock of any class or other securities, or to receive any other rights; or
<PAGE> 5
c. of any capital reorganization of the Corporation, reclassification of the
capital stock of the Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), consolidation or merger of the Corporation
with or into another corporation, share exchange for all outstanding shares of
Common Stock under a plan of exchange to which the Corporation is a party, or
conveyance of all or substantially all of the assets of the Corporation to
another corporation; or
d. of the voluntary or involuntary dissolution, liquidation or winding up of the
Corporation;
then, and in such case, the Corporation shall cause to be mailed to the holders
of record of the outstanding Series B Preferred Stock, at least ten days prior
to the date hereinafter specified, a notice stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, share
exchange, conveyance, dissolution, liquidation, or winding up is to take place
and the date, if any is to be fixed, as of which holders of Corporation
securities of record shall be entitled to exchange their shares of Corporation
securities for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, share exchange,
conveyance, dissolution, liquidation, or winding up.
i. The Corporation will, not by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger, share
exchange, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of an of the terms
to be observed or performed hereunder by the Corporation, but will at all time
in good faith assist the carrying out of all the provisions of paragraph 2(h)
and in the taking of all such actions as may be necessary or appropriate in
order to protect the conversion rights of the holders of the Series B Preferred
Stock against impairment.
j. Upon the occurrence of each adjustment or readjustment of the Conversion
Price pursuant to paragraph 2(h), the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof, and
prepare and furnish to each holder of Series B Preferred Stock a certificate
signed by the chief financial officer of the Corporation setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of such
holder's shares.
j. In case any shares of Series B Preferred Stock shall be converted pursuant to
Section 2(a) hereof, the shares so converted shall be restored to the status of
authorized but unissued shares of preferred stock, without designation as to
class or series, and may thereafter be reissued, but not as shares of Series B
Preferred Stock.
<PAGE> 6
3. Director Nomination.
For a period of five (5) years from the date of issuance of the Series
B Preferred Stock, the holders of the Series B Preferred Stock shall have the
right to nominate one (1) member to the slate of nominees to the Board of
Directors and the Corporation will cause such nominee to be elected to the
Corporation's Board of Directors.
4. Liquidation Rights.
a. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of shares of Series B Preferred Stock
then outstanding shall be entitled to receive out of assets of the Corporation
available for distribution to stockholders, after payment in full of the
liquidation distribution to which holders of the preferred stock with a
liquidation preference are entitled, but before any distribution of assets is
made to holders of Common Stock or of any other class of capital stock of the
Corporation ranking junior to the Series B Preferred Stock as to liquidation, an
amount equal to the Liquidation Amount. It is understood that the Series B
Preferred Stock shall be junior in rank to the Series A Preferred Stock. If upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the amounts payable with respect to the Series B Preferred Stock
and any other shares of stock of the Corporation ranking as to any such
distribution on a parity with the Series B Preferred Stock are not paid in full,
the holders of the Series B Preferred Stock and of such other shares shall share
ratably in any such distribution of assets of the Corporation in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of Series B Preferred Stock shall not be
entitled to any further participation in any distribution of assets by the
Corporation.
a. Neither the consolidation of nor merging of the Corporation with or into any
other corporation or corporations, nor the sale or lease of all or substantially
all of the assets of the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of any of the
provisions of this Section 5.
a. In the event of a voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, the Corporation shall, within 10 days after the
date the Board of Directors approves such action, or within 20 days prior to any
stockholders' meeting called to approve such action, or within 20 days after the
commencement of any involuntary proceeding, whichever is earlier, give each
holder of shares of Series B Preferred Stock initial written notice of the
proposed action. Such initial written notice shall describe the material terms
and conditions of such proposed action, including a description of the stock,
cash and property to be received by the holders of shares of Series B Preferred
Stock upon consummation of the proposed action and the date of delivery thereof.
If any material change in the facts set forth in the initial notice shall occur,
the Corporation shall promptly give written notice to each holder of shares of
Series B Preferred Stock of such material change. The Corporation shall not
consummate any voluntary or involuntary liquidation, dissolution, or winding up
of the Corporation before the expiration of 30 days after the mailing of the
initial notice or 10 days after the mailing of any subsequent written notice,
whichever is later; provided that any such 30-day or 10-day period may be
shortened upon the written consent of the holders of all of the outstanding
shares of Series B
<PAGE> 7
Preferred Stock.
a. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation which will involve the distribution of assets
other than cash, the Corporation shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed to the holders
of shares of Series B Preferred Stock and the holders of shares of Common Stock.
The Corporation shall upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Series B Preferred Stock of the
appraiser's valuation.
5. Limitations.
a. So long as any shares of Series B Preferred Stock are outstanding, the
Corporation shall not, without affirmative vote or with the written consent of
the holders of at least 662/3% of the outstanding shares of Series B Preferred
Stock, voting separately as a class:
i. Amend, alter or repeal any provision of the Articles of Incorporation or
Bylaws of the Corporation or file any Certificate of Designation so as to affect
adversely the relative rights, preferences, qualifications, limitation or
restrictions of the Series B Preferred Stock.
b. The provisions of this paragraph 5 shall not in any way limit the right and
the power of the Corporation to:
i. Increase the total number of authorized shares of Common Stock; or
ii. Issue bonds, notes, mortgages, debentures, and preferred stock ranking
junior to the terms of the Series B Preferred Stock and other obligations, and
to incur indebtedness to banks and to other lenders.
3. This resolution was duly adopted by the Board of Directors of the Corporation
and shareholder action was not required.
4. The foregoing resolution does not provide for an exchange, reclassification,
or cancellation of issued shares of the Corporation.
5. IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused this certificate
to be signed by Jose Chavez, its President, and attested by Mitchell C.
Kettrick, its Secretary, this 11th day of November, 1997.
MICRO-MEDIA SOLUTIONS, INC.
By /s/ JOSE CHAVEZ, President
ATTEST:
By /s/ Mitchell C. Kettrick, Secretary
<PAGE> 1
EXHIBIT 4.2
AMENDMENT TO CERTIFICATE OF THE DESIGNATION, PREFERENCES RIGHTS AND LIMITATIONS
OF SERIES B, 5 PERCENT, CUMULATIVE, CONVERTIBLE, NON-VOTING, PREFERRED STOCK OF
MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc., hereinafter called the "Corporation," a
corporation organized and existing under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to Section
16-10a-602 of the Utah Business Corporation Act, such Board of Directors by the
unanimous written consent of its members dated effective September 21, 1998
adopted a resolution providing for an amendment to that certain Certificate of
Designation filed by the Corporation with the Secretary of the State of Utah on
November 12, 1997, to increase the designation of Series B 5 Percent Cumulative
Convertible Non-Voting, Preferred Stock, $5.30 stated value per share, from
420,000 shares to 490,000 shares, which resolution is as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Series B 5 Percent Cumulative
Convertible Non-Voting Preferred Stock, $5.30 stated value per share, ("Series B
Preferred Stock"), that was created on November 12, 1997, by that certain
Certificate of the Designation, Preferences, Rights, and Limitations of Series B
5 Percent Cumulative Convertible Non-Voting Preferred Stock of the Corporation
is hereby amended to increase the number of shares created from Four Hundred
Twenty Thousand (420,000) shares of Series B Preferred Stock to Four Hundred
Twenty Thousand (490,000) shares of Series B Preferred Stock. The voting powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof shall remain the same.
1. This resolution was duly adopted by the Board of Directors of the Corporation
and it was also duly adopted by all of the holders of outstanding shares of
Series B Preferred Stock.
2. The foregoing resolution does not provide for an exchange, reclassification,
or cancellation of issued shares of the Corporation.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused this certificate
to be signed by Jose Chavez, its President, and attested by Mitchell C.
Kettrick, its Secretary, this 13th day of October, 1998.
MICRO-MEDIA SOLUTIONS, INC. By /s/ JOSE CHAVEZ, President
ATTEST: By: /s/ MITCHELL C. KETTRICK, Secretary
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF THE DESIGNATION, PREFERENCES RIGHTS AND LIMITATIONS OF SERIES C
CUMULATIVE PREFERRED STOCK OF MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc., hereinafter called the "Corporation", a
corporation organized and existing under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to Section
16-10a-602 of the Utah Business Corporation Act, such Board of Directors by the
unanimous written consent of its members dated effective January 27, 1998
adopted a resolution providing for the issuance of a series of Ninety-Nine
Thousand Fifty-Seven (99,057) shares of Series C 6% Cumulative Convertible
Non-Voting Preferred Stock, $10.60 stated value per share, which resolution is
as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Series C 6% Cumulative
Convertible Non-Voting Preferred Stock, $10.60 stated value per share ("Series C
Preferred Stock"), is hereby authorized and created, said series to consist of
up to Ninety-Nine Thousand Fifty-Seven (99,057) shares of Series C Preferred
Stock. The voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations or restrictions
thereof shall be as follows:
1. Stock or Cash Dividends on Series C Preferred Stock
a. The dividends are payable in cash or shares of the Corporation's common
stock, $.10 par value ("Common Stock"), at the option of each of the holders of
the Series C Preferred Stock. The holders of the Series C Preferred Stock shall
be entitled to receive cumulative dividends at the annual rate of 6% of the
Liquidation Amount (defined hereafter) per share, payable quarterly on the last
day of March, June, September, and December, in arrears, commencing March 31,
1998 (each a "Dividend Payment Date"). Notwithstanding the foregoing, if any
Dividend Payment Date is not a Business Day (as hereinafter defined), such
dividend shall be paid on the next succeeding Business Day. "Business Day" shall
mean any day that is not a Saturday, Sunday or a day on which banks in Austin,
Texas, are obligated or permitted by law or executive order to close.
"Liquidation Amount" with respect to any Share of Series C Preferred Stock on
any date shall mean the sum of (i) $10.60 and (ii) the amount of any accrued and
unpaid dividends with respect to such share on such date. Dividends on each
share of Series C Preferred Stock shall begin to accrue and shall cumulate from
the date of original issue of such share ("Issue Date"), whether or not
declared, and shall be payable to the holder of such share on the record date
(as defined in Section 1(b) below). Dividends on account of arrears for any past
dividend periods may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on a record date fixed for
such payment by the Board of Directors of the Corporation or by a committee of
such Board duly authorized to fix such date by
<PAGE> 2
resolution designating such committee. To the extent not paid on a Dividend
Payment Date, all dividends which have accrued on each share outstanding during
the Dividend Period (as defined below) ending on such Dividend Payment Date
shall be added to the Liquidation Amount of such share and shall remain a part
thereof until such dividends are paid. When the Board of Directors declares a
dividend, such dividend shall be payable in shares of its Common Stock and the
number of shares to be issued shall be based on "Current Market Price" of the
Common Stock. The "Current Market Price" of the Common Stock shall be deemed to
be the average of the daily "Closing Prices" for the thirty (30) consecutive
trading days preceding the payment date. The "Current Market Price" of the
Common Stock or other class of capital stock or securities of the Corporation or
any other issuer which is not publicly traded shall mean the fair value thereof
as determined by an independent investment banking firm or appraisal firm
experienced in the valuation of such securities or properties selected in good
faith by the Board of Directors of the Corporation or a committee thereof or, if
no such investment banking or appraisal firm is, in the good faith judgment of
the Board of Directors of the Corporation or such committee, available to make
such determination, as determined in good faith judgment of the Board of
Directors or such committee. The "Closing Price" shall mean the last reported
sales price on the principal securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the National Association of Securities Dealers
Automatic Quotations System, or if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotations System, in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation for that purpose.
b. Dividends on the Series C Preferred Stock shall be payable to holders of
record as they appear on the books of the Corporation as of the close of
business on any record date for the payment of dividends. The record dates for
payment of dividends shall be the 15th day of March, June, September and
December.
c. Dividends payable on the Conversion Date (as defined in Section 2(b) below)
of the Series C Preferred Stock shall be calculated on the basis of the actual
number of days elapsed (including the Conversion Date) over a 365-day year.
2. Conversion of Series C Preferred Stock into Common Stock
a. At any time on or after tbe issuance, each holder of shares of Series C
Preferred Stock may, at his option, convert any or all such shares on the terms
and conditions set forth in this Section 2, into fully paid and non-assessable
shares of the Corporation's Common Stock. The number of shares of Common Stock
into which each share of Series C Preferred Stock may be converted shall be
determined by dividing the Liquidation Amount by the Conversion Price (as
defined herein) in effect at the time of conversion. The Conversion Price per
share at which shares of Common Stock shall be initially issuable upon
conversion of any shares of Series C Preferred Stock shall be $1.06, subject so
adjustment provided below.
<PAGE> 3
b. To exercise his conversion privilege, the holder of any shares of Series C
Preferred Stock shall surrender to the Corporation during regular business hours
at the principal executive offices of the Corporation or the offices of the
transfer agent for the Series C Preferred Stock or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted, duly endorsed for transfer to the Corporation (if required by it),
accompanied by written notice stating that the holder irrevocably elects to
convert such shares. Conversion shall be deemed to have been effected on the
date when such delivery is made, and such date is referred to herein as the
"Conversion Date". Within three (3) business days after she date on which such
delivery is made, the Corporation shall issue and send (with receipt to be
acknowledged) to the holder thereof or the holder's designee, at the address
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which the holder is entitled as a result of such
conversion, and cash with respect to any fractional interest of a share of
Common Stock as provided in paragraph (d) of this Section 2. The holder shall be
deemed to have become a stockholder of record of the number of shares of Common
Stock into which the shares of Series C Preferred Stock have been converted on
the applicable Conversion Date unless the transfer books of the Corporation are
closed on that date, in which event he shall be deemed to have become a
stockholder of record of such shares on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in effect on the
Conversion Date. Upon conversion of only a portion of the number of shares of
Series C Preferred Stock represented by a certificate or certificates
surrendered for conversion, the Corporation shall within three (3) business days
after the date on which such delivery is made, issue and send (with receipt to
be acknowledged) to the holder thereof or the holder's designee, at the address
designated by such holder, a new certificate covering the number of shares of
Series C Preferred Stock representing the unconverted portion of the certificate
or certificates so surrendered.
c. No fractional shares of Common Stock or scrip shall be issued upon conversion
of shares of Series C Preferred Stock. If more than one share of Series C
Preferred Stock shall be surrendered for conversion at any one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series C Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any shares of
Series C Preferred Stock, the Corporation shall make an adjustment in respect of
such fractional interest equal to the fair market value of such fractional
interest, to the nearest 1/100th of a share of Common Stock, in cash at the
Current Market Price (as defined in section 1(a)) on the business day preceding
the effective date of the conversion.
d. The Corporation shall pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series C Preferred Stock pursuant hereto. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Series C Preferred Stock is converted were
registered, and no such issue and delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established, to the satisfaction of the Corporation, that such tax
has been paid.
<PAGE> 4
e. The Corporation shall at all times reserve for issuance and maintain
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of the Series C Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all Series C
Preferred Stock from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and stockholder action), in
accordance with the laws of the State of Utah, increase the authorized number of
shares of its Common Stock if at any time the authorized number of shares of its
Common Stock remaining unissued shall not be sufficient to permit the conversion
of all of the shares of Series C Preferred Stock at the time outstanding.
f. If any shares of Common Stock to be reserved for the purpose of conversion of
shares of Series C Preferred Stock require registration or listing with, or
approval of, any governmental authority, stock exchange or other regulatory body
under any federal or state law or regulation or otherwise, including
registration under the Securities Act of 1933, as amended, and appropriate state
securities laws, before such shares may be validly issued or delivered upon
conversion, the Corporation will in good faith and at its expense and as
expeditiously as possible meet such registration, listing or approval, as the
case may be.
g. All shares of Common Stock which may be issued upon conversion of the shares
of Series C Preferred Stock will upon issuance by the Corporation be validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issuance thereof.
h. The Conversion Price in effect shall be subject to adjustment from time to
time as follows:
i. Stock Splits, Dividends and Combinations. In the event that the
Corporation shall at any time subdivide the outstanding shares of Common Stock,
or shall pay or make a dividend or distribution on any class of capital stock of
the Corporation in Common Stock, the Conversion Price in effect immediately
prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in case the Corporation shall at any time combine
the outstanding shares of Common Stock the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
ii. Non-Cash Dividends, Stock Purchase Rights, Capital Reorganizations
and Dissolutions. In the event:
(A) that the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend, or any other
distribution, payable otherwise than in cash or shares of Common Stock; or
(B) that the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to subscribe for or purchase any shares of
stock of any class or other securities, or to receive any other rights; or
<PAGE> 5
(C) of any capital reorganization of the Corporation, reclassification of the
capital stock of the Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), consolidation or merger of the Corporation
with or into another corporation, share exchange for all outstanding shares of
Common Stock under a plan of exchange to which the Corporation is a party, or
conveyance of all or substantially all of the assets of the Corporation to
another corporation; or
(D) of the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;
then, and in such case, the Corporation shall cause to be mailed to the holders
of record of the outstanding Series C Preferred Stock, at least ten days prior
to the date hereinafter specified, a notice stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, share
exchange, conveyance, dissolution, liquidation, or winding up is to take place
and the date, if any is to be fixed, as of which holders of Corporation
securities of record shall be entitled to exchange their shares of Corporation
securities for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, share exchange,
conveyance, dissolution, liquidation, or winding up.
i. The Corporation will, not by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger, share
exchange, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of an of the terms
to be observed or performed hereunder by the Corporation, but will at all time
in good faith assist the carrying out of all the provisions of paragraph 2(h)
and in the taking of all such actions as may be necessary or appropriate in
order to protect the conversion rights of the holders of the Series C Preferred
Stock against impairment.
j. Upon the occurrence of each adjustment or readjustment of the Conversion
Price pursuant to paragraph 2(h), the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof, and
prepare and furnish to each holder of Series C Preferred Stock a certificate
signed by the chief financial officer of the Corporation setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and tbe amount, if any, of other
property which at the time would be received upon the conversion of such
holder's shares.
k. In case any shares of Series C Preferred Stock shall be converted pursuant to
Section 2(a) hereof, the shares so converted shall be restored to the status of
authorized but unissued shares of preferred stock, without designation as to
class or series, and may thereafter be reissued, but not as shares of Series C
Preferred Stock.
3. Director Nomination.
For a period of five (5) years from the date of issuance of the Series C
Preferred Stock, the holders of the Series C Preferred Stock shall have the
right to nominate one (1) member to the
<PAGE> 6
slate of nominees to the Board of Directors and the Corporation will cause such
nominee to be elected to the Corporation's Board of Directors.
4. Liquidation Rights.
a. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of shares of Series C Preferred Stock
then outstanding shall be entitled to receive out of assets of the Corporation
available for distribution to stockholders, after payment in full of the
liquidation distribution to which holders of the preferred stock with a
liquidation preference are entitled, but before any distribution of assets is
made to holders of Common Stock or of any other class of capital stock of the
Corporation ranking junior to the Series C Preferred Stock as to liquidation, an
amount equal to the Liquidation Amount. It is understood that the Series C
Preferred Stock shall be junior in rank to the Series A Preferred Stock and in
parity with the Series B Preferred Stock of the Corporation. If upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the amounts payable with respect to the Series C Preferred Stock
and any other shares of stock of the Corporation ranking as to any such
distribution on a parity with the Series C Preferred Stock are not paid in full,
the holders of the Series C Preferred Stock and of such other shares shall share
ratably in any such distribution of assets of the Corporation in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of Series C Preferred Stock shall not be
entitled to any further participation in any distribution of assets by the
Corporation.
b. Neither the consolidation of nor merging of the Corporation with or into any
other corporation or corporations, nor the sale or lease of all or substantially
all of the assets of the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of any of the
provisions of this Section 5.
c. In the event of a voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, the Corporation shall, within 10 days after the
date the Board of Directors approves such action, or within 20 days prior to any
stockholders' meeting called to approve such action, or within 20 days after the
commencement of any involuntary proceeding, whichever is earlier, give each
holder of shares of Series C Preferred Stock initial written notice of the
proposed action. Such initial written notice shall describe the material terms
and conditions of such proposed action, including a description of the stock,
cash and property to be received by the holders of shares of Series C Preferred
Stock upon consummation of the proposed action and the date of delivery thereof.
If any material change in the facts set forth in the initial notice shall occur,
the Corporation shall promptly give written notice to each holder of shares of
Series C Preferred Stock of such material change. The Corporation shall not
consummate any voluntary or involuntary liquidation, dissolution, or winding up
of the Corporation before the expiration of 30 days after the mailing of the
initial notice or 10 days after the mailing of any subsequent written notice,
whichever is later; provided that any such 30-day or 10-day period may be
shortened upon the written consent of the holders of all of the outstanding
shares of Series C Preferred Stock.
<PAGE> 7
d. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation which will involve the distribution of assets
other than cash, the Corporation shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed to the holders
of shares of Series C Preferred Stock and the holders of shares of Common Stock.
The Corporation shall upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Series C Preferred Stock of the
appraiser's valuation.
5. Limitations.
a. So long as any shares of Series C Preferred Stock are outstanding, the
Corporation shall not, without affirmative vote or with the written consent of
the holders of at least 66 2/3% of the outstanding shares of Series C Preferred
Stock, voting separately as a class:
i. Amend, alter or repeal any provision of the Articles of Incorporation or
Bylaws of the Corporation or file any Certificate of Designation so as to affect
adversely the relative rights, preferences, qualifications, limitation or
restrictions of the Series C Preferred Stock.
b. The provisions of this paragraph 5 shall not in any way limit the right and
the power of the Corporation to:
i. Increase the total number of authorized shares of Common Stock; or
ii. Issue bonds, notes, mortgages, debentures, and preferred stock ranking
junior to the terms of the Series C Preferred Stock and other obligations, and
to incur indebtedness to banks and to other lenders.
3. This resolution was duly adopted by the Board of Directors of the Corporation
and shareholder action was not required.
4. The foregoing resolution does not provide for an exchange, reclassification,
or cancellation of issued shares of the Corporation.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused this certificate
to be signed by Jose Chavez, its President, and attested by Mitchell C.
Kettrick, its Secretary, this 28th day of January, 1998.
MICRO-MEDIA SOLUTIONS, INC.
By /s/ JOSE CHAVEZ, President
ATTEST:
By /s/ Mitchell C. Kettrick, Secretary
<PAGE> 1
EXHIBIT 4.4
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
Series D CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc. (the "Company"), a corporation organized and
existing, under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company, and pursuant to the provisions of
Section 16-10a-602 of the Utah Business Corporation Act, such Board of
Directors, by unanimous written consent of its members dated effective
[EFFECTIVE DATE], filed with the minutes of the Board, adopted a resolution
providing for the issuance of a series of [NUMBER OF SHARES] shares of Series D
Convertible Participating Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be and hereby is
created, such series of Preferred Stock to be designated Series D Cumulative
Convertible Participating Preferred Stock, to consist of up to [NUMBER OF
SHARES] shares of the stated value of $10.60 per share. The voting powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof shall be as follows:
Section 1. Designation and Amount. The shares of such series shall have a stated
value of $10.60 per share and shall be designated as Series D Cumulative
Convertible Participating Preferred Stock (the "Series D Preferred Stock") and
the number of shares constituting the Series D Preferred Stock shall be [NUMBER
OF SHARES] ( ).
Section 2. Rank. The Series A Preferred Stock shall rank: (i) prior to all of
the Company's common stock, $0.10 par value per share ("Common Stock"); (ii)
prior to any class or series of capital stock of the Company hereafter created
not specifically ranking by its terms senior to or on parity with any Preferred
Stock of whatever subdivision (collectively, with the Common Stock, "Junior
Securities"); and (iii) on parity with any class or series of capital stock of
the Company hereafter created specifically ranking by its terms on parity with
the Series D Preferred Stock ("Parity Securities") in each case as to
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
<PAGE> 2
Section 3. Dividends.
a. The holders of Series D Preferred Stock shall be entitled to receive out of
funds of the Company legally available therefor, a cumulative dividend of six
percent (6%) per annum, payable quarterly in arrears, which shall be paid in
cash, or at the option of a holder of the Series D Preferred Stock, by the
issuance of additional shares of Common Stock as follows: the number of shares
to be issued shall be determined based on the average closing bid price for the
Common Stock as reported by the NASDAQ Over-the-Counter Bulletin Board, or such
national securities exchange on which shares of the Company's Common Stock are
then listed for the thirty (30) trading days immediately preceding the record
date for the declaration of the dividend. The record dates for payment of
dividends shall be the 20th day of the month immediately following the end of
each fiscal quarter. Dividends on each share of Series D shall begin to accrue
and shall accumulate from the date of issuance, whether or not declared, and
shall be payable to the holder of such share on the record date as hereinabove
described. Dividends on account of arrears for any past dividend periods may be
declared and paid at any time, without reference to any regular dividend payment
date, to holders of record on a record date fixed for such payment by the Board
of Directors of the Company or by a committee of such Board duly authorized to
fix such date by resolution designating such committee. Dividends payable on the
Date of Conversion (as defined in 6(b)(iv) below) of the Series D shall be
calculated on the basis of the actual number of days elapsed (including the Date
of Conversion) over a 365-day year.
b. Participating Dividends. No dividends shall be declared and set aside for or
paid upon any shares of Common Stock unless the Board of Directors of the
Company shall contemporaneously declare and pay a dividend upon the then
outstanding shares of Series D in the same amount per share of Series D
Preferred Stock as would be declared payable on the number of shares of Common
Stock into which each share of Preferred Stock could then be converted pursuant
to the provisions of Section 6 hereof, such number to be determined as of the
record date for the determination of holders of Common Stock entitled to receive
such dividends; provided, however, that no dividends shall be paid on the
outstanding Common Stock, unless it is determined by the Board of Directors that
the Company has sufficient net assets available for distribution to holders of
the Series D Preferred Stock, under applicable law, after giving effect to such
dividend on the Common Stock and on the Series D Preferred Stock, to pay the
holders of each share of the Series D Preferred Stock the Liquidation Amount, as
defined below (provided that the return on each share of Series D Preferred
Stock shall be calculated through the date of such dividend).
c. Dividends in Kind. In the event the Company shall make or issue, or shall fix
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or distribution with respect to the Common Stock payable in
i) securities of the Company other than shares of Common Stock or ii) assets,
then and in each such event the holders of Series D Preferred Stock shall
receive, at the same time such distribution is made with respect to Common
Stock, the number of securities or such other assets of the Company which they
would have received had their Series D Preferred Stock been converted into
Common Stock immediately prior to the record date for determining holders of
Common Stock entitled to receive such distribution.
<PAGE> 3
Section 4. Redemption.
a. At any time on or after April 30, 2009, the Company shall, at the written
election of at least a majority if the holders of the shares of Series D then
outstanding delivered to the Company and specifying the date on which such
shares are to be redeemed (the "Redemption Date"), redeem all of the shares of
Series D Preferred Stock outstanding on such Redemption Date.
b. The Redemption Price (as defined in Section 4(c) below) for each share of
Series D Preferred Stock shall be payable to the holder thereof shall be made in
two (2) equal annual installments, with the first installment being due and
payable on the Redemption Date (as defined in Section 4(a) above) and the second
installment due and payable on the 2nd anniversary thereof, respectively. All
shares of Series D Preferred Stock for which any installment payment has not yet
been made shall remain issued and outstanding until the Redemption Price has
been indefeasibly paid in full in cash. The unpaid installments of the
Redemption Price shall bear interest at the annual rate per share of eight
percent (8%) compounded quarterly.
c. The redemption price (the "Redemption Price") for each share of Series D
Preferred Stock redeemed pursuant to this Section 4 shall be the greater of i)
$10.60 per share of Series D Preferred Stock plus accrued and unpaid dividends
thereon, if any, on such share up to and including the Redemption Date and ii)
the fair market value thereof (taking into account all relevant facts and
circumstances, including the Liquidation Preference and the participation
feature set forth in Section 3(b) above, and without deduction for minority or
marketability discounts and disregarding, for purposes of such valuation, the
effect of any redemption of the Series D Preferred Stock required to be made
hereunder), as determined (x) by the mutual agreement of (1) a majority of the
members of the Company's Board of Directors other than those members designated
by the holders of Series D Preferred Stock or Equity Services, Ltd. and (2) the
holders of a majority of the then outstanding shares of Series D Preferred Stock
which are then subject to redemption, or if such parties cannot agree on the
fair market value; (y) then, by a nationally-recognized independent investment
banking firm (an "Appraiser") which is selected by the mutual agreement of (1) a
majority of the members of the Company's Board of Directors other than those
members designated by the holders of Series D Preferred Stock or Equity
Services, Ltd. and (2) the holders of a majority of the then outstanding shares
of Series D Preferred Stock which are subject to redemption or, if such parties
cannot agree on an Appraiser; (z) finally, by the following process: (1) a
majority of the members of the Company's Board of Directors other than those
members designated by the holders of Series D Preferred Stock or Equity
Services, Ltd. shall choose one Appraiser and (2) the holders of a majority of
the then outstanding shares of Series D Preferred Stock which are subject to
redemption shall choose a second Appraiser; if such Appraisers shall arrive at
the same valuation, such valuation shall be deemed to be the fair market value
thereof; if such Appraisers shall arrive at valuations that do not differ from
each other by more than ten percent (10%), then the fair market value thereof
shall be deemed to be the mathematical mean of such valuations; and if such
valuations shall differ by greater than ten percent (10%), then such Appraisers
shall select a third Appraiser and the fair market value shall be the
mathematical mean of i) the value determined by such third Appraiser and ii) the
value previously determined by one of the two previous Appraisers whose
<PAGE> 4
value is closest to the value determined by the third Appraiser. The fees and
expenses of the Appraisers shall be paid as follows: the fees and expenses of
the Appraiser under either clause (y) or (z)(l) above shall be paid by the
Company; the fees and expenses of the second Appraiser under clause (z)(2) above
shall be paid by the holders of Series D Preferred Stock, pro rata based on the
number of shares to be redeemed; and the fees and expenses of the third
Appraiser under clause (z)(2) above shall be paid fifty percent (50%) by the
Company and fifty percent (50%) by the holders of Series D Preferred Stock pro
rata based on the number of shares to be redeemed. Each redemption of shares of
Series D Preferred Stock shall be made so that the number of shares held by each
registered holder requesting redemption of its shares shall be reduced in an
amount which shall bear the same ratio to the total number of shares of Series D
Preferred Stock then held by such registered holder requesting redemption of its
shares bears to the aggregate number of shares of Series D Preferred Stock then
outstanding.
d. Equitable Adjustment. The Redemption Price set forth in this Section 4 shall
be subject to equitable adjustment whenever there shall occur a stock split,
stock dividend, combination, reorganization, recapitalization, reclassification
or other similar event involving a change in the Series D Preferred Stock.
e. Redemption Note. At least forty-five (45) days prior to the Redemption Date
specified in the notice delivered under Section 4(a) above, written notice
(hereinafter referred to as the "Redemption Notice") shall be delivered by the
Company to each holder of record of Series D, at such holder's address as shown
on the records of the Company's transfer agent; provided, however, that the
Company's failure to give such Redemption Notice shall in no way affect its
obligation to redeem the shares of Series D Preferred Stock as provided in
Section 4(a) hereof. The Redemption Notice shall contain the following
information:
i. an offer to redeem all the shares of Series D Preferred Stock held
by the holder and subject to redemption on such date and the total number of
shares of Series D Preferred Stock held by all holders which have requested to
be so redeemed on such date;
ii. the Redemption Date and the applicable Redemption Price; and
iii. a statement that, if the holder elects to have the Company redeem
all of the holder's shares of Series D Preferred Stock, the holder is to
surrender to the Company, at the place designated in the Redemption Notice or to
the Company's designated transfer agent (the "Transfer Agent"), its certificate
or certificates representing all of the shares of Series D Preferred Stock so to
be redeemed.
f. Notice of Acceptance. Within thirty (30) days after receipt of the Redemption
Notice, any holder of Series D Preferred Stock that elects to accept the
Company's offer of redemption shall provide the Company with written notice of
such holder's acceptance of the redemption offer, which notice shall specify the
number of shares to be redeemed. All notices hereunder shall be deemed to have
been given if personally delivered, sent by facsimile transmission, prepaid
overnight courier, or certified or registered mail.
<PAGE> 5
g. Surrender of Certificates. Each holder of shares of Series D Preferred Stock
shall surrender the certificate(s) representing such shares to the Company any
at the address specified in the Redemption Notice or to the Transfer Agent, and
thereupon the Redemption Price for such shares as set forth in this Section 4(c)
shall be paid to the order of the person whose name appears in such
certificate(s) and each surrendered certificate shall be cancelled and retired.
In the event some but not all or of the shares of the Series D Preferred Stock
represented by a certificate(s) surrendered by a holder are being redeemed, the
Company shall execute and deliver to or on the order of the holder, at the
expense of the Company, a new certificate representing the number of shares of
Series D Preferred Stock which were not redeemed.
h. Insufficient Funds. If the funds of the Company legally available for
redemption of shares of Series D Preferred Stock which shall have been called
for redemption on the Redemption Date are insufficient to redeem the total
number of shares of Series D submitted for redemption, those funds which are
legally available will be used to redeem the maximum possible number of whole
shares ratably among the holders of such shares in proportion to the amounts
which such holders of Series D Preferred Stock would otherwise have been
entitled to receive if all amounts payable on or with respect to such Series D
Preferred Stock had been paid in full. The shares of Series D Preferred Stock
not redeemed shall remain outstanding and entitled to all rights and preferences
provided herein. At any time thereafter when additional funds of the Company are
legally available for the redemption of such shares of Series D Preferred Stock,
such funds will be used, at the end of the next succeeding fiscal quarter, to
redeem the balance of such shares, or such portion thereof for which funds are
then legally available.
i. After giving notice of redemption and prior to the close of business on the
business day prior to the Redemption Date, the holders of the Series D Preferred
Stock so called for redemption may convert such stock into Common Stock in
accordance with the conversion privileges set forth in Section 6 hereof. Unless:
(i) the holder of shares of Series D Preferred Stock to whom notice has been
duly given shall have exercised its rights to convert in accordance with Section
6 hereof; or (ii) the Company shall default in the payment of the Redemption
Price as set forth in the Redemption Notice, upon such Redemption Date such
holder shall no longer have any voting or other rights with respect to such
shares, except the right to receive the monies payable upon such redemption from
the Company, without interest thereon, upon surrender (and endorsement, if
required by the Company or the Transfer Agent) of the certificate(s), and the
shares represented thereby shall no longer be deemed to be outstanding as of the
Redemption Date. In the event a holder of Series D Preferred Stock provides the
Company with notice of conversion of all or a portion of such Series D Preferred
Stock into shares of Common Stock on or after any notice of redemption is
provided, the holder shall have been deemed to convert as of the Redemption
Date; provided, however, that in the event the Company shall default in the
payment of the Redemption Price as set forth in such Redemption Notice, the
conversion shall not be effective unless the holder of the Series D electing to
convert provides written notice to the company within twenty (20) days of the
purported Redemption Date of his desire to effect such conversion.
<PAGE> 6
j. The Series D Preferred Stock may not be redeemed and the Company may not
purchase or otherwise acquire, other than by conversion, any shares of Series D
Preferred Stock unless all accrued but unpaid dividends on all outstanding
shares of Series D Preferred Stock shall have been paid in full or
contemporaneously paid in full.
k. All shares of Series D Preferred Stock so redeemed shall have the status of
authorized but unissued preferred stock, but such shares so redeemed shall not
be reissued as shares of Series D Preferred Stock created hereby.
l. If the Company calls for redemption the Series D Preferred Stock, it shall
reserve sufficient shares of Common Stock for the purpose of issuing such shares
of Common Stock to holders of Series D Preferred Stock that determine to convert
such shares of Series D Preferred Stock into Common Stock prior to the close of
business on the business day prior to the Redemption Date. The Company will use
its best efforts to obtain approval for listing the Common Stock on any national
securities exchange, or for inclusion in the NASDAQ Stock Market, or in the
over-the-counter market on which the Common Stock is trading on the date notice
of redemption is provided.
Section 5. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series D Preferred Stock (the
"Holders") shall be entitled to receive, prior in preference to any distribution
to Junior Securities but in parity with any distribution to Parity Securities,
an amount per share equal to the original preferred stock stated value plus
accrued but unpaid dividends, if any thereon. If upon the occurrence of such
event, and after payment in full of the preferential amounts with respect to the
Senior Securities, the assets and funds available to be distributed among the
Holders of the Series D Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to the Holders of the Series D Preferred Stock and the Parity
Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the Holders of the
Series D Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate(s) of designation
relating thereto.
b. Upon the completion of the distribution required by Section 5(a), if assets
remain in this Company, they shall be distributed to holders of Junior
Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
c. At each Holder's option, a sale, conveyance or disposition of all or
substantially all the assets of the Company to a private entity, the common
stock of which is not publicly traded, shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 4; provided,
however, that an event described in the prior clause that the Holder does not
elect to treat as a liquidation and a consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall not be treated as a liquidation, dissolution or winding up
within the meaning of this Section 4, but instead shall be treated
<PAGE> 7
pursuant to Section 5(d) hereof (a Holder who elects to have the transaction
treated as a liquidation is herein referred to as a "Liquidating Holder").
d. Prior to the closing of a transaction described in Section 4(c) which would
constitute a liquidation event, the Company shall either (i) make all cash
distributions it is required to make to the Liquidating Holders pursuant to the
first sentence of Section 4(a), (ii) set aside sufficient funds from which the
cash distributions required to be made to the Liquidating Holders can be made,
or (iii) establish an escrow or other similar arrangement with a third party
pursuant to which the proceeds payable to the Company from a sale of all or
substantially all the assets of the Company will be used to make the liquidating
payments to the Liquidating Holders immediately after the consummation of such
sale. In the event that the Company has not fully complied with either of the
foregoing alternatives, the Company shall either: (x) cause such closing to be
postponed until such cash distributions have been made, or (y) cancel such
transaction, in which event the rights of the Holders or other arrangements
shall be the same as existing immediately prior to such proposed transaction.
Section 6. Conversion. The record Holders of the Series D Preferred Stock shall
have conversion rights as follows:
a. Right to Convert. Each record Holder of Series D Preferred Stock shall be
entitled to convert whole shares of Series D Preferred Stock into Common Shares
issuable upon conversion of the Series D Preferred Stock, as follows: each
outstanding share of Series D Preferred Stock is convertible at any time into
ten (10) fully paid and non-assessable Common Shares of the Company, subject to
adjustment as provided in Section 6(c) hereof. The number of Common Shares
issuable upon the conversion of one share of Series D Preferred Stock is
hereinafter referred to as the "Conversion Rate."
b. Mechanics of Conversion. In order to convert Series D Preferred Stock into
full Common Shares, the Holder shall (i) fax, on or prior to 6:00 p.m., Austin,
Texas time on the Date of Conversion, a copy of a fully executed notice of
conversion ("Notice of Conversion") to the Company at the office of the Company
or to the Transfer Agent for the Series D Preferred Stock stating that the
Holder elects to convert, which notice shall specify the date of conversion and
the number of shares of Series D Preferred Stock to be converted, and (ii)
surrender to a common courier for either overnight or two (2) day delivery to
the office of the Company or the Transfer Agent, the original certificates
representing the Series D Preferred Stock being converted (the "Series D
Preferred Stock Certificates"), duly endorsed for transfer, provided, however,
that the Company shall not be obligated to issue certificates evidencing the
Common Shares issuable upon such conversion unless the Series D Preferred Stock
Certificates are delivered to the Company or the Transfer Agent as provided
above, or the Holder notifies the Company or the Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (i) below).
i. Lost or Stolen Certificates. Upon receipt by the Company of evidence
of the loss, theft, destruction or mutilation of any Series D Preferred Stock
Certificates representing shares of Series D Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security
<PAGE> 8
reasonably satisfactory to the Company, and upon surrender and cancellation of
the Series D Preferred Stock Certificate(s), if mutilated, the Company shall
execute and deliver new Series D Preferred Stock Certificate(s) of like tenor
and date.
However, the Company shall not be obligated to re-issue such lost or stolen
Series D Preferred Stock Certificates if Holder contemporaneously requests the
Company to convert such Series D Preferred Stock into Common Shares.
ii. Delivery of Common Shares Upon Conversion. The Company no later than
6:00 p.m. Austin, Texas time) on the third (3rd) business day after receipt by
the Company or its Transfer Agent of all necessary documentation duly executed
and in proper form required for conversion, including the original Series D
Preferred Stock Certificates to be converted (or after provision for security or
indemnification in the case of lost, stolen or destroyed certificates, if
required), shall issue and deliver to the Holder as shown on the stock records
of the Company a certificate for the number of Common Shares to which the Holder
shall be entitled as aforesaid.
iii. No Fractional Shares. If any conversion of the Series D Preferred
Stock would create a fractional Common Share or a right to acquire a fractional
Common Share, such fractional share shall be disregarded and the number of
Common Shares issuable upon conversion, in the aggregate, shall be the next
higher number of shares.
iv. Date of Conversion. The date on which conversion occurs (the "Date of
Conversion") shall be deemed to be the date such Notice of Conversion is faxed
to the Company or the Transfer Agent, as the case may be, provided an advance
copy of the Notice of Conversion is faxed to the Company on or prior to 6:00
p.m., Austin, Texas time, on the Date of Conversion. The original Series D
Preferred Stock Certificates representing the shares of Series D Preferred Stock
to be converted shall be surrendered by depositing such certificates with a
common courier for either overnight or two (2) day delivery, as soon as possible
following the Date of Conversion. The person or persons entitled to receive the
shares of Common Shares issuable upon such conversion shall be treated for all
purposes as the record Holder or Holders of such Common Shares on the Date of
Conversion.
c. Adjustment to Conversion Rate.
i. Adjustment Due to Stock Split, Stock Dividend, Etc. If, prior to the
conversion of all the Series D Preferred Stock, the number of outstanding Common
Shares is increased by a stock split, stock dividend, or other similar event,
the Conversion Rate shall be proportionately increased, or if the number of
outstanding Common Shares is decreased by a combination or reclassification of
shares, or other similar event, the Conversion Rate shall be proportionately
decreased.
ii. Adjustment Due to Merger, Consolidation, Etc. If, prior to the
conversion of all the Series D Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which Common Shares of the Company shall be
changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale
<PAGE> 9
of all or substantially all the Company's assets that is not deemed to be a
liquidation pursuant to Section 4(c), then the Holders of Series D Preferred
Stock shall thereafter have the right to receive upon conversion of Series D
Preferred Stock, upon the basis and upon the terms and conditions specified
herein and in lieu of the Common Shares, immediately theretofore issuable upon
conversion, such stock, securities and/or other assets which the Holder would
have been entitled to receive in such transaction had the Series D Preferred
Stock been converted immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Series D Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for the adjustment of the
Conversion Rate and of the number of shares issuable upon conversion of the
Series D Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities thereafter deliverable upon the
conversion thereof. The Company shall not effect any transaction described in
this subsection 5(c)(ii) unless (a) it first gives fifteen (15) calendar days
prior notice of such merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event (during which time the
Holders shall be entitled to convert their Series D Preferred Stock into Common
Shares to the extent permitted hereby) and (b) the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation of the Company under this Certificate of Designation, including the
obligation of this subsection 5(d)(ii).
iii. Adjustment Due to Failure to Observe Covenants Contained in Placement
Agreement.
The covenants contained in that certain placement agreement by and between
the Company and Equity Services, Ltd. (the "Placement Agreement") inure to the
benefit of the holders of Series D Preferred Stock and such holders are
identified third-party beneficiaries under the Placement Agreement. In the event
that the Company breaches any of the covenants contained in the Placement
Agreement and such breach is not cured within five (5) days after receipt of
written notice that the Company is in default under the terms of the Placement
Agreement, the Conversion Rate shall be adjusted by increasing the amount of
Common Stock issuable upon conversion of one share of Series D Preferred Stock
by ten percent (10%) during each week (or portion there of) that such breach is
not cured (i.e., increased from ten (10) shares to eleven (11) shares, eleven
(11) shares to twelve (12) shares, etc.)
iv. Failure to Obtain Effectiveness of a Registration Statement. Upon
demand by a holder of Series D Preferred Stock, the Company will immediately
file a registration statement on Form SB-2 or other appropriate form with the
Securities and Exchange Commission ("SEC") to register, among other issuances,
the issuance of the Common Stock to be issued upon the conversion of the Series
D Preferred Stock. The Company will use its best efforts to obtain effectiveness
of such registration statement although there is no assurance that this
registration statement will be declared effective by the SEC, nor is there any
assurance as to the length of time such registration statement will remain
effective if such event occurs. If the Company's registration statement is not
declared effective by the SEC on or before September 30, 1998, the Conversion
Rate shall be adjusted by increasing the amount of Common Stock issuable upon
conversion of one share of Series D Preferred Stock by one (1) share during each
month (or
<PAGE> 10
portion thereof) that such registration statement has not become effective
(i.e., increased from ten to eleven, eleven to twelve, etc.).
v. Upon the occurrence of each adjustment or readjustment of the Conversion
Rate pursuant to paragraphs 6(iii) and 6(iv) above, the Company at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series D Preferred Stock
a certificate signed by the Chief Financial Officer of the Company setting forth
(i) such adjustment or readjustment, (ii) the Conversion Rate at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of his
shares.
vi. No Fractional Shares. If any adjustment under this Section 5(c) would
create a fractional Common Share or a right to acquire a fractional Common
Share, such fractional share shall be disregarded and the number of Common
Shares issuable upon conversion shall be the next higher number of shares.
Section 7. Voting Rights. The holders of the Series D Preferred Stock shall have
no voting power whatsoever, except as otherwise provided by the Utah Business
Corporation Act ("Utah Law"), and Section 8 below, and no Holder of Series D
Preferred Stock shall vote or otherwise participate in any proceeding in which
actions shall be taken by the Company or the shareholders thereof or be entitled
to notification as to any meeting of the shareholders.
Notwithstanding the above, the Company shall provide the Holders of the
Series D Preferred Stock with notification of any meeting of the shareholders
regarding any major corporate events affecting the Company. In the event of any
taking by the Company of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property (including by way of
merger, consolidation or reorganization), or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in connection
with any proposed sale, lease or conveyance of all or substantially all the
assets of the Company, or any proposed liquidation, dissolution or winding up of
the Company, the Company shall mail a notice to such holders, at least five (5)
days prior to the record date specified therein, of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under Utah Law the vote of the holders of the Series D
Preferred Stock, voting separately as a class, is required to authorize a given
action of the Company, the affirmative vote or consent of the holders of at
least a majority of the shares of the Series D Preferred Stock, represented at a
duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series D Preferred Stock (except as otherwise may be
required under Utah Law) shall constitute the approval of such action by the
class. To the extent that under Utah Law the holders of the Series D Preferred
Stock are entitled to vote on a matter with holders of Common Shares, voting
together as one (1) class, each share of Series D
<PAGE> 11
Preferred Stock shall be entitled to a number of votes equal to the number of
Common Shares into which it is then convertible using the record date for the
taking of such vote of stockholders as the date as of which the Conversion Rate
is calculated. Holders of the Series D Preferred Stock also shall be entitled to
notice of all shareholder meetings or written consents with respect to which
they would be entitled to vote, which notice would be provided pursuant to the
Company's by-laws and applicable statutes.
Section 8. Election of a Majority of Directors of the Company.
If the Company has not obtained or has failed to maintain the effectiveness
of a Registration Statement as described in Section 6(c)(iv) on or before
September 30, 1998, and the closing bid price of the Common Stock of the Company
is at or below $1.00 for any five (5) consecutive trading days subsequent to
September 30, then the holders of the Series D Preferred Stock, voting
separately as a class, shall be entitled to elect a majority of the Board of
Directors at any meeting of the stockholders of the Company at which directors
are to be elected, or held, as the case may be. The right of the holders of the
Series D Preferred Stock to elect such directors shall cease when Effectiveness
of a Registration Statement as described in Section 6(c)(iv) occurs. At any time
after such voting power shall have so vested in the holders of the Series D
Preferred Stock, upon the written request of a holder of record of Series D
Preferred Stock, addressed to the Secretary of the Company at the principal
office of the Company, and to the other holders of the Series D Preferred Stock,
the Secretary shall, at the election of such requesting holder: (i) call a
special meeting of the holders of the Series D Preferred Stock for the election
of the directors to be elected by them as hereinafter provided, such meeting to
be held within forty-five (45) days after delivery of such request at the place
and upon the notice provided by law and in the Bylaws for the holding of
meetings of stockholders; provided, however, that the Secretary shall not be
required to call such special meeting in the case of any such request received
less than forty-five (45) days before the date fixed for the next ensuing annual
meeting of the stockholders; or (ii) obtain written consents from holders of the
Series D Preferred Stock for the election of the directors to be elected by them
in an amount sufficient to satisfy applicable state law requirements and comply
with applicable federal securities law requirements with respect to this consent
provision.
a. The holders of the Series D Preferred Stock voting as a class will have the
right to remove without cause at any time and replace any director such holders
have elected pursuant to this Section 11.
Section 9. Status of Converted Stock. In the event any Series D Preferred Stock
shall be converted pursuant to Section 6 hereof, the shares so converted shall
be canceled, shall return to the status of authorized but unissued Preferred
Shares of no designated series, and shall not be issuable by the Company as
Series D Preferred Stock.
Section 10. Company Limitations.
a. So long as any shares of Series D Preferred Stock are outstanding, the
Company shall not, without the unanimous affirmative vote or the written consent
of the holders of the
<PAGE> 12
outstanding shares of Series D Preferred Stock voting separately as a class,
amend, alter or repeal any provision of the Certificate of Incorporation or
Bylaws of the Company so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Series D
Preferred Stock.
b. Unless otherwise contractually restricted, the provisions of this paragraph
13 shall not in any way limit the right and power of the Company to:
i. Increase the total number of authorized shares of Common Stock; or
ii. Issue bonds, notes, mortgages, debentures, preferred stock ranking
junior to the terms of the Series D Preferred Stock and other obligations.
Section 11. Transferability. The Series D Preferred Stock shall be transferable
by the holders, provided such transfer is in compliance with applicable federal
and state securities laws.
Section 12. Preference Rights. Nothing contained herein shall be construed to
prevent the Board of Directors of the Company from issuing one (1) or more
series of Preferred Stock with dividend and/or liquidation preferences junior to
the Series D Preferred Stock.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused its corporate
seal to be hereunto affixed and this Certificate to be signed by Jose Chavez,
its President, and attested by Mitchell C. Kettrick, its Secretary this 30 day
of April, 1998.
/s/ JOSE CHAVEZ, President
Attest:
/s/MITCHELL C. KETTRICK, Secretary
<PAGE> 1
EXHIBIT 4.5
AMENDMENT TO CERTIFICATE OF THE DESIGNATION, PREFERENCES RIGHTS AND LIMITATIONS
OF SERIES D 6% CUMULATIVE CONVERTIBLE NON-VOTING PARTICIPATING PREFERRED STOCK
OF MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc., hereinafter called the "Corporation", a
corporation organized and existing under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to Section
16-10a-602 of the Utah Business Corporation Act, such Board of Directors by the
unanimous written consent of its members dated effective April 30, 1998 adopted
a resolution providing for an amendment to that certain Certificate of
Designation filed by the Corporation with the Secretary of the State of Utah on
April 21, 1998, to increase the designation of Series D 6% Cumulative
Convertible Non-Voting Participating Preferred Stock, $10.60 stated value per
share, from 247,642 shares to 258,657 shares, which resolution is as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Series D 6% Cumulative
Convertible Non-Voting Participating Preferred Stock, $10.60 stated value per
share ("Series D Preferred Stock"), that was created on April 21, 1998 by that
certain Certificate of the Designation, Preferences, Rights, and Limitations of
Series D 6% Cumulative Convertible Non-Voting Participating Preferred Stock of
the Corporation is hereby amended to increase the number of shares created from
Two Hundred Forty-Seven Thousand Six Hundred Forty-Two (247,642) shares of
Series D Preferred Stock to Two Hundred Fifty-Eight Thousand Six Hundred
Fifty-Seven (258,657) shares of Series D Preferred Stock. The voting powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof shall remain the same.
1. This resolution was duly adopted by the Board of Directors of the Corporation
and it was also duly adopted by all of the holders of outstanding shares of
Series D Preferred Stock.
2. The foregoing resolution does not provide for an exchange, reclassification,
or cancellation of issued shares of the Corporation.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused this certificate
to be signed by Jose Chavez, its President, and attested by Mitchell C.
Kettrick, its Secretary, this 30th day of April, 1998.
MICRO-MEDIA SOLUTIONS, INC. By /s/ JOSE CHAVEZ, President
ATTEST:
By /s/ Mitchell C. Kettrick, Secretary
<PAGE> 1
EXHIBIT 4.6
SECOND AMENDMENT TO CERTIFICATE OF THE DESIGNATION, PREFERENCES RIGHTS AND
LIMITATIONS OF SERIES D 6% CUMULATIVE CONVERTIBLE NONVOTING PARTICIPATING
PREFERRED STOCK OF MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc., hereinafter called the "Corporation", a
corporation organized and existing under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to Section
16-10a-602 of the Utah Business Corporation Act, such Board of Directors by the
unanimous written consent of its members dated effective May 1, 1998 adopted a
resolution providing for a second amendment to that certain Certificate of
Designation filed by the Corporation with the Secretary of the State of Utah on
April 21, 1998, and amended by that certain Amendment to Certificate of
Designation adopted by the Corporation as of April 30, 1998 and filed with the
Secretary of the State of Utah on May 14, 1998, to increase the designation of
Series D 6% Cumulative Convertible Non-Voting Participating Preferred Stock,
$10.60 stated value per share, from 258,657 shares to 274,407 shares, which
resolution is as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Series D 6% Cumulative
Convertible Non-Voting Participating Preferred Stock, $10.60 stated value per
share ("Series D Preferred Stock"), that was created on April 21, 1998 by that
certain Certificate of the Designation, Preferences, Rights, and Limitations of
Series D 6% Cumulative Convertible Non-Voting Participating Preferred Stock of
the Corporation, as amended, is hereby further amended to increase the number of
shares created from Two Hundred Fifty-Eight Thousand Six Hundred Fifty-Seven
(258,657) shares of Series D Preferred Stock to Two Hundred Seventy-Four
Thousand Four Hundred Seven (274,407) shares of Series D Preferred Stock. The
voting powers, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof
shall remain the same.
1. This resolution was duly adopted by the Board of Directors of the Corporation
and it was also duly adopted by all of the holders of outstanding shares of
Series D Preferred Stock.
2. The foregoing resolution does not provide for an exchange, reclassification,
or cancellation of issued shares of the Corporation.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused this certificate
to be signed by Jose Chavez, its President, and attested by Mitchell C.
Kettrick, its Secretary, this 21st day of May, 1998.
MICRO-MEDIA SOLUTIONS, INC.
By /s/ JOSE CHAVEZ, President
ATTEST:
By /s/ Mitchell C. Kettrick, Secretary
<PAGE> 1
EXHIBIT 4.7
THIRD AMENDMENT TO CERTIFICATE OF THE DESIGNATION, PREFERENCES RIGHTS AND
LIMITATIONS OF SERIES D 6% CUMULATIVE CONVERTIBLE NONVOTING PARTICIPATING
PREFERRED STOCK OF MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc., hereinafter called the "Corporation", a
corporation organized and existing under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to Section
16-10a-602 of the Utah Business Corporation Act, such Board of Directors by the
unanimous written consent of its members dated effective June 26, 1998 adopted a
resolution providing for a third amendment to that certain Certificate of
Designation filed by the Corporation with the Secretary of the State of Utah on
April 21, 1998, amended by that certain Amendment to Certificate of Designation
adopted by the Corporation as of April 30, 1998 and filed with the Secretary of
the State of Utah on May 14, 1998, and amended by that Second Amendment to
Certificate of Designation adopted by the Corporation as of May 1, 1998 and
filed with the Secretary of State of Utah on May 27, 1998 to increase the
designation of Series D 6% Cumulative Convertible Non-Voting Participating
Preferred Stock, $10.60 stated value per share, from 274,407 shares to 279,657
shares, which resolution is as follows:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Series D 6% Cumulative
Convertible Non-Voting Participating Preferred Stock, $10.60 stated value per
share ("Series D Preferred Stock"), that was created on April 21, 1998 by that
certain Certificate of the Designation, Preferences, Rights, and Limitations of
Series D 6% Cumulative Convertible Non-Voting Participating Preferred Stock of
the Corporation, as amended, is hereby further amended to increase the number of
shares created from Two Hundred Seventy-Four Thousand Four Hundred Seven
(274,407) shares of Series D Preferred Stock to Two Hundred Seventy-Nine
Thousand Six Hundred Fifty-Seven (279,657) shares of Series D Preferred Stock.
The voting powers, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof
shall remain the same.
1. This resolution was duly adopted by the Board of Directors of the Corporation
and it was also duly adopted by all of the holders of outstanding shares of
Series D Preferred Stock.
2. The foregoing resolution does not provide for an exchange, reclassification,
or cancellation of issued shares of the Corporation.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused this certificate
to be signed by Jose Chavez, its President, and attested by Mitchell C.
Kettrick, its Secretary, this 26th day of June, 1998.
MICRO-MEDIA SOLUTIONS, INC.
By /s/ JOSE CHAVEZ, President
ATTEST:
By /s/ Mitchell C. Kettrick, Secretary
<PAGE> 1
EXHIBIT 4.8
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES E 6% CUMULATIVE CONVERTIBLE NON-VOTING
PARTICIPATING PREFERRED STOCK
OF
MICRO-MEDIA SOLUTIONS, INC.
Micro-Media Solutions, Inc. (the "Company"), a corporation organized and
existing, under the laws of the State of Utah,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company, and pursuant to the provisions of
Section 16-10a-602 of the Utah Business Corporation Act, such Board of
Directors, by unanimous written consent of its members dated effective October
12, 1998, filed with the minutes of the Board, adopted a resolution providing
for the issuance of a series of One Hundred Five Thousand (105,000) shares of
Series E 6% Cumulative Convertible Participating Non-Voting Preferred Stock,
which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be and hereby is
created, such series of Preferred Stock to be designated Series E Cumulative
Convertible Participating Preferred Stock, to consist of up to One Hundred Five
Thousand (105,000) shares of the stated value of $30.00 per share. The voting
powers, preferences and relative, participating, optional and other special
rights, and the qualifications, limitations or restrictions thereof shall be as
follows:
Section 1. Designation and Amount. The shares of such series shall have a
stated value of $30.00 per share and shall be designated as Series E Cumulative
Convertible Participating Preferred Stock (the "Series E Preferred Stock") and
the number of shares constituting the Series E Preferred Stock shall be to One
Hundred Five Thousand (105,000).
Section 2. Rank. The Series E Preferred Stock shall rank: (i) prior to all
of the Company's common stock, $0.10 par value per share ("Common Stock"); (ii)
prior to any class or series of capital stock of the Company hereafter created
not specifically ranking by its terms senior to or
<PAGE> 2
on parity with any Preferred Stock of whatever subdivision (collectively, with
the Common Stock, "Junior Securities"); and (iii) on parity with any class or
series of capital stock of the Company hereafter created specifically ranking by
its terms on parity with the Series E Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary (all such distributions
being referred to collectively as "Distributions").
Section 3. Dividends.
a. The holders of Series E Preferred Stock shall be entitled to receive out
of funds of the Company legally available therefor, a cumulative dividend of six
percent (6%) per annum, payable quarterly in arrears, which shall be paid in
cash, or at the option of a holder of the Series E Preferred Stock, by the
issuance of additional shares of Common Stock as follows: the number of shares
to be issued shall be determined based on the average closing bid price for the
Common Stock as reported by the NASDAQ Over-the-Counter Bulletin Board, or such
national securities exchange on which shares of the Company's Common Stock are
then listed for the thirty (30) trading days immediately preceding the record
date for the declaration of the dividend. The record dates for payment of
dividends shall be the 20th day of the month immediately following the end of
each fiscal quarter. Dividends on each share of Series E shall begin to accrue
and shall accumulate from the date of issuance, whether or not declared, and
shall be payable to the holder of such share on the record date as hereinabove
described. Dividends on account of arrears for any past dividend periods may be
declared and paid at any time, without reference to any regular dividend payment
date, to holders of record on a record date fixed for such payment by the Board
of Directors of the Company or by a committee of such Board duly authorized to
fix such date by resolution designating such committee. Dividends payable on the
Date of Conversion (as defined in 5(b)(iv) below) of the Series E shall be
calculated on the basis of the actual number of days elapsed (including the Date
of Conversion) over a 365-day year.
b. Participating Dividends. No dividends shall be declared and set aside
for or paid upon any shares of Common Stock unless the Board of Directors of the
Company shall contemporaneously declare and pay a dividend upon the then
outstanding shares of Series E in the same amount per share of Series E
Preferred Stock as would be declared payable on the number of shares of Common
Stock into which each share of Preferred Stock could then be converted pursuant
to the provisions of Section 6 hereof, such number to be determined as of the
record date for the determination of holders of Common Stock entitled to receive
such dividends; provided, however, that no dividends shall be paid on the
outstanding Common Stock, unless it is determined by the Board of Directors that
the Company has sufficient net assets available for distribution to holders of
the Series E Preferred Stock, under applicable law, after giving effect to such
dividend on the Common Stock and on the Series E Preferred Stock, to pay the
holders of each share of the Series E Preferred Stock the Liquidation Amount, as
defined below (provided that the return on each share of Series E Preferred
Stock shall be calculated through the date of such dividend).
c. Dividends in Kind. In the event the Company shall make or issue, or
shall fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or distribution with respect to the Common Stock
payable in i) securities of the Company other than
<PAGE> 3
shares of Common Stock or ii) assets, then and in each such event the holders of
Series E Preferred Stock shall receive, at the same time such distribution is
made with respect to Common Stock, the number of securities or such other assets
of the Company which they would have received had their Series E Preferred Stock
been converted into Common Stock immediately prior to the record date for
determining holders of Common Stock entitled to receive such distribution.
Section 4. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the holders of Series E Preferred
Stock (the "Holders") shall be entitled to receive, prior in preference to any
distribution to Junior Securities but in parity with any distribution to Parity
Securities, an amount per share equal to the original preferred stock stated
value plus accrued but unpaid dividends, if any thereon. If upon the occurrence
of such event, and after payment in full of the preferential amounts with
respect to the Senior Securities, the assets and funds available to be
distributed among the Holders of the Series E Preferred Stock and Parity
Securities shall be insufficient to permit the payment to such Holders of the
full preferential amounts due to the Holders of the Series E Preferred Stock and
the Parity Securities, respectively, then the entire assets and funds of the
Company legally available for distribution shall be distributed among the
Holders of the Series E Preferred Stock and the Parity Securities, pro rata,
based on the respective liquidation amounts to which each such series of stock
is entitled by the Company's Certificate of Incorporation and any certificate(s)
of designation relating thereto.
b. Upon the completion of the distribution required by Section 4(a), if
assets remain in this Company, they shall be distributed to holders of Junior
Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
c. At each Holder's option, a sale, conveyance or disposition of all or
substantially all the assets of the Company to a private entity, the common
stock of which is not publicly traded, shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 4; provided,
however, that an event described in the prior clause that the Holder does not
elect to treat as a liquidation and a consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall not be treated as a liquidation, dissolution or winding up
within the meaning of this Section 4, but instead shall be treated pursuant to
Section 4(d) hereof (a Holder who elects to have the transaction treated as a
liquidation is herein referred to as a "Liquidating Holder").
d. Prior to the closing of a transaction described in Section 4(c) which
would constitute a liquidation event, the Company shall either (i) make all cash
distributions it is required to make to the Liquidating Holders pursuant to the
first sentence of Section 4(a), (ii) set aside sufficient funds from which the
cash distributions required to be made to the Liquidating Holders can be made,
or (iii) establish an escrow or other similar arrangement with a third party
pursuant to which the proceeds payable to the Company from a sale of all or
substantially all the assets of the Company will be used to make the liquidating
payments to the Liquidating Holders immediately after the consummation of such
sale. In the event that the Company has not fully complied with
<PAGE> 4
either of the foregoing alternatives, the Company shall either: (x) cause such
closing to be postponed until such cash distributions have been made, or (y)
cancel such transaction, in which event the rights of the Holders or other
arrangements shall be the same as existing immediately prior to such proposed
transaction.
Section 5. Conversion. The record Holders of the Series E Preferred Stock
shall have conversion rights as follows:
a. Right to Convert. Each record Holder of Series E Preferred Stock shall
be entitled to convert whole shares of Series E Preferred Stock into Common
Shares issuable upon conversion of the Series E Preferred Stock, as follows:
each outstanding share of Series E Preferred Stock is convertible at any time
into ten (10) fully paid and non-assessable Common Shares of the Company,
subject to adjustment as provided in Section 5(c) hereof. The number of Common
Shares issuable upon the conversion of one share of Series E Preferred Stock is
hereinafter referred to as the "Conversion Rate."
b. Mechanics of Conversion. In order to convert Series E Preferred Stock
into full Common Shares, the Holder shall (i) fax, on or prior to 6:00 p.m.,
Austin, Texas time on the Date of Conversion, a copy of a fully executed notice
of conversion ("Notice of Conversion") to the Company at the office of the
Company or to the Transfer Agent for the Series E Preferred Stock stating that
the Holder elects to convert, which notice shall specify the date of conversion
and the number of shares of Series E Preferred Stock to be converted, and (ii)
surrender to a common courier for either overnight or two (2) day delivery to
the office of the Company or the Transfer Agent, the original certificates
representing the Series E Preferred Stock being converted (the "Series E
Preferred Stock Certificates"), duly endorsed for transfer, provided, however,
that the Company shall not be obligated to issue certificates evidencing the
Common Shares issuable upon such conversion unless the Series E Preferred Stock
Certificates are delivered to the Company or the Transfer Agent as provided
above, or the Holder notifies the Company or the Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (i) below).
(i) Lost or Stolen Certificates. Upon receipt by the Company of evidence of
the loss, theft, destruction or mutilation of any Series E Preferred Stock
Certificates representing shares of Series E Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Company, and upon surrender and cancellation of the Series E Preferred
Stock Certificate(s), if mutilated, the Company shall execute and deliver new
Series E Preferred Stock Certificate(s) of like tenor and date.
However, the Company shall not be obligated to re-issue such lost or stolen
Series E Preferred Stock Certificates if Holder contemporaneously requests the
Company to convert such Series E Preferred Stock into Common Shares.
(ii) Delivery of Common Shares Upon Conversion. The Company no later than
6:00 p.m. Austin, Texas time on the third (3rd) business day after receipt by
the Company or its Transfer Agent of all necessary documentation duly executed
and in proper form required for conversion,
<PAGE> 5
including the original Series E Preferred Stock Certificates to be converted (or
after provision for security or indemnification in the case of lost, stolen or
destroyed certificates, if required), shall issue and deliver to the Holder as
shown on the stock records of the Company a certificate for the number of Common
Shares to which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion of the Series E Preferred
Stock would create a fractional Common Share or a right to acquire a fractional
Common Share, such fractional share shall be disregarded and the number of
Common Shares issuable upon conversion, in the aggregate, shall be the next
higher number of shares.
(iv) Date of Conversion. The date on which conversion occurs (the "Date of
Conversion") shall be deemed to be the date such Notice of Conversion is faxed
to the Company or the Transfer Agent, as the case may be, provided an advance
copy of the Notice of Conversion is faxed to the Company on or prior to 6:00
p.m., Austin, Texas time, on the Date of Conversion. The original Series E
Preferred Stock Certificates representing the shares of Series E Preferred Stock
to be converted shall be surrendered by depositing such certificates with a
common courier for either overnight or two (2) day delivery, as soon as possible
following the Date of Conversion. The person or persons entitled to receive the
shares of Common Shares issuable upon such conversion shall be treated for all
purposes as the record Holder or Holders of such Common Shares on the Date of
Conversion.
c. Adjustment to Conversion Rate.
(i) Adjustment Due to Stock Split, Stock Dividend, Etc. If, prior to the
conversion of all the Series E Preferred Stock, the number of outstanding Common
Shares is increased by a stock split, stock dividend, or other similar event,
the Conversion Rate shall be proportionately increased, or if the number of
outstanding Common Shares is decreased by a combination or reclassification of
shares, or other similar event, the Conversion Rate shall be proportionately
decreased.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
conversion of all the Series E Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which Common Shares of the Company shall be
changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets that is not
deemed to be a liquidation pursuant to Section 4(c), then the Holders of Series
E Preferred Stock shall thereafter have the right to receive upon conversion of
Series E Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the Common Shares, immediately theretofore
issuable upon conversion, such stock, securities and/or other assets which the
Holder would have been entitled to receive in such transaction had the Series E
Preferred Stock been converted immediately prior to such transaction, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holders of the Series E Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the Conversion Rate and of the number of shares issuable upon conversion of
the Series E Preferred
<PAGE> 6
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities thereafter deliverable upon the conversion thereof.
The Company shall not effect any transaction described in this subsection
5(c)(ii) unless (a) it first gives fifteen (15) calendar days prior notice of
such merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event (during which time the Holders shall be
entitled to convert their Series E Preferred Stock into Common Shares to the
extent permitted hereby) and (b) the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation of the Company
under this Certificate of Designation, including the obligation of this
subsection 5(d)(ii).
(iii) Adjustment Due to Failure to Observe Covenants Contained in Placement
Agreement.
The covenants contained in that certain placement agreement by and between
the Company and Equity Services, Ltd. regarding the placement of Series E
Preferred Stock (the "Placement Agreement") inure to the benefit of the holders
of Series E Preferred Stock and such holders are identified third-party
beneficiaries under the Placement Agreement. In the event that the Company
breaches any of the covenants contained in the Placement Agreement and such
breach is not cured within twenty (20) days after receipt of written notice that
the Company is in default under the terms of the Placement Agreement, the
Conversion Rate shall be adjusted by increasing the amount of Common Stock
issuable upon conversion of one share of Series E Preferred Stock by ten percent
(10%) for each month that such breach is not cured (i.e., increased from ten
(10) shares to eleven (11) shares, eleven (11) shares to twelve (12) shares,
etc.)
(iv) Failure to Obtain Effectiveness of a Registration Statement. Upon
demand by a holder of Series E Preferred Stock, the Company will immediately
file a registration statement on Form SB-2 or other appropriate form with the
Securities and Exchange Commission ("SEC") to register, among other issuances,
the issuance of the Common Stock to be issued upon the conversion of the Series
E Preferred Stock. The Company will use its best efforts to obtain effectiveness
of such registration statement although there is no assurance that this
registration statement will be declared effective by the SEC, nor is there any
assurance as to the length of time such registration statement will remain
effective if such event occurs. If the Company's registration statement is not
declared effective by the SEC on or before the 120th day after the Company
received the demand for such filing, the Conversion Rate shall be adjusted by
increasing the amount of Common Stock issuable upon conversion of one share of
Series E Preferred Stock by one (1) share during each month (or portion thereof)
that such registration statement has not become effective (i.e., increased from
ten to eleven, eleven to twelve, etc.).
(v) Upon the occurrence of each adjustment or readjustment of the
Conversion Rate pursuant to paragraphs 5(iii) and 5(iv) above, the Company at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series E
Preferred Stock a certificate signed by the Chief Financial Officer of the
Company setting forth (i) such adjustment or readjustment, (ii) the Conversion
Rate at the time in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of his shares.
<PAGE> 7
(vi) No Fractional Shares. If any adjustment under this Section 5(c) would
create a fractional Common Share or a right to acquire a fractional Common
Share, such fractional share shall be disregarded and the number of Common
Shares issuable upon conversion shall be the next higher number of shares.
Section 6. Voting Rights. The holders of the Series E Preferred Stock shall
have no voting power whatsoever, except as otherwise provided by the Utah
Business Corporation Act ("Utah Law"), and Section 9 below, and no Holder of
Series E Preferred Stock shall vote or otherwise participate in any proceeding
in which actions shall be taken by the Company or the shareholders thereof or be
entitled to notification as to any meeting of the shareholders.
Notwithstanding the above, the Company shall provide the Holders of the
Series E Preferred Stock with notification of any meeting of the shareholders
regarding any major corporate events affecting the Company. In the event of any
taking by the Company of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property (including by way of
merger, consolidation or reorganization), or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in connection
with any proposed sale, lease or conveyance of all or substantially all the
assets of the Company, or any proposed liquidation, dissolution or winding up of
the Company, the Company shall mail a notice to such holders, at least five (5)
days prior to the record date specified therein, of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under Utah Law the vote of the holders of the Series E
Preferred Stock, voting separately as a class, is required to authorize a given
action of the Company, the affirmative vote or consent of the holders of at
least a majority of the shares of the Series E Preferred Stock, represented at a
duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series E Preferred Stock (except as otherwise may be
required under Utah Law) shall constitute the approval of such action by the
class. To the extent that under Utah Law the holders of the Series E Preferred
Stock are entitled to vote on a matter with holders of Common Shares, voting
together as one (1) class, each share of Series E Preferred Stock shall be
entitled to a number of votes equal to the number of Common Shares into which it
is then convertible using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Rate is calculated. Holders
of the Series E Preferred Stock also shall be entitled to notice of all
shareholder meetings or written consents with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Company's
by-laws and applicable statutes.
Section 7. Election of a Majority of Directors of the Company.
If the Company has not obtained or has failed to maintain the effectiveness
of a Registration Statement as described in Section 5(c)(iv) on or before the
120th day after the Company received
<PAGE> 8
the demand for such registration, and the closing bid price of the Common Stock
of the Company is at or below $1.00 for any five (5) consecutive trading days
subsequent to September 30, then the holders of the Series E Preferred Stock,
voting separately as a class, shall be entitled to elect a majority of the Board
of Directors at any meeting of the stockholders of the Company at which
directors are to be elected, or held, as the case may be. The right of the
holders of the Series E Preferred Stock to elect such directors shall cease when
Effectiveness of a Registration Statement as described in Section 5(c)(iv)
occurs. At any time after such voting power shall have so vested in the holders
of the Series E Preferred Stock, upon the written request of a holder of record
of Series E Preferred Stock, addressed to the Secretary of the Company at the
principal office of the Company, and to the other holders of the Series E
Preferred Stock, the Secretary shall, at the election of such requesting holder:
(i) call a special meeting of the holders of the Series E Preferred Stock for
the election of the directors to be elected by them as hereinafter provided,
such meeting to be held within forty-five (45) days after delivery of such
request at the place and upon the notice provided by law and in the Bylaws for
the holding of meetings of stockholders; provided, however, that the Secretary
shall not be required to call such special meeting in the case of any such
request received less than forty-five (45) days before the date fixed for the
next ensuing annual meeting of the stockholders; or (ii) obtain written consents
from holders of the Series E Preferred Stock for the election of the directors
to be elected by them in an amount sufficient to satisfy applicable state law
requirements and comply with applicable federal securities law requirements with
respect to this consent provision.
a. The holders of the Series E Preferred Stock voting as a class will have
the right to remove without cause at any time and replace any director such
holders have elected pursuant to this Section 7.
Section 8. Status of Converted Stock. In the event any Series E Preferred
Stock shall be converted pursuant to Section 5 hereof, the shares so converted
shall be canceled, shall return to the status of authorized but unissued
Preferred Shares of no designated series, and shall not be issuable by the
Company as Series E Preferred Stock.
Section 9. Company Limitations.
a. So long as any shares of Series E Preferred Stock are outstanding, the
Company shall not, without the unanimous affirmative vote or the written consent
of the holders of the outstanding shares of Series E Preferred Stock voting
separately as a class, amend, alter or repeal any provision of the Certificate
of Incorporation or Bylaws of the Company so as to affect adversely the relative
rights, preferences, qualifications, limitations or restrictions of the Series E
Preferred Stock.
b. Unless otherwise contractually restricted, the provisions of this
paragraph 13 shall not in any way limit the right and power of the Company to:
(i) Increase the total number of authorized shares of Common Stock; or
(ii) Issue bonds, notes, mortgages, debentures, preferred stock ranking
junior to the terms of the Series E Preferred Stock and other obligations.
Section 10. Transferability. The Series E Preferred Stock shall be
transferable by the holders, provided such transfer is in compliance with
applicable federal and state securities laws.
Section 11. Preference Rights. Nothing contained herein shall be construed
to prevent the Board of Directors of the Company from issuing one (1) or more
series of Preferred Stock with dividend and/or liquidation preferences junior to
the Series E Preferred Stock.
Section 12. This resolution was duly adopted by the Board of Directors of
the Company and shareholder action was not required.
Section 13. The foregoing resolution does not provide for an exchange,
reclassification, or cancellation of issued shares of the Company.
IN WITNESS WHEREOF, Micro-Media Solutions, Inc. has caused its corporate
seal to be hereunto affixed and this Certificate to be signed by Jose Chavez,
its President, and attested by Mitchell C. Kettrick, its Secretary, this ______
day of April, 1998.
/s/ JOSE CHAVEZ, President
Attest:
/s/ MITCHELL C. KETTRICK, Secretary
<PAGE> 1
EXHIBIT 10.01
The State of Texas ) (
County of Travis ) (
THIS LEASE AGREEMENT, made and entered into this 12th day of August, AD, 1998,
with effective date provided below by and between William B. and Cheri Stringer,
HEREINAFTER called "Lessor" and Micro-Media Solutions, Inc., HEREINAFTER called
"Lessee."
WITNESSETH:
THAT for and in consideration of covenants, agreements and stipulations herein
contained, Lessor does hereby demise and lease unto Lessee, and Lessee does
hereby take, rent and hire from Lessor for the term and upon the terms and
conditions hereinafter set out a lease space as follows:
An approximate 20,540 square foot building located at: 2000 East 6th Street,
Austin, Travis County, Texas, being more particularly described as a portion of
Lot 1 of Outlot 7, Division A of the H & TC Railroad Addition, described more
particularly on Exhibit "A" attached hereto (the "Leased Premises").
1. PURPOSE. Lessee will use the Leased Premises for the following purpose(s):
Electronic manufacturing, testing, programming, distribution and storage.
Lessee will use the Leased Premises for no other purpose(s) without the written
consent of Lessor. Lessee's business will be advertised as and operated under
the name of Micro-Media Solutions, Inc., (MSI) unless and until the company or
franchise (if any) changes it's name, whereupon Lessee may use and advertise
such new name. Lessee binds and obligates itself to occupy and use the entire
Leased Premises continuously during the term of this lease for the purpose
provided above and according to the generally accepted standards for the
operation of same or similar businesses.
2. TERM, COMMENCEMENT AND RENEWAL OPTION.
(a.) Initial Term. The initial term of this Lease will begin either September 1,
1998, or upon Lessee's possession of the Leased Premises whichever occurs first,
which date will hereinafter be referred to as the Commencement Date. This Lease
will terminate on the last day of the eighty-fourth (84th) full calendar month
after the Commencement Date, unless sooner terminated in accordance with the
terms and conditions hereinafter set forth. During the last three hundred and
sixty (360) days of this Lease, Lessor will have the right to enter and show the
Leased Premises during Lessee's normal business hours and place "For Lease"
signs on the Leased Premises for the purpose of reletting Lessee's Leased
Premises.
(b.) Renewal Option. Provided Lessee is not in default of any of the terms
agreed to herein, Lessee will have the option to extend this Lease for one
period of three (3) years. Lessee must notify Lessor in writing of Lessee's
intent to exercise the three year option no later than 360 days prior to the
expiration of the initial term. Lessee's failure to notify Lessor in writing
within the required time limit will render Lessee's option to extend this Lease
null and void.
3. DELIVERY OF POSSESSION. Lessor will deliver keys and possession of the Leased
Premises to Lessee on the lease commencement date stated in Paragraph 2 unless
otherwise agreed in writing by the parties.
<PAGE> 2
4. MINIMUM RENTAL. As minimum rental for the Leased Premises, Lessee agrees to
pay Lessor $ 7,189.00 per month (to be adjusted annually) payable in advance on
or before the first day of each month during the term of this Lease, beginning
on the Commencement Date hereof. If the Lease term does not begin on the first
day of the calendar month, Lessee will pay in advance a pro rata part of the
minimum rental and all other additional monthly rentals referred to herein
(based upon the number of calendar days in such month that Lessee will occupy
the premises), as rental for such partial month. All rental payments will be
paid to Lessor in Travis County, Texas, at the address set out in Paragraph 30.
In the event that the rental is not received by the close of business on the
fifth (5th) of the month in which it is owed, Lessee will pay a delinquent
charge of two percent (2%) per day of the agreed rental through the fifth (5th)
and one percent (1%) per day for each additional day thereafter for a maximum of
15 days. Such delinquent charge is due with the rental as additional rental.
a. Annual Adjustment to Minimum Rental.
The minimum rental during each year of the Lease is as follows:
<TABLE>
<S> <C>
Year 1 $ 7,189.00
Year 2 $ 7,548.45
Year 3 $ 7,925.87
Year 4 $ 8,322.17
Year 5 $ 8,738.27
Year 6 $ 9,175.19
Year 7 $ 9,633.95
</TABLE>
(b.) Minimum Rental for Option Period.
In the event Lessee elects to exercise the option to extend, and exercises such
option as required in Paragraph 2(b), the minimum rental amounts will be as
follows:
<TABLE>
<S> <C>
Year 8 $ 10,115.65
Year 9 $ 10,621.43
Year 10 $ 11,152.50
</TABLE>
5. TAXES. Lessor will pay all ad valorem taxes levied on the Leased Premises and
Lessee will, as additional rental, reimburse Lessor a proportionate share of the
taxes monthly in the amount of $ 341.00 based on Lessor's 1997 tax payments.
Lessee's proportionate share is based upon the percentage which Lessee's net
leaseable area bears to the total net leaseable area of the entire building and
will be adjusted annually as taxes are paid. For the purposes of this Lease,
Lessee's proportionate share of the building is one-hundred percent (100%). In
the event of a deficit in Lessee's accrued tax payments, Lessor will notify
Lessee of such difference and Lessee will pay the difference owed within ten
(10) days of such notice. Any excess paid in by Lessee will be applied to the
following year's taxes. It is the intent of this Lease that Lessee will pay
taxes only for the period of this agreed lease and any surplus Lessee has paid
in at the expiration of this Lease will be refunded to Lessee in a timely
manner. Lessor will provide Lessee with tax statements evidencing the amounts
requested as being correct. The tax prorations will be adjusted as Lessor's
actual tax payments increase or decrease for the Leased Premises.
<PAGE> 3
Lessee will pay all personal property taxes levied on all fixtures, equipment or
other personal property which Lessee places on or about the Leased Premises.
6. CASUALTY INSURANCE. Lessor will maintain in full force and effect during the
term of this Lease, Commercial Building owner's insurance and Comprehensive
General Public Liability Insurance on the Leased Premises. The coverage will
include but not be limited to fire and extended coverage, vandalism and
malicious mischief coverage, ordinance at law and loss of rents insurance in
amounts sufficient to replace the Leased Premises (whether damaged or destroyed
in whole or in part.) In addition to all rent and other payments to be made by
Lessee as provided herein, Lessee will also pay, as additional monthly rental, a
monthly amount of $ 316.50, for the cost of the commercial property insurance
maintained by Lessor on the building, during this Lease. Such insurance
prorations may increase or decrease as Lessor's actual cost for the referenced
insurance changes.
7. ADDITIONAL RENTAL. All payments required to be made by Lessee under the terms
of this Lease for taxes, insurance and all other charges will be considered as
additional rental and will be due and payable with the regular rental payments
unless otherwise specifically called for herein.
8. TOTAL SCHEDULED RENTAL. The total agreed rental due upon signing this Lease
and each month thereafter until adjustments occur as provided herein, is
calculated below:
<TABLE>
<S> <C>
Minimum Rental $ 7,189.00
Taxes 341.00 (see Paragraph 5)
Insurance 316.50 (see Paragraph 6)
TOTAL $ 7,846.50
</TABLE>
The total amount due upon the inception of this lease is as follows:
<TABLE>
<S> <C>
Total Scheduled Rental $ 7,846.50
Security Deposit $ 7,846.50 (see Paragraph 31)
TOTAL DUE $ 15,693.00
</TABLE>
9. LESSEE'S PREMISES. Lessor will provide Lessee's premises in an "as is"
condition with the exception Lessor will:
(a) Complete the drop ceiling in the production area of the east half of the
building.
(b) Paint a stripe 6 feet to 8 feet in height across the front of the building
at Lessor's discretion in a color to closely match Lessee's corporate color of
green.
(c) Install a double door in the demising wall between the east and west halves
of the building and at a location mutually agreeable to Lessor and Lessee.
Such improvements by Lessor will not be causes for delay of possession and
Lessor will complete such improvements in an expeditious manner. The terms
"Lessee's premises", and "Leased Premises" as used in this Lease, all mean the
premises.
<PAGE> 4
10. SIGNS. Lessee will not place or suffer to be placed or maintain on the
exterior of the Leased Premises or in the parking area or sidewalks any sign,
advertising matter, or any other advertising of any kind, and will not place or
maintain any decoration, lettering, or advertising matter on or about the glass
of any window or door of the exterior of the Leased Premises without first
obtaining Lessor's written approval, and Lessee will maintain such signs,
lettering, advertising matter or the other things as may be approved, in good
condition and repair at all times.
11. MAINTENANCE AND REPAIRS. Lessor agrees to maintain at its' own cost and
expense the exterior walls, foundations, parking lot, roof, gutters and
downspouts and external and structural elements of the improvements in good
condition and repair (as to structural soundness only) during the term of this
Lease, unless damage to such portions of the improvements is caused by the acts
or omissions of the Lessee, its' agents, customers or invitees, in which event
Lessee will bear the cost of such repair. Lessee agrees to maintain at its' own
cost and expense the balance of the Leased Premises including, but not limited
to the interior improvements, the exterior entrance doors and/or overhead doors
and all other fixtures applicable to the Leased Premises in substantially the
same condition as at the beginning of the term, excepting only reasonable wear
and tear arising from the proper use thereof, and will make all necessary
repairs to keep the Leased Premises in good order and condition.
Lessee will keep the parking lot free and clear of trash and refuse and keep the
vegetation in the front and rear of the building in a neat and orderly manner.
In the event Lessor or Lessee landscapes the vegetated area in front of the
property, Lessee will maintain such landscaped area thereafter.
Lessee will provide and maintain vermin-proof receptacles for Lessee's own use
in the event refuse is temporarily stored outside of the Leased Premises, and
Lessee will be responsible for the removal of said refuse and will promptly and
strictly comply with all health, sanitary or other laws, regulations and
ordinances pertaining to the depositing and removal of such refuse from or about
the Leased Premises. Lessee's refuse receptacle will be placed in a location
designated by Lessor.
Lessee will maintain, repair, and replace, when necessary, the air conditioning,
plumbing, gas and electrical appurtenances and fixtures in the Leased Premises
and will retain the services of an outside vendor for the purpose of monthly air
conditioner filter changes. A copy of Lessee's current agreement with said
filter service will be maintained with Lessor.
Lessee will maintain an adequate number of two and one-half gallon soda-acid
fire extinguishers, or as otherwise required, in the Leased Premises as may be
reasonably required by Lessor, the Austin Fire Department, or Lessor's insurance
company, covering the Leased Premises and in no event less than one such
extinguisher for the Leased Premises. Lessor will not be liable to Lessee or any
other person whomsoever for injury or damage to Lessee or any other person
whomsoever for injury or damage to persons or property received on or incidental
to the use of said Leased Premises.
<PAGE> 5
Lessee will indemnify and save harmless Lessor from and against any loss, claim,
expense or liability in connection therewith including Lessor's failure to
repair. All outside window breakage, including plate glass doors and special
window front equipment will be repaired by Lessee at Lessee's expense unless
Lessor or its agents cause such breakage.
12. ALTERATIONS BY LESSEE. Lessee may not make any alterations (demolition,
improvements or other modifications) of any kind to the Leased Premises without
Lessor's written consent. Consent for governmentally required changes may not be
unreasonably withheld. "Alterations" include structural changes, roof and wall
penetrations, and all plumbing, electrical and HVAC changes. Request for
Lessor's approval of alterations will be in writing and will be detailed to
Lessor's reasonable satisfaction. The foregoing will be done only by Lessor's
contractors or employees or by third parties approved by Lessor in writing, such
approval not to be unreasonably withheld. If same are performed by Lessee with
Lessor's approval, Lessee will not allow any liens to be placed against the
Leased Premises as a result of such alterations. Alterations will comply with
all applicable laws. Changes in Lessee's alterations in Lessee's space which may
be later required by governmental actions will also be paid by Lessee.
13. REMOVAL OF PROPERTY BY LESSEE. Lessee may remove its trade fixtures,
furniture and equipment only if (1) such removal is made prior to the end of the
Lease term, (2) Lessee is not in default under this Lease at time of removal,
and (3) such removal is not in anticipation of an early move-out prior to the
end of the Lease term. Lessee will pay all costs of removal. Lessee will have no
rights to property remaining on the Leased Premises after move-out. Lessee may
not remove any alterations or improvements such as wall-to-wall carpeting, book
shelves, window coverings, drapes, cabinets, electrical/telecommunication wiring
or terminals, paneling, counters, kitchen lavatories or break-room built-ins,
shelving, wall coverings, and anything else attached to the floor, walls, or
ceilings. If Lessor requests in writing, Lessee will, immediately prior to
moving out, remove any alterations, fixtures, equipment, and any other property
installed by Lessee. Lessee will pay for cleaning or repairing damage caused by
Lessee's removal of any property.
14. INSPECTION OF LEASED PREMISES. Lessor will have the right to enter upon the
Leased Premises at all reasonable hours for the purpose of inspecting same.
Lessor has the right, in the event Lessee does not maintain the premises as
required herein and after giving Lessee written notice and ten (10) business
days to cure such default, to order such repairs or maintenance as may be deemed
necessary by Lessor, and to charge the cost and administration thereof to
Lessee, said cost to be an additional amount due from Lessee on the first day of
the month following notice to Lessee that such work has been performed by Lessor
on behalf of Lessee.
15. COMPLIANCE WITH LAWS. Lessee and Lessor will comply with all material
statutes, ordinances, rules, orders, regulations, requirements of the federal,
state, county and city governments and all departments thereof applicable to the
Leased Premises or the business conducted therein by Lessee.
<PAGE> 6
16. LIABILITY INSURANCE. Lessee will provide Lessee's own public liability
insurance for its operation on the Leased Premises in an amount equal to the
minimum "primary coverage" amount required by Lessee's insurance carrier as a
completion for purchasing umbrella liability insurance by Lessee. In no event
will such coverage be less than $ 1,000,000. Upon written notice by Lessor to
Lessee, such dollar amount of Lessee's liability policy will be increased by the
amount of any increase required by Lessee's carrier for "primary coverage" under
an umbrella liability policy. Lessee is encouraged to maintain fire and extended
coverage insurance (including vandalism and malicious mischief) on the contents
in the Leased Premises, including fixtures, furniture, equipment, supplies,
inventory and other personal property. Such property is not covered by Lessor's
insurance. Certificates for such insurance will be provided by Lessee to Lessor
within fifteen (15) days of the date of this agreement showing Lessor to be an
additional insured, and will indicate that the policy will not be canceled
without ten (10) days prior written notice being first given to Lessor. A
duplicate original of such policy will be deposited with Lessor.
17. HOLD HARMLESS. To the extent that it is not covered by Lessor or Lessor's
insurance, Lessee will indemnify Lessor for and will hold Lessor harmless from
all fines, claims, liabilities, and suits (including costs and expenses of
defending against same) resulting from any breach or nonperformance of the Lease
or caused by Lessee or Lessee's agents, employees, family, licensees, or
invitees. To the extent that it is not covered by Lessee's insurance, Lessor
will indemnify Lessee for and will hold Lessee harmless from all fines, claims,
liabilities, and suits (including costs and expenses of defending against same)
resulting from any breach or nonperformance of the Lease by Lessor or Lessor's
agents, employees, family, licensees, or invitees. To the extent that it is
covered by Lessor or Lessee's insurance, Lessor and Lessee will not be liable to
the other or the other's agents, employees, or family for any damage to personal
property resulting from any act, omission, or negligence of any other tenant or
occupant of the Leased Premises.
18. CONDEMNATION. If any part of the Leased Premises is taken by condemnation or
by deed in lieu of condemnation by any governmental authority, this Lease will
terminate one day prior to such taking. If any part of the Leased Premise's
parking lot is so taken, Lessee's right to use such portion will terminate one
day prior to such taking; and Lessee's rent will be reduced only to the extent
that such partial taking reduces the fair market value of the Leased Premises.
Lessor will pay all costs associated with construction reasonably necessary to
render the Leased Premises usable for Lessee's permitted purposes after such
partial taking. All compensation awarded for any partial or total taking of the
Leased Premises will be the Property of Lessor. If Lessor has received written
notice of intent to condemn, Lessee will upon ten (10) days written request by
Lessor execute an acknowledgment that the Lease terminates one day prior to the
condemnation or deed in lieu of condemnation and that Lessee claims no interest
in the condemnation award. Lessor will have no interest in any monies paid by
the condemning authorities to Lessee for moving costs or for the taking of
Lessee's fixtures and other personal property within the Leased Premises
(excluding leasehold improvements) if a separate award for such items is made to
Lessee.
19. DEFAULT BY LESSOR. Lessee will be entitled to recover actual damages and
terminate this Lease if (1) Lessor fails to pay any sum due and owing to Lessee
within ten (10) days after
<PAGE> 7
written demand from Lessee, or (2) Lessor remains in default on any other
obligation for ten (10) days after Lessee's written demand for performance.
However, Lessor will not be in default if Lessor promptly commences to cure such
noncompliance and diligently proceeds in good faith to cure same after receiving
written notice of such default. If taxes on the Leased Premises are not timely
paid by Lessor, Lessee may pay same and be entitled to reimbursement by Lessor.
If Lessor fails to perform any covenant, term or condition of this Lease that
Lessor is obligated to perform and, as a consequence of such nonperformance,
Lessee will recover a money judgment against Lessor, such judgment will be
satisfied only out of Lessor's equity in the Leased Premises. Lessor will have
no liability whatsoever for any deficiency, and no other property or assets of
Lessor will be subject to levy, execution or other enforcement procedures as a
result of such judgment.
20. DEFAULT BY LESSEE. If Lessee defaults, Lessor will have all remedies set
forth below. (a.) Definition of default. The occurrence of any of the following
will constitute a default by Lessee: (1) failure to pay rent or any other sum
due by Lessee under this Lease (including but not limited to monthly tax and
insurance reimbursements to Lessor) within 5 days after written demand therefor
by Lessor; (2) failure to vacate on or before the last day of the Lease term,
renewal term, or extension period; (3) failure to pay rent in advance on a daily
basis in the event of unlawful holdover by Lessee; (4) unauthorized early
move-out or notice of same as set forth below; (5) acquisition of Lessee's
interest in the Lease by a third party by judicial or non-judicial process; or
(6) failure to comply with any other provision of the Lease (including rules, of
any) if such failure to comply is not cured as soon as reasonably possible after
delivery of written notice by Lessor to Lessee. However, Lessee will not be in
default under subclause (6) above if Lessee promptly commences to cure such
noncompliance and diligently proceeds in good faith to cure same after receiving
written notice of such default.
(b.) Acceleration upon early move-out. If Lessee is lawfully evicted, or if
Lessee moves out or gives verbal or written notice (in person or by an
authorized employee or agent) of intent to move out prior to the end of the
Lease term without the rent being paid in full for the entire remainder of the
Lease term or renewal or extension period or without prior written consent of
Lessor, evicted or abandons Leased Premises all remaining rents for the
remainder of the Lease term will be accelerated immediately and automatically,
without demand or notice. Such accelerated rents will be due and delinquent
without notice before or after such acceleration. Such acceleration will occur
even if the rent for the current monthly has been paid in full.
(c.) Termination of possession. If Lessee is in default as defined in
subparagraph (a.) above and if Lessee remains in default for 5 days after Lessor
gives notice of such default to Lessee, or if Lessee abandons the Leased
Premises, Lessor may (with or without demand for performance) terminate Lessee's
right of possession by giving one day's written notice to vacate; and Lessor
will be entitled to immediate possession without termination of Lessee's
obligations under the Lease. Lessor's repossession will not be considered an
election to terminate this Lease unless written notice of such intention to
terminate is given to Lessee by Lessor. Repossession may be by voluntary
agreement or by eviction lawsuit. Commencement of an eviction lawsuit will not
preclude other Lessor remedies under this Lease or other laws.
<PAGE> 8
(d.) Reletting costs. If Lessee is in default under this Lease and if Lessor
terminates Lessee's right of possession without terminating this Lease and
Lessee's space is released, Lessee will pay upon Lessor's demand the following;
(1) all costs of reletting (which in no event will be less than one month's
rent), including leasing commissions, rent concessions (whether in the form of
assuming or buying out Lease remainders elsewhere, free rent for a period of
time, or reduced rental rates), utilities during the vacancy, advertising costs,
administrative overhead, and all cost of repair, remodeling, or redecorating for
replacement tenants in the Leased Premises, (2) all rent and other indebtedness
due from Lessee to Lessor through the date of termination of Lessee's right of
possession, and (3) all rent and other sums required to be paid by Lessee during
the remainder of the entire Lease term subject to the acceleration paragraph
above.
(e.) Mitigation by Lessor. Upon eviction or voluntary vacation of the Leased
Premises by Lessee without the Lease being terminated by Lessor, Lessor will
make reasonable efforts to relet the Leased Premises. After deduction of
reasonable expenses incurred by Lessor, Lessee will receive credit for any
rentals received by Lessor through reletting the Leased Premises during the
remainder of the Lease term or renewal or extension period. Such deductible
expenses may include leasing commissions, attorney's fees, and all other
reasonable expenses in connection with reletting. Lawsuits to collect amounts
due by Lessee under this Lease may be brought from time to time on one or more
occasions without the necessity of Lessor's waiting until the expiration of the
Lease term. If judgment for accelerated rents is recovered, Lessor will give
credit against such judgment for subsequent payments made by Lessee and
subsequent rentals received by Lessor from other tenants of the Leased Premises,
less lawful deductions and expenses of reletting that have not been paid by
Lessee.
(f.) Termination of Lease. Upon default by Lessee, Lessor may terminate this
Lease at any time after termination of Lessee's possession rights under
subparagraph (c.) by giving written notice of termination pursuant to Paragraph
30.
21. DAMAGES. In addition to other remedies, Lessor may recover actual damages
resulting from Lessee's default.
22. DESTRUCTION BY FIRE OR OTHER CASUALTY.
(a) Total destruction, rent abatement, and restoration. If the Leased Premises
is totally destroyed by fire or other casualty so that it cannot reasonably be
used by Lessee and if this Lease is not terminated as provided in subparagraph
(d) below, there will be a total abatement of Lessee's rent until the Leased
Premises is restored by Lessor and Lessee.
(b) Partial destruction, rent abatement, and restoration. If the Leased Premises
is partially destroyed or damaged by fire or other hazard so that it can be only
partially used by Lessee for the purposes allowed in this Lease and if this
Lease is not terminated as provided in subparagraph (d) below, there will be a
partial abatement of Lessee's rent and Lessee's obligation to pay operating
expenses which fairly and reasonably corresponds to the time and extent to which
the Leased Premises cannot reasonably be used by Lessee.
<PAGE> 9
(c) Restoration. Lessor's obligation to restore will be limited to the condition
of the Leased Premises existing prior to the casualty. Lessor will proceed with
diligence to restore the Leased Premises. During restoration, Lessee will
continue business to the extent practical in Lessee's reasonable judgment.
(d) Lease termination. If the Leased Premises is so badly damaged that
restoration and repairs cannot be completed within 6 months after the fire or
casualty, then this Lease may be terminated as of the date of the destruction by
either Lessor or Lessee by serving written notice upon the other. Termination
notice must be delivered within 30 days after the casualty.
23. ASSIGNMENT. Lessee may not assign, sublet or underlet the Leased Premises or
any portion thereof without the prior written approval of Lessor. Any attempt to
do so will be null and void. Neither the acceptance of rent from any assignment,
sublease, or underlease nor the passage of time will constitute a waiver of this
prohibition. In the event Lessor's written approval is given to such assignment,
subletting or underletting, Lessee will not be relieved from any liability
hereunder.
24. HOLDING OVER. If Lessee remains in possession of the leased premises after
the expiration of, or mutual agreed termination of this Lease, without the
execution by Lessor and Lessee of a new Lease or a negotiated extension of this
Lease, then (a) Lessee will be deemed to be occupying the leased premises as a
tenant-at-sufferance on a daily basis, subject to all obligations of this Lease,
(b) Lessee will pay for the entire holdover period at the rate of one hundred
twenty-five percent (125%) of the rental for the most recently completed lease
period, (c) Lessee will be subject to all other remedies of Lessor as provided
in Paragraphs 20 and 21, (d) Lessee will indemnify Lessor and /or prospective
tenants for damages (including lost rentals, storage expenses, and attorney's
fees), and (e) at Lessor's sole option, Lessee may extend the lease term for a
period of one month at the then current rental rates for the building, as
reasonably determined by Lessor, by written notice to Lessee. Holdover rents
will be immediately due on a daily basis and delinquent without notice or
demand; and the prior written notice and waiting period requirements of
Paragraph 20 will not be necessary in order for Lessor to exercise remedies
thereunder.
25. ATTORNEY'S FEES, INTEREST AND OTHER EXPENSES. All sums due and unpaid by
Lessor or Lessee under this Lease will bear interest at the maximum lawful rate
of interest from date of default under Paragraph 20 or other paragraphs until
paid, plus any late payment fees due under this Lease. Late payment fees will be
considered liquidated damages for Lessor's loss of use of such funds during the
time of delinquency. If either party is in default under this Lease and if it
becomes necessary for the non-breaching party to place this Lease in the hands
of an attorney in order to enforce the rights or remedies of such non-breaching
party, the non-breaching party, may recover reasonable attorney's fees even if
suit has not been filed. In any lawsuit concerning this Lease, the prevailing
party will be entitled to recover reasonable attorney's fees from the
nonprevailing party, plus all out-of pocket expenses such as deposition costs,
telephone calls, travel expenses, expert witness fees, court cost, and other
reasonable expenses.
<PAGE> 10
26. NONWAIVER. Lessor's acceptance of rent or failure to complain of any action,
nonaction or default of Lessee, whether singular or repetitive, will not
constitute a waiver of any of Lessor's rights. If Lessee's payment of any sums
due Lessor is accompanied by written conditions or is represented by Lessee to
be a settlement or satisfaction of any obligation, Lessor may accept and deposit
such monies without being bound by such conditions or representation unless
Lessor expressly agrees in a separate written instrument. Lessor's waiver of any
right of Lessor or any default of Lessee will not constitute a waiver of any
other right or constitute waiver of any other default or subsequent default. No
act or omission by Lessor or Lessor's agents will (in the absence of a signed
agreement) be deemed an acceptance of surrender of the leased premises. No
agreement by Lessor to accept a surrender of the leased premises will be valid
unless it is in writing and signed by a duly authorized agent of Lessor.
27. SURRENDER OF PREMISES. At the expiration or termination of this Lease or the
termination of Lessee's right of possession, Lessee will surrender the lease
premises to Lessor in the same condition as on the date of initial possession by
Lessee, ordinary wear and tear excepted. Removal of property by Lessee upon
Lessee's surrender of the leased premises will be in accordance with this Lease.
Upon surrender, Lessee will provide Lessor with all of Lessee's keys to the
Leased Premises and the combination to all safes and vaults, if any, in the
Leased Premises.
28. LIEN FOR RENT.
(a.) Notwithstanding anything to the contrary in this Lease, Lessor's landlord
lien will be subordinate to any existing security interest and any future bona
fide security interests on Lessee's personal property if such security interest
is properly perfected and timely recorded as required by the Texas Business
Code. Lessor will cooperate in signing lien subordinations in accordance with
the foregoing. Any lien subordination will be on forms reasonably acceptable to
Lessor, provided they are substantially the same as the form in attached Exhibit
E.
(b.) Subject to the limitations of subparagraph (a) above, Lessee gives to
Lessor a contractual lien on all of Lessee's property which may be found on the
Leased Premises to secure payment of all monies and damages owed by Lessee under
the Lease. Such lien also covers all insurance proceeds on such property. Lessee
will not remove such property while rent or other sums remain due and unpaid to
Lessor and such property will not be removed until all Lessee's obligations
under the Lease have been complied with. This lien is in addition to Lessor's
statutory lien under Section 54.021 of the Texas Property Code. If Lessee is in
default for nonpayment of rent or any other sums due by Lessee, Lessor's
representatives may peacefully enter the Leased Premises and remove and store
all property. If Lessor removes any property under this lien, Lessor will leave
the following information in a conspicuous place inside the Leased Premises; (1)
written notice of exercise of lien (2) a list of items removed, (3) the name of
Lessor's representative who removed such items, and (4) the date of such
removal. Lessor will be entitled to reasonable charges for packing, removing, or
storing abandoned or seized property, and may sell same at public or private
sale (subject to any properly recorded chattel mortgage or recorded financing
statement) after 30 days' written notice of time and place of sale is given to
Lessee by certified mail, return receipt requested. Upon request by Lessor,
Lessee will acknowledge the above lien rights by executing a UCC-1 form or
similar form reflecting same.
<PAGE> 11
Lessor's subordination of Lessor's lien to any UCC-1 line will be subject to the
following condition: If such UCC-1 lienholder removes or causes to be removed
any property attached to the Leased Premises, such lienholder will restore the
premises to its condition prior to the removal of the fixtures.
29. NO TERMINATION ON BANKRUPTCY. Neither bankruptcy, insolvency, assignment for
the benefit of creditors, nor the appointment of a receiver will affect this
Lease so long as all covenants of Lessee are continued in performance by Lessee
or Lessor and their respective successors or legal representatives.
30. NOTICES. Any notices, requests or other communications required hereunder
will be in writing, and will be deemed duly given if made in writing and
personally delivered, mailed by registered or certified mail or sent by
facsimile transmission with receipt confirmed, as follows:
TO LESSOR: William B. & Cheri Stringer
c/o Ausvest, Inc.
1135 W. 6th Street, Suite 115
Austin, Texas 78703
(512) 472-5606
(512) 472-5701 FAX
TO LESSEE: Jose Chavez, CEO and President
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
(512) 476-6925
(512) 473-2371 (FAX)
The parties may change their address for notice by notice given in accordance
with this Paragraph.
31. SECURITY DEPOSIT. In addition to the rental for the first month of the
Lease, Lessee will promptly upon execution of this Lease pay the Lessor the sum
of $ 7,846.50 to remain on deposit with Lessor, without liability for interest,
as security for the faithful performance of all the terms and conditions of this
Lease by Lessee. Upon the effective date of any rental increases throughout the
term of this Lease and/or any extensions hereof, Lessee will make additional
payments to Lessor, so that Lessor at all times holds a security deposit equal
to the then current monthly rental amount. If Lessee should default in
performing any term or provision of this Lease, then the security deposit, or
any part hereof, may be applied to the damages or expenses sustained by Lessor
by reason of such default; such application will not be construed as an
agreement to limit the amount of Lessor's claim or as a waiver of any damages,
but on the contrary Lessor's claim for damages not covered by such security
deposit will remain in full force
<PAGE> 12
and effect. Lessee will immediately restore the security deposit to the level of
the current Total Scheduled Rental after any portion of it is applied to amounts
due and unpaid by Lessee. If, at the end of the term of the Lease, Lessee is not
in default in the performance of any provision of this Lease, the security
deposit, or any balance thereof remaining, will be refunded to Lessee.
32. HEIRS AND ASSIGNS. This Lease will be binding upon and inure to the benefit
of the heirs, legatees, devisees, executors, administrators, successors, and
assigns of the respective parties hereto, who may come into possession of the
premises in any manner whatsoever, provided that no transferee of Lessor's
interest in the premises will disturb Lessee's quiet enjoyment while Lessee is
not in default.
33. ESTOPPEL CERTIFICATES. From time to time, upon 10 days prior written request
from Lessor, Lessee will execute and deliver to Lessor the estoppel certificate
attached as Exhibit B. The form in Exhibit B may be changed as reasonably
required by a prospective purchaser or lender. If any statement in the estoppel
certificate form is contrary to the facts existing at the time of execution of
such form, Lessee may correct same before signing. Reasonable modifications in
the form may be made as requested by a prospective lienholder or purchaser of
the Leased Premises. If Lessee fails to comply with the foregoing by the end of
such 10-day period, it will be conclusively presumed that (1) this Lease is in
full force and effect without any subleases or assignments and is unamended or
modified except for amendments verified by affidavit of Lessor to the
prospective lienholder or purchaser, (2) no rents, security deposits, or other
charges have been prepaid, (3) the statements contained in the estoppel
certificate from (Exhibit B) are correct, (4) there are no uncured defaults by
Lessor, (5) Lessee has no right of offset or rescission, and (6) any prospective
purchaser or lienholder may conclusively rely on such silence or noncompliance
by Lessee and may conclusively assume no Lessor defaults within the 120 days
following Lessee's receipt of Lessor's request for an estoppel certificate. If
the estopel certificate discloses the name and address of the entity who will be
relying on the estoppel certificate, Lessee will, during the 120 days following
the date of the estoppel certifiate, have the duty to give to such entity
written notice of any default by Lessor.
34. SUBORDINATION. Upon request of Lessor, Lessee will in writing subordinate
its' rights hereunder to the lien of any first mortgage, or first deed of trust,
to any bank, insurance company or other lending institution, now or hereafter in
force against the land and building of which the Leased Premises are a part, and
upon any buildings hereafter placed upon the land of which the Leased Premises
are a part, and to all advances made or hereafter to be made upon the security
thereof, provided that such lien holder agrees not to disturb Lessee's quiet
enjoyment of the premises so long as Lessee is not in default.
In the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by Lessor
covering the Leased Premises, Lessee will attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as Lessor under this Lease.
Lessor will obtain from each holder of a deed of trust, mortgage or security
agreement that is superior to this Lease (and from future holders of such
instruments) a written nondisturbance
<PAGE> 13
agreement in recordable form and provided by Lessee, confirming that the rights
of Lessee will remain in effect (including in the event of a foreclosure) during
the term of the Lease (and its exercised renewals) and that Lessee's occupancy,
use and enjoyment of the premises will not be disturbed so long as Lessee will
continue to faithfully perform and observe the covenants and conditions of this
Lease.
35. LESSOR'S WARRANTY OF TITLE. Lessor hereby represents and warrants that he is
the owner in fee simple absolute of the leased premises or is authorized to
enter into this agreement on behalf of such owners subject to previously
recorded covenants, conditions, restrictions, easements, and other matters of
record: and Lessor represents that it is aware of no such matter of record that
would conflict with or impair Lessor's warranty in Paragraph 36. Lessor's duties
and warranties are limited to those expressly stated in this Lease and will not
include any implied duties or implied warranties, now or in the future. No
representations or warranties have been made by Lessor other than those
expressly contained in this Lease.
36. LESSOR'S WARRANTY OF QUIET ENJOYMENT. Lessor covenants and agrees that
Lessee, on paying the rent and other charges herein provided for and observing
and keeping the covenants, conditions, and terms of this Lease and Lessee's part
to be kept or performed, will lawfully and quietly hold, occupy, and enjoy the
leased premises during the term of this Lease without hindrance or molestation
of Lessor or any person claiming under Lessor except such portion of the leased
premises, if any, is taken under the power of eminent domain.
37. REPRESENTATIONS AND WARRANTIES BY LESSEE. Lessee warrants to Lessor that (1)
any financial statements of Lessee heretofore furnished to Lessor are true and
correct to the best of Lessee's knowledge, (2) there has been no significant
adverse change in Lessee's financial condition since the date of any financial
statements provided to Lessor, (3) any financial statements presented to Lessor
fairly represent the financial condition of Lessee upon those dates and at the
time of execution hereof, and (4) there are no delinquent taxes due and unpaid
by Lessee. Lessee warrants that Lessee has disclosed in writing to Lessor all
lawsuits pending or threatened against Lessee, and Lessee has made no material
misrepresentation or material omission of facts regarding Lessee's financial
condition or business operations. Any financial statements submitted to Lessor
must be dated and signed by Lessee. Lessee acknowledges that if financial
statements are submitted, Lessor has relied on the above information furnished
by Lessee to Lessor and that Lessor would not have entered into this Lease
otherwise. Financial statements referred to in subparagraph (1) above are
attached as Exhibit D. The parties agree to keep the information in Exhibit D
confidential except as reasonably required for legitimate business purposes.
(Lessor's banker, attorney, partners, etc.)
38. HAZARDOUS MATERIALS.
a. Lessee will not cause or permit any Hazardous Material (as hereinafter
defined) to be brought on, stored, or used in or about the Leased Premises by
Lessee, its agents, employees, contractors, or invitees, other than those
expressly permitted by Lessor. If Lessee breaches the obligation stated in the
preceding sentence, or if the presence of Hazardous Materials on the Leased
Premises caused or permitted by Lessee (including Hazardous Materials
specifically permitted) results in contamination of the Leased Premises, or if
contamination of the Leased
<PAGE> 14
Premises by Hazardous Material otherwise occurs for which Lessee is legally
liable to Lessor for damage resulting therefrom, then Lessee will indemnify,
defend, and hold Lessor, its agents, and contractors harmless from any and all
claims, judgments, damages, penalties, fines, costs, liabilities, or losses
(including, without limitation, diminution in value of the Leased Premises,
damages for the loss or restriction on use of rentable or usable space or of any
amenity of the Leased Premises, damages arising from any adverse impact on
marketing of space in the Leased Premises, and amounts paid in settlement of
claims, costs, attorneys' fees, consultant fees, and expert fees) that arise
during or after the term of this Agreement as a result of such contamination.
This indemnification of Lessor by Lessee includes, without limitation, costs
incurred in connection with any investigation of any site conditions or any
cleanup, remediation, removal, or restoration work required by any federal,
state, or local government agency, or political subdivision because of Hazardous
Material present in the soil or ground water on or under the Leased Premises as
a result of Lessee's actions. Without limiting the foregoing, if the presence of
any Hazardous Material on the Leased Premises caused or permitted by Lessee
results in any contamination of the Leased Premises, Lessee will promptly take
all actions at its sole expense as are necessary to return the Leased Premises
to the condition existing prior to the introduction of any such Hazardous
Material to the Leased Premises, provided that Lessor's approval of such action
will be first obtained, which approval will not be unreasonably withheld so long
as such action would not potentially have any material adverse long-term or
short-term effect on the Leased Premises.
b. Notwithstanding the provisions of subparagraph (a) above, if (i) any
anticipated use of the Leased Premises by Lessee involves generation, storage,
use, treatment, or disposal of Hazardous Material, (ii) Lessee has been required
by any prior Lessor, lender, or governmental authority to take remedial action
in connection with Hazardous Material contaminating a property if the
contamination resulted from such party's action or use of the property in
question, or (iii) Lessee is subject to an enforcement order issued by any
governmental authority in connection with the use, disposal, or storage of a
Hazardous Material, Lessor will have the right to terminate this Agreement in
Lessor's sole and absolute discretion (with respect to any such matter involving
Lessee).
c. At any time prior to the expiration of the term of this Agreement,
Lessor will have the right to conduct appropriate tests of water and soil and to
deliver to Lessee the result of such tests to demonstrate the contamination in
excess of permissible levels has occurred as a result of Lessee's use of the
Leased Premises. Lessee will be solely responsible for and will defend,
indemnify, and hold Lessor and its agents, and contractors harmless from any and
against any and all claims, costs, and liabilities including attorneys' fees and
all costs, arising from or in connection with any removal, cleanup, restoration,
and materials required under this Lease to return the Leased Premises and any
other property of whatever nature including any adjoining or adjacent property
that has been similarly contaminated by Lessee, its agents, employees,
contractors, or invitees to their condition existing prior to the appearance of
the Hazardous Materials. To the best of Lessor's knowledge and belief, the
Leased Premises is in compliance with all applicable Environmental Laws (meaning
any federal, state, or local law or regulation) as of the date on which this
Lease is being executed. Lessee does not assume any responsibility to Lessor or
any other person with respect to any environmental feature or condition of the
Leased Premises that is not caused by Lessee, its agents, employees, contractors
or invitees. Lessor agrees to indemnify and hold Lessee harmless from all
claims, demands, actions, liabilities, costs,
<PAGE> 15
expenses (including reasonable attorneys fees and other costs of defense),
damages and obligation of any nature arising from or as a result of any
environmental contamination, hazardous waste, hazardous substances, or violation
of an Environmental Law attributable to (i) contamination existing prior to the
execution of this Lease, or (ii) any cause independent of the acts, negligence
or breach of this Lease on the part of Lessee, and its agents, servants,
employees, concessionaires, licensees, invitees and customers.
d. Lessee's obligations under this Paragraph 38 will survive the
termination of this Agreement. During any period of time after the termination
of this Agreement that Lessee's efforts to complete the remediation of any
pollution located on the Leased Premises, or the removal of Hazardous Materials
make a new tenancy impractical, Lessee will continue to pay the full rental in
accordance with this Agreement, which rental will be prorated daily.
e. As used in this Agreement, the term "Hazardous Material" means any
hazardous or toxic substance, material, or waste that is or becomes regulated by
any local governmental authority, the State of Texas, or the United States
Government. The term "Hazardous Material" includes, without limitation, any
material or substance that is (i) defined as a "hazardous waste," "extremely
hazardous waste" or "restricted hazardous waste" by the State of Texas, (ii)
defined as a "hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), (iii) defined as a "hazardous
waste" pursuant to Section 1004 of the Federal Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et. seq. (42 U.S.C. Section 6903), (iv)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response Compensation and Liability Act, 42. Section 9601 et. seq.
(42 U.S.C. Section 9601), or (iv) any petroleum-based products regardless of the
so-called "petroleum exclusion" in _9601(14) of CERCLA as well as all indigenous
components of crude oil such as benzene, toluene, xylene, ethylbenzene, and
lead.
f. Notwithstanding anything contained in Paragraph 38e to the contrary,
"Hazardous Material" will not include materials commonly used in the ordinary
operations of a computer services company provided that (i) such materials are
used and stored in the Leased Premises in quantities ordinarily used and stored
for computer services companies and (ii) such materials are not introduced into
the buildings plumbing systems or are not otherwise released or discharged in
the Leased Premises.
Lessee may terminate this Lease in the event it is notified or discovers that
there is contamination in material amounts on the Leased Premises directly
affecting Lessee's business operation and such contamination is not caused by
Lessee, its agents, employees, contractors invitees or a person over whom it
exercises control, provided Lessee notifies Lessor in writing of such knowledge
and provides Lessor with verifiable evidence from a registered engineer
qualified to make such evaluation and Lessor is unable to remediate or cure such
contamination within 120 days of Lessee's written notice.
39. RENTAL PAYMENTS BY CHECK. Upon the second occasion of a check (personal or
company check) received from Lessee by Lessor or Lessor's agent for rent
hereunder, being declared uncollectable or insufficient upon the first submittal
to Lessee's financial institution for payment by Lessor, Lessor's agent or a
financial institution of their choice, Lessor or Lessor's agent will have the
right to require all subsequent rent payments from Lessee under this Lease be
paid to Lessor or Lessor's agent in the form of cashier's check or money order
from a financial institution acceptable to Lessor or Lessor's agent.
<PAGE> 16
Also, in the event Lessee's check is declared uncollectable or insufficient as
referenced heretofore, Lessee hereby recognizes that rents hereunder have not
been paid Lessor and all delinquent charges or other remedies afforded Lessor
hereunder are applicable as if no check or other form of payment had been
tendered to Lessor or Lessor's agent.
40. LESSOR'S BROKERAGE STATUS. Lessee hereby recognizes Lessor is a licensed
Real Estate Broker (License # 0177899) in the State of Texas.
41. COMMISSION. Lessor agrees to pay John Hernandez of Girton & McAllister 3% of
the minimum rental each month as the rents are collected
42. LESSEE'S FIRST RIGHT OF REFUSAL TO PURCHASE. Lessee will have the first
right of refusal to purchase in the event Lessor receives a written offer to
purchase the Leased Premises which Lessor accepts. Upon entering into such
purchase agreement with a third party purchaser, Lessor will (a) make note of
Lessee's First Right of Refusal to Purchase in such agreement (b) Give Lessee a
copy of such third party purchase agreement after which Lessee will have ten
(10) days to enter into an agreement encompassing the same terms and conditions
with Lessor to purchase the Leased Premises. Lessee's failure to enter into such
agreement will release Lessor to sell the Leased Premises to the third party
purchaser. In the event the third party purchase agreement does not close as
agreed, Lessee's First Right of Refusal will remain effective and applicable to
subsequent offers to purchase the Leased Premises.
43. ACKNOWLEDGEMENT OF LEASE. Upon commencement of this Lease, Lessor and Lessee
will execute a recordable acknowledgment of this Lease which is attached as
Exhibit C and which will confirm the commencement date, ending date and annual
anniversary of the Lease.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be executed in
duplicate originals, this 12th day of August, A.D., 1998.
LESSOR:
/s/ William B. Stringer /s/ Cheri Stringer
William B. Stringer Cheri Stringer
LESSEE: Micro-Media Solutions, Inc.
By: /s/ Jose Chavez
Jose Chavez, CEO and President
<PAGE> 17
EXHIBIT "A"
A portion of Lot 1, Outlot 7, Division "A" out of the H. and T.C. R.R. Addition,
an addition in the City of Austin, Travis County, Texas, according to the map or
plat thereof, recorded in Book "Z", Page 188, Plat Records of Travis County,
Texas, more particularly described as follows: Being out of the southeast corner
of that certain tract of land described in deed from Tom Miller, et ux, to Wm.
Cameron & Co., Inc. of record in Book 756, on Page 309-311 of the Deed Records
of Travis County, Texas, and beginning at a point in the present cyclone fence
located on the east line of the tract so conveyed to Wm. Cameron & Co., Inc., at
an iron post in the center of two spur railroad tracts, which point is the
southeast corner of a tract of land conveyed by said Wm. Cameron & Co., to J. W.
Greene for the N. E. corner of this; THENCE S 22 degrees 55' W along said
cyclone fence 192.7 feet to a cross cut in concrete for the southeast corner of
this tract, being also the southeast corner of a tract conveyed by Miller, et
ux, to Wm. Cameron & co., Inc. which point is in the south line of Lot No. 1,
Block No. 7, and is also in the north line of east Sixth Street; THENCE N 67
degrees 7' West along the south line of said Lot 2, in Block 7 and also along
the north line of this; THENCE N 22 degrees 55' E 192.7 feet, more or less, to a
point in the south line of said tract so conveyed by Wm. Cameron & Co., Inc. to
J. W. Greene for the N. W. corner of this; THENCE S 67 degrees 47' E 158 feet
more or less, to the PLACE OF BEGINNING.
EXHIBIT "B"
ESTOPPEL CERTIFICATE
This form is not to be executed at time of lease execution.
The purpose of this certificate is to confirm the current status of matter
relating to the Lease described below. It is for the benefit of the owner or
prospective purchaser or mortgagee of the building in which the Leased Premises
are located.
1. The undersigned is the Lessee under a Lease between William B. & Cheri
Stringer, as Lessor, and Micro-Media Solutions, Inc., as Lessee, dated August
_____, 1998, on Leased Premises located at 2000 E. 6th Street in Austin, Travis
County, Texas. A copy of the fully executed Lease and any amendments or
modifications thereto are attached. There are no other modifications or
amendments to the above described Lease. The dates of any amendments or
modifications are: (put "none" if inapplicable) _____________________.
2. There are no unfulfilled written or verbal promises, representations, or
warranties by Lessor.
3. There are no subleases of the Lease Premises or any portions thereof.
4. The Lease (together with any amendments or modifications referred to above)
is in good standing and in full force and effect. lessor is not in default.
Lessee agrees to give notice of any Lessor default to any purchaser or lender
making written request to Lessee for same.
<PAGE> 18
5. Except for rents (if any) which may be due under the Lease for the current
month, there are no rents or other charges which have been prepaid by the
undersigned Lessee to Lessor under the Lease other than the following:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6. The amount of security deposit currently posted by Lessee with Lessor is $
_________ in the form of ___ cash or ____ an irrevocable, unconditional letter
of credit issued by ___________________________ in favor of Lessor which is
still valid.
7. Lessee acknowledges that the space being leased consists of 20,540 "useable"
square feet according to the Lease, that the improvements to be constructed by
Lessor have been satisfactorily completed, that the lease space has been
accepted by Lessee, that Lessee now occupies the lease space, and that the
commencement date for the lease term was ___________________________________.
8. There are no rentals which are due and unpaid. Rentals are fully paid (if
required by the lease) through the last day of the month in which this estoppel
certificate has been executed.
9. There are no known offsets or credits against rental except as expressly
provided by the terms of the lease or as disclosed below. There is no known
right of rescission and no known defense to Lessee's future obligations to pay
the specified rentals at the times and in accordance with the lease terms,
except as may be disclosed below. Lessee has not received any concession (rental
or otherwise) or similar compensation not expressed in the lease which is
presently in effect, except as may be disclosed below.
10. Lessee has not (a) made a general assignment for the benefit of creditors;
and (b) commenced any case, proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization, or
relief of debtors; or (c) had any involuntary case, proceeding, or other action
commenced against it which seeks to have an order for relief entered against it,
as debtor, or seeks reorganization, arrangement, adjustment, liquidation,
dissolution, or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization, or relief of debtors; or (d) concealed,
removed, or permitted to be concealed or removed, any part of its property, with
intent to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance, or similar law; or made any transfer of its
property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or (e) had a trustee, receiver, custodian
or other similar official appointed for or take possession of all or any part of
its property or had any court take jurisdiction of any other of its property.
<PAGE> 19
11. Lessee agrees to furnish Lessor with estoppel letters on this form within 10
days (stating the then-current facts) after written request by Lessor or
subsequent owners of the building.
12. Lessee acknowledges that, upon 10 days' prior written request of Lessor's
mortgagee at any time after foreclosure proceedings or a deed in lieu of
foreclosure, Lessee will attorn to the mortgage or foreclosure purchaser by
recognizing such new owner as Lessor under the lease provided that such
purchaser will recognize the rights of tenant under the lease as long as tenant
is not in default. The agreement of Lessee to attorn will survive any
foreclosure sale or deed in lieu of foreclosure. Lessee will, upon 10 days'
written notice from Lessor's mortgagee anytime before or after foreclosure sale,
execute, acknowledge, and deliver to Lessor's mortgagee all instruments and
certificates that in the reasonable judgment of Lessor's mortgagee may be
necessary or proper to confirm such attornment.
13. Lessee acknowledges that this estoppel certificate and the statements
therein may be conclusively relied upon by Lessor and by any prospective
purchaser or lien holder of the Leased Premises.
14. The form of this estoppel certificate may vary, depending on lender or
purchaser requirements. It is agreed that this certificate may be modified to
conform to reasonable requests by lenders or purchasers.
15. This agreement will be binding upon and will inure to the benefit of the
Lessor, any present or future mortgagee, any prospective buyer or master Lessee
of the property, and their successors and assigns.
Dated this day of , 19 .
------------- --------------- ----
Lessee
------------------------------------------------
By
---------------------------------------------------
Printed Name of signatory
-----------------------------
Title
-------------------------------------------------
EXHIBIT "C"
ACKNOWLEDGMENT OF LEASE
The undersigned parties acknowledge that the Lease described below is in full
force and effect and that Lessee has taken possession of the space.
Date of Lease August 12, 1998
Lessor: William B. & Cheri Stringer
Lessee: Micro-Media Solutions, Inc.
Address of Leased Premises: 2000 E. 6th Street, Austin, Texas, 78702
Legal Description of Leased Premises: Portion of Lot 1 of Outlot 7, Division A
of the H & TC Railroad Addition.
<PAGE> 20
The commencement date, annual anniversary date, and ending date of the initial
Lease term as defined in Paragraph 2 of the Lease are as follows:
Commencement date: September 30, 1998
Annual Anniversary date: September 1, 1998
Ending date: August 31, 2005
The parties acknowledge that the Lease has not been amended or modified and that
this acknowledgment may be filed of record with the Texas Secretary of State or
the county where the property is located in order to record (1) Lessee's
possession rights to the Leased Premises, and (2) Lessor's contractual landlord
lien rights to the extent provided in the lease, over all personal property
therein and any security deposit posted by Lessee. The entire Lease is hereby
affirmed and incorporated herein. The Lease will cease to be an encumbrance to
Lessor's title if Lessor files an affidavit of record, stating that Lessee no
longer occupies the Leased Premises and that Lessee's right of possession has
been lawfully terminated.
Lessee: Lessor:
(To be signed at move-in) (To be signed at move-in)
Micro-Media Solutions, Inc. William B. & Cheri Stringer
By: /s/ Jose Chavez /s/ Cheri Stringer
Title: President & CEO Cheri Stringer
Date Signed: 8/12/1998 Date Signed: 8/12/98
/s/ William B. Stringer
William B. Stringer
Date Signed: 8/12/98
EXHIBIT "D"
Lessee's Financial Statement
EXHIBIT "E"
LANDLORD'S SUBORDINATION AGREEMENT AND
LIMITED WAIVER OF LANDLORD LIEN RIGHTS
Creditor (lender or vendor)
---------------------------------------------------
Landlord
---------------------------------------------------------------------
Debtor (Tenant)
---------------------------------------------------------------
Date of Lease between Landlord and Tenant
-------------------------------------
Street Address of Leased Premises
---------------------------------------------
Collateral (describe Collateral here; be specific)
----------------------------
1. SUBORDINATION TO CREDITOR'S LIEN. The Landlord's lien to secure performance
of Tenant's lese obligations under the above described lease is hereby
subordinated to Creditor's lien, provided that the Creditor's lien (i.e.,
security agreement or UCC-1 financing statement) is timely recorded as required
by the Texas Business Code.
2. WAIVER BY LANDLORD. Landlord waives its right to exercise Landlord's lien by
seizure of the Collateral unless (a) Creditor's superior lien has been
terminated, or (b) seizure is pursuant to court order with proper protection for
the Collateral and at least 10 days written notice to Creditor. Such judicial
action will not adversely affect Creditor's superior lien rights in any way.
3. TIME LIMIT ON CREATION OF CREDITOR'S LIEN. The Creditor's lien referred to in
this Agreement is limited to security agreements or UCC-1 financing statements
securing loans made prior to the date of the above lease, purchase money loans,
purchase money installment sales, or lease-purchase agreements entered into
heretofore or within 14 days from the date hereof. This Subordination Agreement
will not extend to loans, sales contracts, or lease-purchase agreements entered
into after such 14-day period.
4. ADDITIONAL CREDITOR'S RIGHTS. As between Landlord and Creditor, Landlord
agrees that (a) the Collateral is and will remain personal property
notwithstanding the fact that it is or is not affixed to realty, and (b)
Creditor may remove at any time all or any part of the Collateral from the
Leased Premises. Creditor agrees to reimburse Landlord for any damages caused to
the Landlord's premises by Creditor's removal of the Collateral. Without notice
or consent of Landlord, Creditor may waive any security interest in the
Collateral without waiving its rights under this Agreement.
5. BINDING ON SUCCESSORS. This Agreement is binding upon and will accrue to the
benefit of the successors and assigns of Landlord and Creditor and is not
effective unless executed by Landlord and Creditor, each receiving a copy.
Name of Name of
Landlord Creditor
---------------------------- ----------------------------
By By
----------------------------------- ---------------------------------
Title Title
-------------------------------- -------------------------------
Date Date
--------------------------------- -------------------------------
Lessee's Initials Lessor's Initials
---------- ----------
<PAGE> 1
EXHIBIT 10.2
SUBLEASE
This Sublease is made as of the 27th day of July, 1998, by and between GTE
Intelligent Network Services Incorporated, a Delaware corporation ("Subtenant"),
and Micro-Media Solutions Inc., a Texas corporation and successor in interest to
Media Solutions ("Sublandlord").
RECITALS
A. Sublandlord is the tenant under that certain Lease Agreement dated as of
June 6, 1994 as amended by Addendum to Lease Agreement, dated March 11, 1996,
and as further amended by Second Amendment to Lease Agreement, dated
concurrently herewith (collectively, the "Master Lease") with WBH, Ltd., a Texas
limited partnership and successor in interest to W.B. Houston & Company (the
"Landlord"). A copy of the Master Lease, with certain economic terms deleted, is
attached hereto as Exhibit A. Pursuant to the Master Lease, Sublandlord is
leasing approximately 36,100 rentable square feet of space (the "Premises"),
with 19,100 square feet in the building located at 1210 East Fifth, Austin,
Texas, and 17,000 square feet in the building located at 501 Waller, Austin,
Texas.
B. Sublandlord desires to sublease to and Subtenant desires to sublease
from Sublandlord a certain portion of the Premises located at 501 Waller, Lots
10-12, Block 4, Outlot 3, Division A, City of Austin, Travis County, Texas (the
"Building") consisting of approximately 10,000 rentable square feet of floor
space (the "Subleased Premises") more particularly shown on Exhibit B, attached
hereto.
AGREEMENT
The parties hereto agree as follows:
1. Sublease. Sublandlord hereby subleases and demises to Subtenant and
Subtenant hereby hires, subleases and takes from Sublandlord the Subleased
Premises.
2. Term. The term of this Sublease shall commence on the later of the
execution and delivery of this Sublease by Sublandlord, Subtenant, and Landlord,
or delivery of the Subleased Premises to Subtenant ("Commencement Date"). The
term shall end, unless sooner terminated as provided herein, on the day
proceeding the 10th anniversary of the Commencement Date. Sublandlord shall
deliver the Subleased Premises to Subtenant by not later than August 17, 1998.
3. Rent.
3.1 Base Rent. Commencing on the Commencement Date, Subtenant shall pay
monthly base rent ("Base Rent") during
<PAGE> 2
the term of this Sublease of $3.75 per square foot per year ($3,125 per month).
On each anniversary of the Commencement Date, the Base Rent shall increase by
3%, as shown on Exhibit "F".
3.2 Additional Rental. In addition to Base Rent, commencing with the
calendar year which begins on January 1, 1999 and for each calendar year
thereafter, Subtenant shall pay, as Additional Rental under this Sublease,
Subtenant's pro rata share of all increases in Additional Rental that are passed
through to Sublandlord pursuant to Section 3.2 of the Master Lease. Subtenant's
pro rata share is determined by multiplying 27.70% (the "Subtenant Escalation
Percentage") by the annual increases in Additional Rental for the Premises which
are imposed pursuant to the terms of the Master Lease. Commencing January 1,
1999, Subtenant shall reimburse Sublandlord monthly for 1/12 of the pro rata
share of such increases as are estimated by Landlord and imposed pursuant to the
Master Lease, which amount shall be adjusted to reflect the actual share as
determined by and in accordance with the Master Lease. The current Subtenant
Escalation Percentage has been calculated by dividing 10,000, which is the total
number of rentable square feet in the Subleased Premises, by 36,100, which is
the total number of usable square feet in the Premises as provided in the Master
Lease. Subtenant shall not be obligated to reimburse Sublandlord (or to pay to
Landlord, in the event of a direct lease) the amount of $300 per month that
Sublandlord is obligated to pay Landlord pursuant to Section 5 of the Second
Addendum.
3.3 Partial Month. The Base Rent and any Additional Rental shall be
prorated as to any partial month.
3.4 Supporting Documents. Sublandlord agrees to (i) reasonably
cooperate with Subtenant, at no cost to Sublandlord, in requesting from Landlord
supporting documentation and backup for Operating Expenses used to calculate
Additional Rental under the Master Lease, and (ii) make reasonable efforts, not
more frequently than once in each calendar year during the term of this
Sublease, to obtain Landlord's permission to audit said books and records on
Subtenant's behalf and at Subtenant's sole cost and expense. If having obtained
Landlord's permission to conduct an audit of Landlord's books and records and,
upon completion of such audit an overcharge or other discrepancy is revealed
thereby, then to the extent any such amounts have been (a) paid by Subtenant
pursuant to the Sublease and (b) refunded to Sublandlord by Landlord,
Sublandlord shall reimburse Subtenant
<PAGE> 3
for its pro rata share of any such overcharge or discrepancy. Sublandlord's sole
obligation hereunder shall be to make reasonable attempts to obtain Landlord's
cooperation with respect to its books and records and Sublandlord shall not be
liable to Subtenant as a result of or in connection with any discrepancy or
inaccuracy in Landlord's books, records or method of accounting.
3.5 No Security Deposit. Subtenant shall not be required to pay a
security deposit.
4. Use. Notwithstanding anything in the Master Lease to the contrary, the
Subtenant shall have the following rights:
4.1 Subtenant's Use of Subleased Premises and Project.
4.1.1 During Construction. During construction, Subtenant is
permitted to store and stage equipment and material in that certain warehouse
located outside of the footprint of the R POP, and to engage in welding inside
of the Subleased Premises. During construction, Subtenant shall have 24 hour per
day, 7 day per week access to and use of the Subleased Premises, freight and
passenger elevators and hoists, electricity, water, air conditioning, and other
utilities; provided that Subtenant shall pay the actual cost of utilities used
by Subtenant outside of generally accepted business hours. Sublandlord and
Landlord agree that Subtenant shall be provided with adequate parking for all of
Subtenant's contractors during construction. Subtenant's subcontractors, shall
not, however park trailers in Landlord's parking lot.
4.1.2 Throughout Term. Subtenant is permitted (a) to construct,
maintain, operate and repair electronic, transmitting and receiving equipment
and supporting structures on the Subleased Premises, (b) to construct, maintain,
operate and repair an equipment room on the Subleased Premises, including the
construction of an upgraded fire suppression system, (c) to install, maintain,
operate, and repair electrical and other utility lines, transmission lines, and
telecommunications conduit and cabling (collectively, the "Conduits") for any
purpose, including, without limitation, connecting the Subleased Premises to
other entities located within the Project (as defined in the Master Lease) or at
other locations (but only so long as Subtenant has the consent of such other
entities), and in such locations on the Project as set forth in plans and
specifications, which plans and specifications shall be subject
<PAGE> 4
to Sublandlord's and Landlord's approval, which approval shall not be
unreasonably withheld, conditioned or delayed, (d) reasonable ingress and egress
over existing roadways on the Project for Subtenant's trucks and other vehicles,
to maintain Subtenant's equipment and the Conduits (collectively, "Equipment"),
(e) to use the Subleased Premises for any activity related to the provision of
telecommunication services, including, without limitation, the right to transmit
data, VOX, and other transmissions, (f) access to all Common Areas, including
restroom facilities, and (g) to install, maintain, operate and repair condenser
units ("Condenser") on the roof of the Building (provided any damage to the roof
resulting from such acts by Subtenant shall be repaired at the sole cost of
Subtenant), and (h) at Sublessee's sole cost and expense, to upgrade the
infrastructure of the Building, including, but not limited to, the fire
suppression system, electrical, water, and telecommunications conduit. The
Equipment shall include, without limitation, the Condenser, batteries,
uninterruptible power supply, fuel tank, and such other equipment as is listed
on Exhibit "C" attached hereto and shall be for Subtenant's exclusive use.
Subtenant shall have access to and use of the Subleased Premises, the Project
and the Conduits, 24 hours per day, 365 days per year.
4.2 Subtenant's Use of Conduit Ducts. Subtenant shall have the right to
install, maintain, operate and repair the Conduits in any of Sublandlord's
conduit ducts located on the Project, so long as Subtenant's use of the Conduits
does not interfere with Sublandlord's or any subsequent occupant of the
Building's use of Sublandlord's or such other occupant's conduit ducts located
on the Project. Sublandlord shall not install and shall not permit other tenants
of the Building to install equipment in the conduit ducts which interfere with
the Equipment. Subtenant shall also have the right to make connections with any
offsite telecommunications or other companies whose facilities may be accessed
through the Conduits point of entry in the Building or on the Project.
4.3 Unmanned Use. Sublandlord acknowledges and agrees that the
operation of the Subleased Premises may be unmanned during the Sublease Term,
and Subtenant shall not be deemed to be in default or breach of this Sublease if
Subtenant
<PAGE> 5
does not have employees, personnel or other agents present at the Subleased
Premises so long as Subtenant complies with all of Subtenant's obligations as
set forth in the Sublease, including payment of rent in accordance with this
Sublease. Nothing contained in this Sublease shall prevent Subtenant from having
employees on site, whether on a permanent or temporary basis.
5. Initial Installation and Testing. Subtenant shall have the right, at
Subtenant's sole cost and expense, at any time following the execution of this
Sublease and prior to and after the Commencement Date, to enter upon the Project
to carry out any tests, inspections, pre-installation and installation
activities on the Project as necessary for the construction and installation of
the Equipment, including without limitation, engineering and environmental
surveys, physical inspections, soil test borings, and underground trenching.
Immediately following the completion of such tests, inspections or
pre-installation activities, Subtenant shall, at Subtenant's sole cost and
expense, repair any damage to the Project caused by such inspections or pre-
installation activities, including repaving and re-landscaping any affected
areas of the Project.
Any such entry onto the Project prior to the Commencement Date of the Sublease
shall be on all of the terms and provisions of the Sublease, except for
Subtenant's obligation to pay rent.
6. Equipment Ownership; Surrender. Notwithstanding anything to the contrary
in the Master Lease, the Equipment shall be the property of and owned by
Subtenant throughout the Sublease Term, and shall in no event be deemed
fixtures, even if affixed to the Subleased Premises or Project. On or before the
Expiration Date or earlier termination of this Sublease, Subtenant shall remove
its Equipment from the Subleased Premises and Project. Notwithstanding anything
to the contrary in the foregoing, Subtenant shall not be required to remove any
Conduits, Subtenant's HVAC Unit (as defined in Section 7.3 below), Subtenant's
Generator (as defined in Section 7.4.1 below), or the fire or lightening
protection systems being installed pursuant to Section 4.2 of Landlord's
Consent, from the Subleased Premises or the Project, all of which if not so
removed by Subtenant, which removal shall be at Subtenant's sole option, shall
become the property of Landlord upon the Expiration Date or earlier termination
of this Sublease. Sublandlord and Landlord hereby expressly waive and release
any and all contractual liens and security interests or constitutional and/or
statutory liens
<PAGE> 6
and security interests arising by operation of law or under the Sublease to
which Sublandlord or Landlord might now or hereafter be entitled on any of the
property of Subtenant, including without limitation, the Equipment, Subtenant's
HVAC Unit or Subtenant's Generator. Landlord and Sublandlord further agree that
the Equipment, Subtenant's HVAC Unit, and Subtenant's Generator shall be exempt
from execution, foreclosure, sale, levy, attachment, for any Subtenant default
hereunder, and that the Equipment, Subtenant's HVAC Unit, and Subtenant's
Generator may be removed at any time from the Subleased Premises or the Project
by Subtenant.
7. Utilities.
7.1 Supply of Electrical Power. Landlord shall have no obligation to
provide utilities to the Subleased Premises, but Subtenant shall make all its
own arrangements in such regard. Subtenant's electrical power requirements are
described in Exhibit "D" attached to this Sublease. Since Subtenant has
determined that the Building's electrical system does not have sufficient
capacity to accommodate Subtenant's needs, Subtenant, at its sole cost and
expense, shall upgrade the Building's electrical system, as necessary to
accommodate the Equipment and Subtenant's HVAC Unit. Subtenant, at its sole cost
and expense, shall install a transformer tying into the Project's bus duct
system to obtain the electrical supply for the Subleased Premises and to
separately meter Subtenant's electrical power usage at the Subleased Premises.
7.2 Payment for Electrical Usage. Subtenant shall have its electrical
usage directly metered and shall pay the local public utility directly for all
such electric usage (including electrical usage for Subtenant's HVAC Unit, as
defined below) as shown by such meters.
7.3 Subtenant's HVAC Units. In addition, or at Subtenant's option,
instead of, the HVAC utilities supplied to the Subleased Premises by
Sublandlord, Subtenant shall have the right, at Subtenant's option, to install
in the Subleased Premises or elsewhere on the Project, in such location as
reasonably approved by Landlord, one or more separate self-contained twenty-four
(24) hour a day heating, ventilation and air-conditioning ("HVAC") HVAC units
(collectively, whether one or more, "Subtenant's HVAC Unit") subject to
Landlord's prior approval of the plans and specifications for the work and
<PAGE> 7
electrical requirements of Subtenant's HVAC Unit, which approval shall not be
unreasonably withheld, conditioned, or delayed. Subtenant shall pay all costs of
electrical power for such unit in the manner set forth in Section 7.2 above.
7.4 Emergency Power Generators.
7.4.1 Installation of Subtenant's Generators. Subtenant shall
have the right, at any time during the Sublease Term, at Subtenant's option and
at Subtenant's sole cost and expense to (a) install one or more emergency power
generators (collectively, whether one or more, "Subtenant's Generator") on the
Subleased Premises or elsewhere on the Project, in such location as reasonably
approved by Landlord, to provide back-up emergency power for the Equipment and
for Subtenant's HVAC Unit, and (b) store fuel on the Subleased Premises or
elsewhere on the Project, in such locations and in such manner as reasonably
approved by Landlord, in such amounts as Subtenant reasonably determines
necessary for Subtenant's Generator.
8. No Interference; Relocation.
8.1 No Interference. Landlord and Sublandlord each agrees that neither
it nor its agents, employees, or contractors (collectively, the "Sublandlord
Parties") shall interfere in any way, or authorize any other tenant or other
third party to take any actions that could interfere in any way, with the
Equipment or with Subtenant's access to the Subleased Premises, the Conduits,
Subtenant's HVAC Unit, or Subtenant's Generator (the "Interference"). Landlord
and Sublandlord each agree that prior to carrying out (or authorizing any other
tenant or other third party to carry out) any construction, maintenance or
repair activities (other than emergencies, in which case notice shall be given
to Subtenant as quickly as possible, with best efforts being made to notify
Subtenant prior to commencement of the activity) which are in the vicinity of
the Subleased Premises, the Conduits, Subtenant's HVAC Unit, or Subtenant's
Generator, Sublandlord and Landlord shall provide three (3) days' prior written
notice of such parties' intent to carry out such construction, maintenance or
repair work, including the date, time and location in which such work will take
place. Notwithstanding any Notices provision in the Sublease, Landlord and
Sublandlord shall provide such written notice to the following Subtenant
representative at the following address:
<PAGE> 8
Rick Wyss, Director-Strategic Services, Assets, GTE Support A, 5800 Campus
Circle Drive, Irving, Texas 75063. Subtenant shall have the right to monitor and
inspect such work at Subtenant's own risk, and at Subtenant's sole cost and
expense. Sublandlord and Sublandlord Parties shall exercise all due care in
carrying out such work as they perform, and Landlord shall notify such other
parties that they are obligated to exercise due care in carrying out such work.
Landlord and Sublandlord shall immediately notify the Subtenant's designated
contact person by telephone or facsimile in the event of fire, power failure,
bomb threats, or other unplanned events of which Landlord or Sublandlord becomes
aware which could adversely impact Subtenant's operations.
8.2 Remedies. Upon written notice from Subtenant stating with
specificity that an Interference has been created in violation of Section 8.1
above, Sublandlord or Landlord, as applicable, shall promptly take all
reasonably necessary measures at Sublandlord's or Landlord's, as applicable,
sole cost and expense, to eliminate the Interference, including hiring agents to
work extended hours, until the Interference is eliminated. If Landlord or
Sublandlord, as applicable, does not eliminate the Interference, Subtenant shall
have the right, at Subtenant's option, in addition to any other remedy at law or
in equity, to (a) eliminate the Interference, and deduct the cost of eliminating
the Interference from the Base Rent next due, (b) obtain injunctive relief
enjoining or restraining whatever Interference may have occurred or be
occurring, without posting a bond or other security and without proving damages,
it being expressly recognized by Sublandlord that any Interference will cause
irreparable harm to Subtenant which cannot be fully compensable by damages, or
(c) immediately terminate this Sublease, in which event, this Sublease shall be
of no further force and effect and Subtenant shall have no further obligations
hereunder.
8.3 Relocation. In no event shall Sublandlord or Landlord relocate
Subtenant or the Equipment to other premises, or require Subtenant to relocate
its Equipment for any length of time to any other location, either on the
Project or elsewhere.
<PAGE> 9
9. Access. Notwithstanding anything in the Master Lease to the contrary,
access rights shall be established as follows:
9.1 Subleased Premises. Sublandlord and Landlord acknowledge and agree
that the Equipment at the Subleased Premises is highly sensitive, requiring
specialized maintenance and care. It is essential to the successful operation of
Subtenant's business that access to the Subleased Premises be restricted to
Subtenant's employees and agents. Sublandlord and Landlord shall only have
access to the Subleased Premises for the purpose of making such alterations,
repairs, improvements or additions to the Subleased Premises as required
pursuant to this Sublease or the Master Lease. Except in the case of
Emergencies, as described below, Sublandlord or Sublandlord Parties shall give
no less than two (2) days' prior written notice to Subtenant prior to each entry
onto the Subleased Premises and upon each such entry, Sublandlord Parties shall
be accompanied by a representative of Subtenant. Sublandlord acknowledges that
due to the foregoing reasons, neither Sublandlord nor Landlord shall have a key
to the Subleased Premises during the Sublease Term.
9.2 Emergency Access - Subleased Premises. In the event of an
Emergency, Landlord, Sublandlord, or emergency personnel including fire or
police department personnel, may use force to enter the Subleased Premises in
order to remedy such Emergency; provided, however that Landlord, Sublandlord,
and such emergency personnel shall use reasonable efforts to avoid causing
damage to or interfering with the Equipment. Subtenant shall, upon receipt of
notice from Landlord or Sublandlord, pay for all damage to the Subleased
Premises or Project resulting from such forced entry by Landlord, Sublandlord,
or such emergency personnel into the Subleased Premises, including without
limitation, damage to the door leading into the Subleased Premises due to an
Emergency. For purposes of this Section, an "Emergency" shall mean a condition
in the Subleased Premises reasonably likely to cause (a) imminent bodily harm to
persons at the Project or (b) imminent and substantial damage to the Project.
9.3 Project. Landlord acknowledges and agrees that in order to
accommodate Subtenant's specialized utility needs, Subtenant shall have a key to
each and every mechanical room located at the Project which contains equipment
or cabling of any kind relating to the Subleased Premises or the Equipment,
including without limitation, boiler rooms and electrical rooms (the "Subtenant
Access Mechanical Rooms"). Landlord and Sublandlord further acknowledge and
agree that it is essential to the successful operation of Subtenant's business
that access to each and every Subtenant Access Mechanical Room be restricted in
<PAGE> 10
order to protect the special requirements of the Equipment and Subtenant's
specialized utility needs.
10. Assignment; Subletting. Subtenant shall have the right, without first
obtaining the consent of Landlord or Sublandlord, and without Landlord or
Sublandlord having the right of recapture, to assign this Sublease or sublease
the Subleased Premises to (a) any entity resulting from a merger or
consolidation of Subtenant with any organization; (b) any entity purchasing
substantially all of the stock or assets of Subtenant; (c) any entity succeeding
to the business and assets of Subtenant; (d) any entity which controls, or is
controlled by, is under common control with Subtenant; and (e) any public
utility or subsidiary or affiliate thereof. No change of stock ownership or
control of Subtenant shall constitute an assignment hereunder.
Subtenant shall provide Landlord and Sublandlord with written notice of such
assignment or sublease within ten (10) days after each such occurrence.
Sublandlord shall have the right to payment of all excess sums over the rent
payable hereunder after Subtenant's recovery of its out-of-pocket expenses,
including, without limitation, brokers' fees, attorneys' fees, and tenant
improvements (including the unamortized portion of Subtenant's initial costs of
construction). Landlord shall have the right to sell, transfer, or assign its
interest under the Master Lease in which event Landlord shall be released from
all obligations under this Sublease and the attached Consent after the effective
date of such sale, transfer, or assignment and upon the purchaser, transferee or
assignee assuming, in writing, Landlord's obligations under the Master Lease,
this Sublease, and the attached Consent.
11. Collocation. Landlord and Sublandlord acknowledge that Subtenant's
business to be conducted in the Building requires the installation in the
Building of certain communications equipment by certain licensees and customers
of Subtenant (collectively, "Customers") in order for such Customers to
interconnect with the Equipment or to permit Subtenant to manage or operate such
Customers' equipment, or otherwise as may be required pursuant to applicable
statutes and regulations. Notwithstanding anything to the contrary contained in
Section 16 of the Master Lease, Landlord and Sublandlord hereby consent in
advance to any sublease, license agreement, "collocation agreement" or similar
agreement (collectively, "Customer License") between Subtenant and such a
Customer for the limited purpose of permitting such arrangements as described
above. The
<PAGE> 11
effectiveness of such advance consent to a particular Customer License is
conditioned upon (a) such Customer and Subtenant signing and submitting to
Sublandlord and Landlord a Notice and Agreement, in the form attached hereto as
Exhibit "E" to this Sublease, and (b) such Customer License being in writing and
consistent with the provisions of this Sublease (although Subtenant will only be
required to provide Sublandlord and Landlord a copy of the executed Customer
License if the Sublandlord or Landlord requests it in writing).
12. Confidentiality. Landlord and Sublandlord shall keep all Confidential
Information of Subtenant confidential; provided nothing herein shall prevent
reasonable disclosure to attorneys, accountants, or business consultants, or
disclosure required by law, court order, or subpoena. For the purposes of this
Sublease, "Confidential Information" includes any data or information pertaining
to Subtenant or Subtenant's business, regardless of medium, that is provided by
Subtenant to Sublandlord or Landlord, including Subtenant's plans and
specifications or electrical power requirements, site plans, or copies of any
such information, but excludes any information (a) approved in writing by
Subtenant for release to third parties, (b) that Sublandlord or Landlord
possesses independently of Subtenant, or (c) that Subtenant places in the public
domain.
13. Approvals; Utilization of Equipment and Subleased Premises. Subtenant's
obligations under this Sublease are conditioned upon Subtenant, within ninety
(90) days after the date Subtenant signs the Sublease, (1) obtaining all
licenses, permits or other governmental approvals as may be required for
Subtenant's proposed use of the Subleased Premises (the "Approvals") and (2)
determining to Subtenant's satisfaction, based on Subtenant's independent
investigation, that Subtenant will be able to utilize the Equipment and
Subleased Premises in the manner permitted under the Sublease. In the event
Subtenant determines in its sole discretion that it is unable to obtain any such
Approvals or utilize the Equipment and Subleased Premises as set forth above,
Subtenant may terminate this Sublease upon written notice to Sublandlord, in
which event the parties' obligations under this Sublease shall terminate,
effective as of the termination of the Sublease. In the event Subtenant does not
so terminate this Sublease within such 90-day period, Subtenant will be deemed
to have waived its termination right.
<PAGE> 12
14. Master Lease. Except as otherwise expressly provided in this Sublease,
the covenants, agreements, terms, provisions and conditions of the Master Lease,
all as they relate to the Subleased Premises and are not inconsistent with the
terms of this Sublease, are made a part of and incorporated into this Sublease
as if recited herein in full, and the rights and obligations of the Landlord and
the Tenant under the Master Lease shall be deemed the rights and obligations of
Sublandlord and Subtenant, respectively, hereunder and shall be binding upon and
inure to the benefit of Sublandlord and Subtenant, respectively. In the event of
a conflict between the terms of the Master Lease and the terms of this Sublease,
the terms of this Sublease shall control. All references to the default of
Subtenant shall refer to the definition of default and shall including the cure
periods, grace periods and notice requirements set forth in the Master Lease.
15. Performance Under Master Lease.
15.1 Sublandlord's Performance.
(a) Any obligation of Sublandlord regarding Subtenant's use or
occupancy of the Subleased Premises which is contained in this Sublease may be
performed by Sublandlord using reasonable efforts to cause the Landlord to
perform the same. Sublandlord shall have no obligation to commence any action or
incur any expense in order to cause such performance by the Landlord; provided,
however, that on Subtenant's request and at Subtenant's cost, Sublandlord shall
commence any action or take any steps deemed by Subtenant to be reasonably
necessary to enforce Subtenant's rights. If any cash recovery from such action
would be paid to Sublandlord, Subtenant shall first receive reimbursement of its
actual out-of-pocket costs. Thereafter, any recovery shall be allocated between
Sublandlord and Subtenant in proportion to their respective premises.
(b) Landlord's Compliance. In light of the extremely sensitive
nature of Subtenant's Equipment and business operations, Landlord agrees that,
notwithstanding the fact that this is a Sublease, Subtenant shall have the right
to initiate a direct relationship with Landlord as deemed reasonably necessary
by Subtenant if Landlord is not in compliance with the terms of the Master Lease
or this Sublease, and such noncompliance results in an adverse effect on
Subtenant's Equipment or operations.
<PAGE> 13
15.2 Landlord Consent. Whenever the consent of Landlord shall be
required under the Master Lease, Sublandlord agrees to use reasonable efforts to
obtain such consent. Subtenant shall pay all of Sublandlord's out-of-pocket
costs and expenses in connection with obtaining such consent as the same are
incurred.
15.3 Master Lease Effective. Landlord and Sublandlord represent and
warrant to Subtenant that the Master Lease is in full force and effect, all
obligations of both Landlord and Sublandlord thereunder have been satisfied to
date and Sublandlord has neither given nor received a notice of default pursuant
to the Master Lease for an event which has not been fully cured.
15.4 Sublandlord Covenants. Sublandlord covenants as follows: (i) not
to voluntarily terminate the Master Lease (except upon terms pursuant to which
the Landlord would recognize this Sublease as a direct lease upon all the terms
contained herein), (ii) to perform or cause to be performed those obligations of
Sublandlord under and otherwise to comply with all provisions of the Master
Lease that do not pertain to the Subleased Premises, (iii) to perform or cause
to be performed those obligations of Sublandlord under and otherwise comply with
all provisions of the Master Lease that pertain to the Subleased Premises and by
the terms of this Sublease are expressly not required to be performed by
Subtenant, including, without limitation, the obligation to pay rent and
additional rent as and when due (iv) not to modify the Master Lease so as to
adversely affect Subtenant's rights hereunder, and (v) to take all actions
reasonably necessary to preserve the Master Lease. Sublandlord covenants and
agrees with Subtenant that upon Subtenant paying the rent required under this
Sublease and paying all other charges and performing all of the covenants and
provisions on Subtenant's part to be observed and performed under this Sublease,
Subtenant shall and may peaceably and quietly have, hold and enjoy the Subleased
Premises.
15.5 Subtenant's Rights. If Sublandlord does not pay rent as required
by the Master Lease or takes or fails to take an action which act or failure to
act directly and materially affects Subtenant's quiet enjoyment under its
Sublease, and there are less than ten (10) days remaining on any applicable cure
period under the Master Lease, then, Subtenant may, but shall not be obligated
to, (a) enter into a direct lease with Landlord pursuant to Section 15.6 below;
or (b) perform or
<PAGE> 14
cure such defaults on behalf of Sublandlord. If Subtenant elects option (b),
Sublandlord shall reimburse Subtenant for the actual out-of-pocket costs and
expenses incurred by Subtenant in performing such obligation or curing such
default along with interest on such amounts at the lesser of ten percent (10%)
per annum or the maximum legal rate then allowable by law from the date that
such sums are expended by Subtenant (the "Default Reimbursement").
Notwithstanding anything to the contrary in this Sublease, if the Default
Reimbursement is not paid in full within ten (10) days of a written request for
payment by Subtenant and provided Sublandlord has not notified Subtenant in
writing that it is, in good faith, contesting the costs incurred by Subtenant in
curing such default or performing such obligation, Subtenant may offset the
amount of the Default Reimbursement against rental amounts next owing hereunder.
15.6 Termination of Master Lease. In the event of the threatened
cancellation or termination of the Master Lease for any reason whatsoever or of
the involuntary surrender of the Master Lease by operation of law prior to the
expiration date of this Sublease, Landlord and Subtenant shall enter into a
direct lease for the Subleased Premises for the balance of the term of this
Sublease and upon the terms hereof, but providing that Landlord shall have no
duty to maintain the Subleased Premises except as provided in Section 7.1 of the
Master Lease, and providing further that Landlord, at Landlord's sole election,
can require that Subtenant perform the maintenance obligations set out in
Section 7.1(i)(b), in which event Landlord shall reimburse Subtenant for the
reasonable costs of such maintenance. The direct lease shall be evidenced by an
agreement in form and substance reasonably satisfactory to the Landlord and
Subtenant. Landlord and Subtenant shall each execute and deliver the direct
lease within ten (10) business days after the cancellation or termination of the
Master Lease, and Landlord and Subtenant each waive the provisions of any law
now or hereafter in effect which may give either party the right of election to
surrender or require surrender of possession of the Subleased Premises as a
result of such cancellation or termination of the Master Lease. The execution of
a direct lease does not waive any claims Landlord and Subtenant may have against
Sublandlord for breach of the Lease or this Sublease.
15.7 Direct Lease. At Subtenant's request, Sublandlord shall cooperate
with Subtenant in seeking a termination of the Master Lease with respect to the
Subleased
<PAGE> 15
Premises and replacement with a direct lease with the Landlord upon terms
acceptable to Subtenant in its sole discretion. Nothing herein shall obligate
Landlord to enter into such a direct lease, except on the terms set forth in
Section 15.6 above.
16. Commissions. Subtenant warrants (i) that it had no dealing with any
real estate broker or agent in connection with the negotiation of this Sublease,
except for The Staubach Company ("Staubach"), whose commission Subtenant shall
pay in accordance with a separate agreement with Staubach, and (ii) that it
knows of no other real estate broker or agent who is or might be entitled to a
commission in connection with this Sublease. Sublandlord warrants that (i) it
had no dealing with any real estate broker or agent in connection with the
negotiation of this Sublease; and (ii) that it knows of no other real estate
broker or agent other than Staubach who is or might be entitled to a commission
in connection with this Sublease. Subtenant agrees to indemnify, hold and save
Sublandlord and Landlord harmless from and against any and all claims for
brokerage commissions or finders' fees payable to Staubach pursuant to the
aforementioned agreements. The provisions of this Section 16 shall survive the
expiration or earlier termination of this Sublease.
17. Notices. Any notice which may or shall be given by either party
hereunder shall be either delivered personally or sent by certified mail, return
receipt requested or by nationally recognized overnight courier, addressed as
follows:
Subtenant: GTE Intelligent Network Services Incorporated
c/o Staubach Portfolio Services
6750 LBJ Freeway, Suite 1100
Dallas, Texas 75240
Attn: Lease Administrator
With a copy to: GTE-BAS Service Supervisor
William Briley
500 East Carpenter Freeway
MC -TXD 1911C
Irving, Texas 75062
<PAGE> 16
Sublandlord: Jose G. Chavez
President
Micro-Media Solutions, Inc.
501 Waller
Austin, TX 78702
With a copy to: Mitchell Kettrick
Vice-President
Micro-Media Solutions, Inc.
501 Waller
Austin, TX 78702
or to such other address as may have been designated in a notice given in
accordance with the provisions of this Section 17. Any notice delivered by
overnight courier as aforesaid shall be deemed delivered one day after such
notice is deposited with such courier.
18. Tenant Improvements. Sublandlord shall deliver the Subleased Premises
to Subtenant in their "as is" condition, with all moveable furniture removed and
in broom clean condition. Subtenant shall, at its sole cost and expense,
construct and build out the Subleased Premises. Subtenant shall conduct its own
bidding process and shall use its selected construction manager to coordinate
and manage the demolition and construction process. Subtenant's construction
shall be made in accordance with plans and specifications prepared by Subtenant
and approved by Sublandlord and Landlord, and in accordance with all applicable
building codes. Subtenant shall provide the final plans and specifications to
Sublandlord and Landlord prior to the commencement of demolition and
construction. Sublandlord and Landlord shall approve (or disapprove) such plans
and specifications within 3 business days of receipt, and approval shall not be
unreasonably withheld. Subtenant may, from time to time, make minor
modifications to the plans and specifications without the need to notify
Sublandlord or Landlord. Subtenant shall notify Sublandlord and Landlord of
material modifications to the plans and specifications throughout the
construction process. Sublandlord and Landlord shall approve (or disapprove)
such modifications within three business days of receipt, and approval shall not
be unreasonably withheld. Material modifications are modifications that affect
Building systems or the structural integrity of the Building. Subtenant shall
have the right, at is sole cost and expense, to install and maintain its own
security system in the Subleased Premises. Sublandlord
<PAGE> 17
and Landlord will not charge Subtenant a fee for reviewing Subtenant's plans for
the construction of the Subleased Premises, and will not charge a construction
management service fee. In addition, there will not be any charge for freight or
passenger elevator use or hoists, electricity, water, air conditioning or other
utilities (during generally accepted business hours) during the construction
(including move in) period of the Subleased Premises. Subtenant shall keep the
Subleased Premises and the Project free and clear of all liens.
19. Parking. During the term of this Sublease, Sublandlord shall provide to
Subtenant, at no charge, at least one parking space for use by Subtenant's
employees, contractors, and visitors.
20. Insurance.
(a) Subtenant shall cause Sublandlord and the Landlord to be named as
additional insureds on its liability insurance policies and to furnish a
certificate of such coverage to Sublandlord, with a copy to Landlord. The amount
of the insurance shall be Three Million Dollars ($3,000,000.00). Except for
general public liability insurance, each such insurance policy carried by either
Sublandlord or Subtenant shall include such a waiver of the insurer's rights of
subrogation against the other parties and Landlord. Subtenant shall deliver a
certificate of insurance to Sublandlord within thirty (30) days after delivery
of possession of the Subleased Premises. Notwithstanding Section 8.4 of the
Master Lease, Subtenant shall be obligated to deliver certificates of insurance
as soon as possible, but not later than thirty (30) days after a scheduled
expiration date. In no event shall Subtenant allow its insurance to lapse or
expire.
(b) Anything in this Sublease to the contrary notwithstanding,
Landlord, Sublandlord and Subtenant hereby waive any and all rights or recovery,
claim, action or cause of action against the others, their respective agents,
officers, employees and shareholders, for any loss or damage that may occur to
the Subleased Premises, the Premises, the Building or the Project, or any
improvements thereto or contents thereof, by reason of fire, the elements or any
other cause which could be insured against under the terms of standard fire and
extended coverage insurance
<PAGE> 18
policies, regardless of cause or origin [including negligence of such parties,
their agents, officers and employees,] [THIS IS BEING REVIEWED BY COUNSEL AND IS
OPEN.]
21. Indemnity. Subtenant hereby agrees to defend, indemnify and hold
Sublandlord and Landlord harmless from and against any and all claims, losses
and damages, including, without limitation, reasonable attorneys' fees and
disbursements, which may at any time be asserted (a) against Sublandlord by the
Landlord for failure of Subtenant to perform any of the covenants, agreements,
terms, provisions or conditions contained in the Master Lease which by reason of
the provisions of this Sublease Subtenant is obligated to perform, or (b)
against Sublandlord and/or Landlord by any person by reason of Subtenant's use
and/or occupancy of the Subleased Premises. Sublandlord hereby agrees to defend,
indemnify and hold Subtenant harmless from and against any and all claims,
losses and damages, including, without limitation, reasonable attorneys' fees
and disbursements, arising out of or relating to (i) Sublandlord's failure to
perform its covenants, agreements and obligations hereunder, (ii) Sublandlord's
default in the payment of rent as required by the Master Lease, or (iii)
Sublandlord's action or failure to take an action which is a breach of the
Master Lease which directly and materially affects Subtenant's quiet enjoyment
under its Sublease. The provisions of this Section 21 shall survive the
expiration or earlier termination of the Master Lease or this Sublease.
22. Severability. If any term or provision of this Sublease or the
application thereof to any person or circumstances shall, to any extent, be
invalid and unenforceable, the remainder of this Sublease or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each term
or provision of this Sublease shall be valid and be enforced to the fullest
extent permitted by law.
23. Entire Agreement; Waiver. This Sublease contains the entire agreement
between the parties hereto and shall be binding upon and inure, to the benefit
of their respective heirs, representatives, successors and permitted assigns.
Any agreement hereinafter made shall be ineffective to change, modify, waive,
release, discharge, terminate or effect an abandonment hereof, in whole or in
part, unless such agreement is in writing and signed by the parties hereto,
including Landlord.
<PAGE> 19
24. Captions and Definitions. Captions to the Sections in this Sublease are
included for convenience only and are not intended and shall not be deemed to
modify or explain any of the terms of this Sublease. Capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the Master
Lease.
25. Further Assurances. The parties hereto agree that each of them, upon
the request of the other party, shall execute and deliver, in recordable form if
necessary, such further documents, instruments or agreements and shall take such
further action that may be necessary or appropriate to effectuate the purposes
of this Sublease. Subtenant agrees to provide to Landlord promptly following
request by Landlord, Estoppel Certificates meeting the requirements of Section
17 of the Master Lease, in the same fashion as Sublandlord has agreed therein to
provide Estoppel Certificates to Landlord.
26. Governing Law. This Sublease shall be governed by and in all respects
construed in accordance with the internal laws of the State of Texas.
27. Exhibits. Exhibits A, B, C, D, E, and F attached hereto are hereby made
a part hereof.
28. Consent of Landlord. The validity of this Sublease shall be subject to
the Landlord's prior written consent hereto pursuant to the terms of the Master
Lease, and if Landlord's consent shall not be obtained and a copy thereof
delivered to Sublandlord and Subtenant within fifteen (15) days of the date
hereof, Subtenant shall have the option to cancel this Sublease by notice to
Sublandlord within thirty (30) days from the date hereof.
Executed on the date first above written.
Sublandlord:
Micro-Media Solutions, Inc.,
a Texas corporation
By: /s/ Jose G. Chavez
Jose G. Chavez
Title: President
By:/s/ Mitchell Kettrick
Title: Secretary or Treasurer
Subtenant:
GTE INTELLIGENT NETWORK SERVICES
INCORPORATED, a Delaware corporation
By: /s/ Ronald W. Kuypinski
Ronald W. Kuypinski
Title: Vice-president, Corporate Real Estate
By:
Title:
<PAGE> 20
CONSENT
1. Consent to Sublease. Landlord hereby consents to the foregoing
Sublease for purposes of Section 11 of the Master Lease, and specifically agrees
to comply with the terms of those paragraphs of the Sublease that require
performance by Landlord.
2. Options to Extend.
2.1 Landlord further agrees to grant to Subtenant the option to
enter into a direct lease with Landlord upon termination of the Sublease in 2008
upon the following terms and conditions. Regardless of whether Sublandlord
exercises its option to renew the Master Lease pursuant to Section 6 of the
Second Addendum, Subtenant's option to enter into a direct lease with Landlord
shall commence in 2008, at the expiration of the initial term of the Master
Lease, as defined in the Second Addendum. Sublandlord's right to renew the
Master Lease shall not include the Subleased Premises if Subtenant elects to
enter
<PAGE> 21
into a direct lease with Landlord for the Subleased Premises. Provided Subtenant
is not in monetary default hereunder beyond any applicable notice and cure
periods, Subtenant shall have two five-year options (each, an "Option"), at the
rental amount described in Section 2.2 below, to lease directly from Landlord
all of the Subleased Premises. In order to exercise an Option, Subtenant shall
give Landlord written notice not later than 180 days prior to the termination
date of this Sublease (and of the termination of the first Option term) of its
intent to exercise the Option. If Subtenant exercises the Option for the first
Option period, the Base Rent shall be the scheduled rent for the last year under
Master Lease, increased by 3%, and the Base Rent shall increase by 3% each year
of the Option period. If Subtenant exercises the Option for the second Option
period, the Base Rent shall continue to increase by 3% per year. In addition to
Base Rent, Subtenant shall pay its proportionate share (27.70%) of annual
increases in Property Taxes for the Subleased Premises, over a base year of
1998; provided, however, that Subtenant shall not be obligated to pay increases
that exceed a 10% increase per year. Landlord shall pay any increases in excess
of 10% per year.
2.2 If Subtenant does not exercise the first Option, it shall
have no right to exercise the second Option.
2.3 Except for the term and rental rate, the direct lease shall
be on the same terms and conditions as this Sublease, including the
incorporation of those terms of the Master Lease that are not inconsistent with
the terms of the Sublease.
3. Non-Disturbance/Subordination. Landlord hereby represents and
warrants that neither the Project nor the Subleased Premises is currently
subject to any mortgage or deed of trust. Subject to the requirement of the
Nondisturbance Agreement set forth below, this Sublease shall be subject and
subordinate to any mortgages or deeds of trust that may hereafter be placed
against the Subleased Premises by Landlord and to any advances thereunder and to
any interest thereon, and all renewals, replacements, and extensions thereof.
Provided, however, that any mortgagee or trustee may elect by written
notification to give the rights and interests of Subtenant under this Sublease
priority over the lien of its mortgage or deed of trust. The subordination of
this Sublease to any future mortgages or deeds of trust is expressly conditioned
upon
<PAGE> 22
Subtenant receiving from such mortgagee or holder of the lien of the deed of
trust an agreement (the "Nondisturbance Agreement") pursuant to which such party
agrees that the possession of the Subtenant under this Sublease shall not be
disturbed, so long as Subtenant is not in default under this Sublease beyond any
applicable cure period permitted under the Sublease or Master Lease. The
Nondisturbance Agreement may be on such form and contain such other commercially
reasonable terms as mortgagees or lienholders typically require in the ordinary
course of business.
4. Improvements to Building.
4.1 Building Improvements. Subtenant shall have the right, at its
sole cost and expense, to make the following improvements outside of the
Subleased Premises, and within the Building (the "Building Improvements").
Subtenant shall conduct its own building process and shall use its selected
contractor and subcontractors to construct the Building Improvements. The
Building Improvements shall be constructed in accordance with plans and
specifications prepared by Subtenant and approved by Landlord, and in accordance
with all applicable building codes. Subtenant shall provide the final plans and
specifications to Landlord prior to commencement of construction of the Building
Improvements. Landlord shall approve (or disapprove) such plans and
specifications within 3 business days of receipt, and approval shall not be
unreasonably withheld. Subtenant may, from time to time, make minor
modifications to the plans and specifications without the need to notify
Landlord. Subtenant shall notify Landlord of material modifications to the plans
and specifications or drawings throughout the construction process for the
Building Improvements. Landlord shall approve (or disapprove) such modifications
within three business days of receipt, and approval shall not be unreasonably
withheld. Material modifications are modifications that affect Building systems
or the structural integrity of the Building. Landlord will not charge Subtenant
a fee for reviewing Subtenant's plans for the construction of the Building
Improvements, and will not charge a construction management fee.
4.2 Construction Details. The Building Improvements may include
the following items, which are hereby approved in concept by Landlord. The plans
and specifications or other drawings showing the details of these Building
Improvements shall be delivered to Landlord for approval (as described in
Paragraph 4.1 of this Consent) after the execution of this Sublease and Consent,
but prior to the commencement of construction.
<PAGE> 23
(a) Subtenant may connect the dry pipe fire protection
system (including the valve, header, compressor, and piping from the header) to
the Subleased Premises. The header and compressor may be placed in a new valve
closet which may be constructed by Subtenant and located adjacent to the
existing building fire sprinkler riser at the northeast corner of the Building.
The valve, header, compressor, and piping shall be located outside of the
Subleased Premises and within or around the Building and Project.
(b) Subtenant may tap off of the existing plumbing located
in the restrooms to provide small quantities of water (estimated to be less than
one gallon per day) to the Subleased Premises, the cost of which is deemed to be
included in the Base Rent.
(c) Subtenant may run condenser drain line(s) from the HVAC
condenser to the floor drain located in the restrooms.
(d) Subtenant may install normal, standby, and emergency
exhaust fans (for a total of three fans) for the battery room. For ease of
maintenance, the fans will be placed high in the ceiling space in the hall
outside the battery room and outside of the Subleased Premises.
(e) Subtenant may install an electrical power conduit that
runs from the power service entrance to the Subleased Premises.
(f) Subtenant may install a telephone conduit that runs from
the telephone service entrance to the Subleased Premises.
(g) Subtenant may install a lightning protection system,
including installation of lightning protection down conductors in ten (10)
locations throughout the Building, at locations to be determined by Subtenant
and reasonably approved by Landlord.
(h) Subtenant may install fiber-optic conduits at locations
to be determined by Subtenant, and reasonably approved by Landlord.
LANDLORD:
WBH, Ltd.,
a Texas Limited Partnership
By: /s/ Will Houston
Title: President
By: /s/
Title: Boardmember
<PAGE> 24
EXHIBIT "C"
EQUIPMENT LIST
<TABLE>
<CAPTION>
M POP to 1600 SF
<S> <C> <C>
2 ea. - Generator 230KW
2 ea. - 20 ton Liebert
2 ea. - Fan Coils
2 ea. - Generator ATS
1 ea. - 2000 AMP DC System
</TABLE>
Note - All generators will require either a propane, diesel or natural gas fuel
system.
EXHIBIT "D"
ELECTRICAL REQUIREMENTS
M POP to 1600
SF 207KW (90% of Generator Capability)
EXHIBIT "E"
COLLOCATION AGREEMENT NOTICE AND AGREEMENT
TO: FROM:
Landlord GTE Intelligent
---------------------------
Sublandlord Network Services
-------------------------
(Collectively, Incorporated ("Lessee's Customer")
Landlord and ("Lessee")
Sublandlord are
referred to herein as
"Lessor")
LOCATION: 501 Waller, Austin, Texas
DATE:
-------------------------------------
RECITALS
This Notice and Agreement is hereby given to Lessor by Lessee and Lessee's
Customer. Lessor and Lessee are the current parties to a Sublease dated ,
as amended to date (the "Master Sublease"), concerning certain "Subleased
Premises" (as defined in the Master Sublease) in Lessor's building at 501
Waller, Austin, Texas (the "Building"). Landlord is the master landlord under
the Master Lease referred to in the Master Sublease. Lessee's Customer,
concurrently herewith, is entering into a written agreement with Lessee calling
for Lessee's Customer to have limited rights of access to and use of certain
equipment space (the "Equipment Space") in the Subleased Premises for the
installation and operation of equipment of Lessee's Customer. Such equipment
will be connected with the telecommunications system of Lessee. Regardless of
whether such written agreement is called by Lessee and Lessee's Customer a
sublease, a license, or a collocation agreement, or is called by
<PAGE> 25
some other name, it is referred to herein as the "License". The Equipment Space
is more specifically described in the License. As more specifically described in
the Master Sublease, this Notice and Agreement is given to satisfy the
conditions to the effectiveness of Lessors' advance consent in the Master
Sublease to transactions such as this one.
Therefore, in consideration of their mutual covenants in this Consent,
Lessee and Lessee's Customer agree as follows for the benefit of Lessor:
SPECIFIC TERMS
1. Form of License. Lessee agrees to provide a redacted copy of the License
to Lessor if Lessor so requests in writing.
2. Master Sublease. Lessee and Lessee's Customer agree that the Master
Sublease is and shall remain in all respects prior and superior to the License
and is not being modified by the License. Lessor is not joining in nor bound by
any agreement, representation or warranty contained in the License. Any matter
that requires Lessor's approval under the Master Sublease shall continue to
require such approval. Lessee's Customer shall obtain directly from Lessee any
copies Lessee's customer requires of the applicable terms of the Master
Sublease, and Lessor shall have no obligation in that regard. Upon any
termination of the Master Sublease, whether due to agreement, default or
expiration of the term, Lessee's Customer shall immediately surrender possession
of the Subleased Premises, including the Equipment Space, to Lessor.
3. Scope of Lessor's Consent. Lessor's advance consent shall not constitute
or be construed as a consent to any other sublease, assignment, hypothecation,
conveyance of any nature, license, collocation agreement or other agreement for
use or occupancy of any portion of the Subleased Premises, except as provided in
the Master Sublease.
4. Additional Agreements by Lessee's Customer. Lessee's Customer agrees to
use the Equipment Space only for the limited purposes described in the Recitals
above, and to comply with all Lessor's Building Rules in effect from time to
time of which Lessee's Customer has notice. Similarly, Lessee's Customer agrees
not to violate any provisions of the Master Sublease. Without limiting the
foregoing, Lessee's Customer agrees
<PAGE> 26
immediately to repair any damage to the Subleased Premises or Building caused by
the installation, operation, maintenance or removal of the equipment of Lessee's
Customer.
Lessee's Customer hereby waives on behalf of itself, and agrees to defend,
indemnify and hold harmless Lessor, and their respective officers, directors,
shareholders, agents and employees (collectively, the "Lessor Group") from and
against, any and all claims, actions, losses, expenses, and liabilities
(collectively, "Claims") arising from or related in any way to the presence in
or about the Subleased Premises or the Building (or use of the Subleased
Premises or the Building) by Lessee's Customer or its employees, contractors,
guests or invitees (including but not limited to Claims for bodily injury,
Project damage, loss of data, or interruptions in service), arising out of any
negligence of Lessee's Customer. Such waiver and indemnity agreement by Lessee's
Customer shall not apply to Claims to the extent arising out of the negligence,
wilful misconduct or breach of this Agreement by Lessor.
Lessee's Customer shall maintain throughout the License term liability
insurance with a combined single limit of at least $1,000,000 covering the
activities of Lessee's Customer in and about the Building. Such insurance shall
be issued by a carrier duly licensed in the State of Texas and having a rating
of B + or better in Best's Insurance Guide. Such insurance shall include an
endorsement naming Lessor as an additional insured with respect to any incidents
in or about the Building and shall not be cancelable without at least 30 days'
prior written notice to Lessor. Lessee's Customer shall provide to Lessor
evidence reasonably acceptable to Lessor of such insurance coverage.
5. Miscellaneous. This Notice and Agreement supersedes all prior oral and
written offers or agreements between the parties with respect to its subject
matter. This Notice and Agreement is part of and shall be attached to the Master
Sublease. The Master Sublease may be amended only in a writing signed by Lessor
and Lessee. All terms of the existing Master Sublease not expressly affected or
altered by this Notice and Agreement remain in full force.
IN WITNESS WHEREOF, this Notice and Agreement has been duly executed by the
parties as of the date first above written.
<PAGE> 27
LESSEE: LESSEE'S CUSTOMER:
GTE Intelligent Network
Services Incorporated,
a Delaware corporation
By: By:
its its
By: By:
its its
ACCEPTED AND AGREED:
LESSOR: LESSOR:
LANDLORD: SUBLANDLORD:
WBH, Ltd., Micro-Media Solutions, Inc.,
a Texas limited partnership a Texas corporation
By: By:
its its
By: By:
its its
EXHIBIT F
RENTS FOR INITIAL TERM
<TABLE>
<CAPTION>
SUBLEASE BASE RENT ANNUAL BASE RENT
YEAR RENT/SF PER MONTH INCREASE PER YEAR
<S> <C> <C> <C> <C>
1 3.75 3,125.00 0 37,500.00
2 3.86 3,218.75 3% 38,625.00
3 3.98 3,315.31 3% 39,783.75
4 4.10 3,414.77 3% 40,977.26
5 4.22 3,517.22 3% 42,206.58
6 4.35 3,622.73 3% 43,472.78
7 4.48 3,731.41 3% 44,776.96
8 4.61 3,843.36 3% 46,120.27
9 4.75 3,958.66 3% 47,503.88
10 4.89 4,077.42 3% 48,928.99
</TABLE>
<PAGE> 1
EXHIBIT 10.3
GTE
INTERNETWORKING
Powered by BBN
Service quotation for Micro-Media Solutions
To: Jose Chavez Quote date: May 29, 1998
Micro-Media Solutions Quote valid to:
501 Waller Quote number: 38561.9719.1
Austin, TX 78702 Service level: Internet Advantage 5.1, Flex
USA Multi-T-1 Gold
Service Period:
__ 1 Year __ 2 Year XX 3 Year
The service period shall commence upon the provisioning by BBN Corporation, a
subsidiary of GTE Internetworking Incorporated ("We", "Our", or "Us"), to you of
the service listed on this Service Quotation.
<TABLE>
<CAPTION>
Recurring Fees (1 Year Contract) List Price Discount Monthly Annual
<S> <C> <C> <C> <C>
Gold Multi-T1 Service Fee-Usage at 1Mbps $3200.00 25.0% $ 2400.00 $28800.00
Cisco 4700-M w/4 Serial, Gold Option .00 .00
Muti-T1 Packaging Kit Gold Surcharge $ 100.00 25.0% 75.00 900.00
Fast Eth I/F Cisco4x00-M GoldScharge $ 140.00 25.0% 105.00 1260.00
Leased Circuit Monthly Recurring .00 .00
Leased Circuit Monthly Recurring .00 .00
-------- ---------
2580.00 30960.00
</TABLE>
<TABLE>
<CAPTION>
One-time Fees List Price Discount one-time
<S> <C> <C> <C>
Activation, 2xT1 $ 3000.00 96.7% $ 100.00
Telco Extended Demarcation 150.00 100.0% .00
Leased Circuit installation fee .00
Leased Circuit installation fee .00
--------
100.00
</TABLE>
Internet Advantage v5.1 Connection Service is a comprehensive, fully-managed
offering for customers who view the Internet as a strategic resource and require
a high level of reliability, quality, and performance to use the Internet as a
vehicle for collaboration and commerce.
Internet Advantage Gold Connection Service is monitored and maintained by GTE
Internetworking 24 hours a day, 365 days a year by experienced operators,
technicians, and analysts, and includes the following at no additional charge:
- - Customer Premises Equipment (CPE), provided by us, and associated Advanced
Replacement Next Business Day maintenance. Surcharges may be applicable for
and/or optional CPE, depending upon your selection of hardware. Gold service
customers may also purchase on-site hardware maintenance support for an
additional charge.
<PAGE> 2
- - GTE monitoring and configuration management of customer premise equipment.
- - Domain Name Service (DNS): Primary and secondary DNS are provided for up to 10
domains and 100 kilobytes of associated zone data file storage. We will also
register up to 10 domain names for you with InterNIC. Fees for initial
registration and on-going maintenance fees for each domain name will be billed
to you directly by InterNIC.
<TABLE>
<S> <C>
Up to 8 Mbps $14,200
Over 8 Mbps $15,700
</TABLE>
All invoices are payable net 30 days. Applicable taxes will be additional.
This Service Quotation is applicable only for version 5.1 of Internet Advantage
Connection Service. This Service Quotation does not entitle you to any future
versions or releases of such service that we may make available during the
Service Period unless separately agreed to in writing by the parties.
Additional Terms:
(a) The Service Quotation and all services that may be provided pursuant to this
Service Quotation are subject to the terms and conditions of (a) the Master
Agreement for Internetworking Service or the Master Agreement for Internet
Services or Internet Services and Products Master Agreement previously signed by
you (or, if you have not signed such a Master Agreement, the terms and
conditions of the current Master Agreement for Internetworking Services), and
(b) the Service Schedule for applicable Services you are purchasing as indicated
in this Service Quotation.
(b) Final acceptance of this Service Quotation by us is subject to credit check
approval, and confirmation of a valid Master Agreement and Service Schedule
signed by the Customer.
(c) Any terms and conditions (including but not limited to those contained in a
purchase order issued by Customer) which are different in form or in addition to
the terms and conditions contained in this Service Quotation, the applicable
Master Agreement, and/or the applicable Service Schedule(s) signed by the
Customer, shall not be binding on us unless expressly accepted in writing,
herein or otherwise, by our authorized representative, and we hereby object to
and reject all terms and conditions not so accepted.
Customer Micro-Media Solutions, Inc.
Signature: /s/ Mitchell Kettrick V. P. Date: 5-28-98
Print Name: Mitchell Kettrick V. P. Title: Vice-president
<PAGE> 3
Purchase orders should be made out to:
GTE Internetworking
Attention: Glenn Birk
1950 Stemmons Freeway
Suite 2032
Dallas, TX 75207
Should you have questions about this quotation, please contact Glenn Birk at
214-800-5814, E-mail: [email protected]
Micro-Media Solutions, Inc. Purchase Order: 38025
501 Waller Vendor: GTE_BBN
Austin, Tx 78702
Phone #: 512-476-6925
Fax #: 512-473-2371
P U R C H A S E O R D E R
To:
GTE Internetworking
1950 Stemmons Fwy.
Suite 2032
Dallas, TX 75207
Date: 5/29/98
Buyer: MCK
Confirming to: Glenn Birk
Remarks: Internat Connection
<TABLE>
<CAPTION>
Required Item Number Description Unit Cost Amount
- -------- ----------- -------------------------- ---------- --------
<S> <C> <C> <C> <C>
1 non-stock Gold Multi T-1 Service Fee 2580.00 2580.00
Monthly rate
Usage at 1Mbps
Flexible usage applies
Quote number 38561-9719.1
Purchase Order total 2580.00
</TABLE>
/s/ Jose Chavez
Jose Chavez
Authorized Signature
<PAGE> 1
EXHIBIT 10.4
GTE INTERNETWORKING
Powered by BBN
Service quotation for Micro-Media Solutions
To: Jose Chavez Quote date: September 29, 1998
Micro-Media Solutions Quote valid to:
501 Waller Quote number: 76512.9719.1
Austin, TX 78702 Service level: IA 6.0, Frac T3 Port-Only
USA Connection
Service Period:
__ 1 Year __ 2 Year XX 3 Year
The service period shall commence upon the provisioning by BBN Corporation, a
<PAGE> 2
subsidiary of GTE Internetworking Incorporated ("We", "Our", or "Us"), to you of
the service listed on this Service Quotation.
<TABLE>
<CAPTION>
Recurring Fees(1 Year Contract) List Price Discount Monthly Annual
<S> <C> <C> <C> <C>
POC Frac T-3 Gold Service Fee, 6Mb $8000.00 30.0% $5600.00 $67200.00
------- --------
5600.00 67200.00
</TABLE>
<TABLE>
<CAPTION>
One-time Fees List Price Discount one-time
<S> <C> <C> <C>
Activation, T3 $5000.00 50.0% $2500.00
--------
2500.00
</TABLE>
Internet Advantage v6.0 Connection Service is a comprehensive, fully-managed
offering for customers who view the Internet as a strategic resource and require
a high level of reliability, quality, and performance to use the Internet as a
vehicle for collaboration and commerce.
Internet Advantage Port Only Connection Service is monitored and maintained by
GTE Internetworking 24 hours a day, 365 days a year by experienced operators,
technicians, and analysts, and includes the following at no additional charge:
- - Domain Name Service(DNS): Primary and secondary DNS are provided for up to 10
domains and 100 kilobytes of associated zone data file storage. We will also
register up to 10 domain names for you with InterNIC. Fees for initial
registration and on-going maintenance fees for each domain name will be billed
to you directly by InterNIC.
- - Stats Advantage Usage Reporting: Provides on-demand, web based graphical and
tabular management summaries of traffic from your Internet connection to support
your monitoring and capacity planning needs. In order to be able to view or
receive Stats Advantage reports, Internet Advantage Port Only Connection Service
customers must provide GTE Internetworking with a community string permitting
read-only SNMP access to the CPE router.
- - Network News Feed: Access to a virtually unlimited number of Internet news
groups, bulletin boards, and discussion forums.
- - Web-Based Training: Self-service, web-based training on Internet technology,
configuration, and installation information, and guidelines for installing and
operating Internet applications.
For additional charges, the following optional features and services are
available under Internet Advantage Silver Connection Service:
- - News Access Service allows customers to access Usenet news groups directly
from GTE Internetworking's central news server.
<PAGE> 3
- - Domain Name E-mail Access Service provides basic functionality without the
expense of installing and maintaining an e-mail server. The service provides up
to twenty domain name e-mail boxes for each Internet Advantage connection.
New customer orders for Internet Advantage Connection service must be placed for
at least an initial one-year term. Service discounts may be available for
one-year commitments. Activation, advanced features, and hardware-related fees
are not discountable.
The Port Only Connection Service is intended for customers with the telco
knowledge level and relationships to effectively maintain and trouble shoot the
telco circuit. All customer Telco Circuit provisioning, troubleshooting, and
maintenance are the responsibility of the customer.
An invoice for all one-time fees will be issued following the completion of
service activation. Recurring fees will be invoiced on a monthly basis.
With fractional T3 service, you lock in a constant monthly fee regardless of how
much bandwidth you use.
All invoices are payable net 30 days. Applicable taxes will be additional.
This Service Quotation is applicable only for version 6.0 of Internet Advantage
Connection Service. This Service Quotation does not entitle you to any future
versions or releases of such service that we may make available during the
Service Period unless separately agreed to in writing by the parties.
Additional Terms:
(a) The Service Quotation and all services that may be provided pursuant to this
Service Quotation are subject to the terms and conditions of (a) the Master
Agreement for Internetworking Service or the Master Agreement for Internet
Services or Internet Services and Products Master Agreement previously signed by
you (or, if you have not signed such a Master Agreement, the terms and
conditions of the current Master Agreement for Internetworking Services), and
(b) the Service Schedule for applicable Services you are purchasing as indicated
in this Service Quotation.
(b) Final acceptance of this Service Quotation by us is subject to credit check
approval, and confirmation of a valid Master Agreement and Service Schedule
signed by the Customer.
(c) Any terms and conditions (including but not limited to those contained in a
purchase order issued by Customer) which are different in form or in addition to
the terms and conditions contained in this Service Quotation, the applicable
Master Agreement, and/or the applicable Service Schedule(s) signed by the
Customer, shall not be binding on us unless expressly accepted in writing,
<PAGE> 4
herein or otherwise, by our authorized representative, and we hereby object to
and reject all terms and conditions not so accepted.
Customer Micro-Media Solutions, Inc.
Signature : /s/ Mitchell Kettrick V. P. Date: 9-30-98
Print Name: Mitchell Kettrick V. P. Title: Vice-president
Purchase orders should be made out to:
GTE Internetworking
Attention: Glenn Birk
1950 Stemmons Freeway
Suite 2032
Dallas, TX 75207
Should you have questions about this quotation, please contact Glenn Birk at
214-800-5814, E-mail: [email protected]
Micro-Media Solutions, Inc. Purchase Order: 38437
501 Waller Vendor: GTE_BBN
Austin, Tx 78702
Phone #: 512-476-6925
Fax #: 512-473-2371
P U R C H A S E O R D E R
To:
GTE Internetworking
1950 Stemmons Fwy.
Suite 2032
Dallas, TX 75207
Date: 9/30/98
Buyer: MCK
Confirming to: Glenn Birk
Remarks: Internat Connection
<TABLE>
<CAPTION>
Required Item Number Description Unit Cost Amount
- -------- ----------- -------------------- --------- --------
<S> <C> <C> <C> <C>
1 non-stock POD Frac T3 Gold
Service Fee 5600.00 5600.00
Monthly rate
Usage at 6Mbps
Flexible usage applies
Quote number 76512-9719.1
Purchase Order total 5600.00
</TABLE>
/s/ Mitchell Kettrick
Mitchell Kettrick
Authorized Signature
<PAGE> 1
EXHIBIT 10.5
MASTER AGREEMENT for INTERNETWORKING SERVICES
GTE Internetworking
Powered by BBN
This Master Agreement between GTE Internetworking Incorporated ("We") and the
Customer identified below ("You") includes the attached Service Schedules and
Service Quotations (collectively "Schedules") together with any additional
Schedules mutually agreed in writing in the future.
1. Services. We will provide you the Internetworking services ("Services")
specified in the Schedule(s). Our commencement of providing any of the Services
shall constitute our acceptance of this Master Agreement.
2. Prices. Prices are stated in the Schedules and are guaranteed for the Term
stated in the Schedules. If any of the Services are on a month-to-month basis,
we will give you at least 30 days notice of a price change. In addition, you are
responsible for applicable taxes, tariffs, telecommunications surcharges or
other governmental charges due on account of Services.
3. Payment. Unless otherwise stated in a Schedule, we will invoice you monthly.
You agree to pay within 30 days from receipt of invoice. For overdue invoices,
you will pay interest of 1.5% for each month or part of a month (or the maximum
allowed by law, whichever is less).
4. Our Responsibility. We are responsible for proving the Services by qualified
personnel in a professional manner. WE DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5. Your Responsibility. You are responsible for the manner in which you use
<PAGE> 2
your services, including the maintenance and security of your data, computer
network and other facilities; your choice of equipment, software and online
content; and all other matters related to how you use the Services. Unless
expressly permitted by a Schedule or separate reseller agreement with us, you
shall not resell Services, or access to Services, directly or indirectly to
third parties.
6. Indemnification. We will indemnify you for damages, cost, and attorneys fees
you incur from any claim that our design of the Services infringes any U.S.
patent, copyright, trademark, trade secret or other intellectual property right.
You will indemnify us for damages, cost and attorneys fees we incur from any
claim arising from your manner of using of the services, your combination of
services with other products or services not provided by us, or your
modification of the Services. The indemnifying party shall conduct the defense
and shall have control of the litigation; the other party shall give prompt
notice of claims and shall cooperate in the defending against the claim. THE
PARTIES DISCLAIM THE IMPLIED WARRANTY OF NON-INFRINGEMENT, RELYING INSTEAD ON
THE TERMS OF THIS SECTION.
7. IP Addresses. Upon expiration, cancellation or termination of the Agreement
or applicable Schedule, you shall relinquish any IP addresses or address blocks
assigned to you by us.
8. Compliance with Laws. You shall not use or permit your end users to use the
Services in ways that violate laws, infringe the rights of others, or interfere
with users of our network or other networks. For example, you shall not
distribute chain letters or unsolicited bulk electronic mail ("spamming");
propagate computer worms or viruses; use a false identity; attempt to gain
unauthorized entry into any site or network; distribute child pornography,
obscenity or defamatory material over the Internet; or infringe copyrights,
trademarks or other intellectual property rights. You further agree to comply
with U.S. export laws concerning the transmission of technical data and other
regulated materials via the Services.
9. Termination. Either party may terminate or cancel this Agreement if the other
fails to cure material breach of the Agreement within 30 days after receiving
written notice of the breach. We reserve the right, but assume no obligation, to
suspend performance immediately if you are more than 30 days overdue in payments
or if, our reasonable judgement, you have violated Section 8.
10. Limitation of Liability. EXCEPT FOR INDEMNIFICATION PURSUANT TO SECTION 6,
NEITHER PARTY (NOR ITS SUPPLIERS OR CUSTOMERS) SHALL BE LIABLE TO THE OTHER
PARTY FOR PUNITIVE, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES
INCLUDING WITHOUT LIMITATION, LOST PROFITS OR LOSS OR DAMAGE TO DATA ARISING OUT
OF THE USE OR INABILITY TO USE SERVICES, EVEN IF THE PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
11. Limitation of Damages. OUR AGGREGATE LIABILITY TO YOU RELATING TO OR ARISING
OUT OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL NOT EXCEED
(a) THE TOTAL AMOUNTS PAID BY YOU TO US FOR THE SERVICE IN QUESTION, DURING THE
ONE-YEAR PERIOD IMMEDIATELY PRECEDING THE EVENT WHICH GAVE RISE TO YOUR CLAIMS
OR (b) $100,000, WHICHEVER IS LESS.
12. Acknowledgement. You agree that we may include your name in listings of our
customers.
13. Miscellaneous. The terms and conditions of this Agreement supersede all
previous agreements, proposals or representations related to the Services.
Except for assignments to GTE affiliates, neither party may assign this
Agreement without the prior written consent of the other party. This Agreement
shall be governed by the substantive laws of the Commonwealth of Massachusetts.
Any changes to this Agreement, or any additional or different terms in your
purchase orders, acknowledgements, or other documents, will not be effective
unless expressly agreed to in writing to us.
Customer: Micro-Media Solutions, Inc.
Signature: /s/ Mitchell Kettrick V. P. Date: 5-29-98
Print Name: Mitchell Kettrick V. P. Title: Vice-president
<PAGE> 3
<PAGE> 1
EXHIBIT 10.6
Quotation for DiaLinx Service-Micro-Media Solutions, Inc.
TO: Micro-Media Solutions, Inc. Quote Date: 10/23/98
Attn: Mitch Kettrick, Vice President Quote Valid To: 11/23/98
501 Waller Quote Number: Mico102398
Austin TX 78702
Quotation for DiaLinx Service
This Quotation is for DiaLinx Service Version 2.0, and sets forth the pricing
and volume commitments agreed to under the Service Schedule for DiaLinx
Services.
1. Recital: For ease of understanding, this section highlights the general
elements of pricing and commitments:
1.1 Network Access. You will be billed for each hour that an end user accesses
the GTE Internetworking DiaLinx network ("Network"). In addition, you will be
charged for Network Access which shall be the Overage Hourly Rate for each hour
that a user may access the GTE Internetworking DiaLinx network ("Network") over
the maximum number of hours detailed in Section 6.
1.2 Minimum Customer Commitment: There is no Minimum Customer Commitment.
1.3 800/888 Charge: You will be billed additional charges for user's use of the
800 or 888 dial access.
2. Commencement Date: The Commencement Date shall be November 1, 1998.
3. Service Period: The Service Period shall be thirty-six (36) full calendar
months plus an initial period consisting of one (1) partial calendar month.
Month zero (0) means the partial calendar month beginning on the Commencement
Date. Month one (1) means the full calendar month immediately following the
Commencement Date, etc.
4. Minimum Customer Commitment: During the Service Period, in return for
discounts inherent in the pricing outlined herein, you have agreed to use a
minimum dollar volume of network access in each month of the agreement ("Minimum
Customer Commitment"). In the event that Network access charges do not meet the
Minimum Customer Commitment you will be billed for the difference between the
amount actually charged within the given month and the Minimum Customer
Commitment.
<PAGE> 2
4.1 Minimum Customer Commitment:
Minimum Customer Commitment
Months from Commencement Date
<TABLE>
<S> <C>
Months 0 No Minimum
Months 1-3 $2,500 per month
Months 4-6 $5,000 per month
Months 7-36 $15,000 per month
</TABLE>
5. Pricing: Pricing is set forth below:
6. Rates and Charges: You have the following pricing options available.
<TABLE>
<S> <C>
Overage Analog Hourly Rate: $ .55 per hour
Overage ISDN Hourly Rate $ .75 per hour
800/888 Rate: $ 6.00 per hour
Per User Rate: $ 14.00 per user/mth (30 hours aver cap)
</TABLE>
All Network connect time is rounded up to the next highest minute and billed in
one-minute increments. Invoices are issued monthly and due net thirty days. All
pricing is listed as U.S. dollars.
GTE Internetworking expects the DiaLinx network to change over time in order to
meet the changing needs of our customers. GTE Internetworking reserve the right
to add or delete the dial-in access numbers associated with a specified zone
from time to time.
We also reserve the right to add additional services and zones to the foregoing
rate schedule as the DiaLinx network develops (e.g. Canadian 800 Service). These
additional services and respective prices will be made available to you on an
on-going basis, and will be deemed added to the foregoing rate schedule upon
notice by us to you that they are available. For an updated list of services,
prices, and dial-up access number associated with each zone, please consult our
Web page or contact your GTE Internetworking representative.
7. Basic Services - Recurring Fees:
7.1 Network Access: You will be charged for Network Access charges due in a
accordance with Section 6.
7.2 800/888 Charge: In addition to any other applicable charges under section
6.0, you will be charged the 800/888 charge for each hour that an End User
accesses the Network via the 800/888 access number. Network access connect time
is measured in one (1) minute increments, rounded up to the next highest minute.
7.3 Dialer/Phone Book Software. Based on Microsoft's Connection Manager, GTEI
will provide a software client that provides a PPP dialer, and Local Number
Phone Book.
7.4 Level I (End-User) Support: Level 1 will be the responsibility of Customer.
7.5 Level II and III (Network) Support. Every GTE Internetworking customer is
provided with second-level help desk support designed to work with either your
own or out-sourced help desk, your project administrator, or your IS department.
This help desk is integrated with our Cambridge NOC and is the first point of
contact for opening new trouble tickets, getting updates on existing ones, or
simply asking information questions.
Please sign below to indicate your understanding and acceptance of the terms of
this Quotation.
Company: Micro-Media Solutions, Inc.
Signature: /s/ Mitchell Kettrick Date: 10-28-98
Print Name: Mitchell Kettrick Title: Vice President
<PAGE> 1
EXHIBIT 10.7
BASIC AGREEMENT
This Warehousing and System Integration Services Agreement (The "Agreement") is
dated and made effective September 18, 1998 (The "Effective Date") by and
between Siemens Nixdorf Information Systems, Inc., a Massachusetts Corporation
("SNI") with its primary place of business at 200 Wheeler Road, Burlington, MA,
and Micro Media Solutions, Inc., a Texas Corporation, with its primary place of
business at 501 Waller Street Austin, TX,("MSI").
Recitals
SNI is seeking a strategic partner to provide goods warehousing, order
fulfillment, system integration, and value-added services to support its retail
sales business.
MSI specializes in providing warehousing, systems integration, system
configuration and order fulfillment services to the high technology industry.
<PAGE> 2
Definitive Agreement
Now, therefore, in consideration of the foregoing premises and the mutual
covenants set forth below, MSI and SNI agree as follows.
1.0 Term
1.1 This Agreement shall commence as of the date hereof and purchase orders
delivered after the date of this Agreement shall be governed by this Agreement,
and this Agreement shall expire on September 30, 1999 (the "Purchase Period").
Unless terminated earlier pursuant to the provisions of this Agreement. The
parties agree that this Agreement will continue thereafter for successive 1 year
terms until such time as one party gives the other at least ninety (90) days
written notice of its intent to terminate this Agreement, according to the
provision of Section 16.
2.0 STATEMENT OF WORK
2.1 Appointment
2.1.1 MSI shall perform the receipt of goods, move to storage area, pick stock,
move to staging area, prepare products as directed via sales order, adequately
package for shipment and ship equipment via third party carrier. All of the
material movements shall be recorded in the SNI management system. The
performance of this warehousing, system integration, configuration, shipping
service will be priced as listed in section A.
2.1.2 Additional products not itemized in Schedule A may be added by mutual
agreement of the parties. SNI shall use MSI for its domestic sales order
fulfillment requirements for the Products. Performance requirements and
commitments will be issued by SNI utilizing Purchase Orders which outline the
scope and delivery requirements for specified projects. MSI will be provided
system integration instructions and work orders with project purchase orders.
2.1.3 MSI will utilize SNI's management systems to manage the order fulfillment
of the business. SNI will provide adequate software, hardware and networking
equipment, and adequate training to MSI's personnel to perform daily business
transactions on SNI's management system. MSI will provide personnel dedicated to
the SNI project with an adequate understanding of management systems. Additional
or supplemental training is available through SNI at SNI's then current rate.
2.1.4 SNI is to maintain the systems and all telecommunications cost for these
systems.
<PAGE> 3
2.1.7 MSI may utilize outside vendors or subcontractors to perform order
fulfillment and system integration services hereunder, with the prior written
consent of SNI. SNI may request that personnel either subcontractors or MSI
personnel be removed from the SNI project with a written request to MSI. MSI' s
use of outside vendors shall not affect MSI's obligations to SNI as set forth in
this Agreement.
2.1.9 SNI will retain responsibility for the sales order planning and purchasing
functions.
2.1.10 MSI shall perform all traffic management functions, including but not
limited to, product scheduling and expediting, Customs documentation preparation
and clearing coordination, related to the performances of services hereunder.
3.0 ASSETS
3.1 Inventory
3.1.1 SNI will store its Retail inventory at MSI. MSI will utilize adequate
controls to ensure the safe keeping of the SNI inventory against any loss or
damage. MSI will designate a segregated area and provide limited access to the
SNI inventory to SNI or MSI personnel who are working on SNI services.
3.1.2. SNI will provide reimbursement for the cost of shipping supplies used to
ship the SNI products. MSI will manage the acquisition and delivery of the
supplies. If SNI requires specialized packaging products, MSI will notify SNI of
the cost of the products and SNI may either purchase the specialized products
via MSI or obtain the specialized products from another source.
3.2 Title
3.2.1 Title to all SNI inventory, Supplies and Management system software, and
networking equipment will remain with SNI. MSI agrees to a cycle count program
as outlined in Attachment A with provision for no more than a 2% inventory
shrinkage per year.
4.0 Omitted
5.0 Pricing
<PAGE> 4
5.1 System Integration
5.1.1 MSI will charge system integration services.
5.1.1.1 Pricing for items not priced as part of the initial contract, and not
included in Schedule A, if performed internally at MSI, will be based on
material costs plus 15% and estimated labor at $45.00 an hour as specified in
Schedule A.
5.5 Freight
5.5.1 SNI is responsible for the incoming and outgoing freight charges for its
goods.
5.6 Price Adjustments
5.6.1 All prices set forth on Schedule A shall be fixed for the first 6 months
of this Agreement. After the first year, prices may be raised by MSI upon giving
at least sixty (60) days prior written notice before the end of the current
term.
5.6.2 The base hourly labor rates used in all pricing will not increase beyond
the increases in the Consumer Price Index plus 2%.
6.0 PAYMENTS
6.1 SNI shall issue payment net thirty (30) calendar days after invoice. MSI
will send separate monthly invoices for each SNI Business Unit (i.e. SNI
Customer Service, SNI Retail Sales, etc.)
7.0 PURCHASE ORDERS & FORECAST PROCESS
7.1 Purchasing
7.1.1 For the purposes of this Agreement, purchase order shall mean SNI's
written purchase order form and any documents incorporated by reference and
purchase orders transmitted electronically, and any documents incorporated
therein by reference.
7.1.2 Purchase orders and SNI Work Orders will be placed by SNI to MSI on a
Monthly basis, and shall specify the system integration services and other
services to be performed hereunder. The preprinted terms on a purchase order,
SNI work order, or Purchase order effect and the terms of this Agreement shall
control.
<PAGE> 5
7.2 Forecast
7.2.1 SNI will provide , on a Monthly basis, quarterly forecast of
7.2.1.1 SNI sales order forecast for inventory levels
7.2.1.2 SNI system integration and other unit demands required.
7.2.2 The forecasts are for planning purposes only and do not constitute orders
or contractual commitments.
8.0 WARRANTY
8.1 MSI warrants all repairs under this Agreement to be free from defects in
material and workmanship for a period of 120 days from the date of shipment to
the end customer. Should a failure occur during this warranty, SNI and MSI agree
that SNI will obtain a Return Material Authorization (RMA) from MSI, prior to
returning the failed product, in a timely fashion and MSI will promptly repair,
or re-perform services hereunder. The warranty hereunder shall run to SNI and
not to SNI's customers. MSI's sole liability, and SNI's sole remedy, for breach
of warranty hereunder shall be the repair of the defective item or re-
performance of service.
8.2 This warranty shall not apply to breakdown, malfunction, or other failure of
the product if the product is:
a) Used, operated, or maintained in a manner, or subjected to any condition, not
consistent with the intended purpose of the product.
b) Improperly repaired by the SNI field.
c) Damaged or affected by the negligence of SNI or the End User, or by causes
external to the equipment, such as, but not limited to, air conditioning
failure, electrical surges, or negligent acts or conduct of a third person(s).
9.0 SCRAP MATERIAL DISPOSITION
9.1 If SNI identifies a unit to be "Scrapped". MSI will warehouse the items in a
"Holding Area" for disposition. SNI will notify MSI of the current SNI
"Inventory Scrap Policy and Procedure". MSI will "SCRAP" the identified items
per SNI policy and procedure at SNI expense.
10.0 DOCUMENTATION, TRAINING & TECH SUPPORT
10.1 SNI shall supply to MSI the documentation, training and technical support
as reasonably required by MSI.
<PAGE> 6
10.2 SNI hereby grants to MSI the nonexclusive right to reproduce, in whole or
in part, all documentation and training material provided to MSI for internal
use only in order for MSI to effectively service SNI products.
10.3 Upon signing of this Agreement, SNI will transfer existing documentation
including schematics, bill of materials, assembly drawings, repair and test
procedures, service manuals, systems operating manuals and any other documents
reasonably necessary to perform the function. MSI shall keep all such
documentation confidential and shall treat the confidential information as it
would its own confidential information.
11.0 GENERAL
11.1 This Agreement is the complete and entire understanding between the parties
on this subject matter and supersedes all prior agreements, proposals,
representations, statements, or understanding whether written or oral on this
subject between them.
11.2 The provisions of this Agreement may be amended or waived only by a writing
executed by the authorized representatives of the parties hereto. In the event
that either party to this Agreement shall, on any occasion, fail to perform any
provision of this Agreement, and the other party does not enforce that
provision, the failure to enforce shall not prevent enforcement of the provision
on any other occasion. No assignments without written consent. Any attempt shall
be void.
11.3 As used in this Agreement, except where otherwise noted, the term "days"
shall mean business days.
11.4 MSI, including its servants, agents and employees is an independent
contractor and not an agent or employee of SNI. Without limiting the generality
of the foregoing, MSI is not authorized to represent or make any commitments on
behalf of SNI, and SNI expressly disclaims any liability therefor.
11.5 Supplemental terms are included in all schedules and are incorporated
herein by reference.
11.6 All rights and remedies conferred by this Agreement, by any other
instrument, or by law are cumulative and may be exercised singularly or
concurrently. If any provision of this Agreement is held
<PAGE> 7
invalid by any law or regulation of any government or by any court, such
invalidity shall not effect the enforceability of any other provisions hereof
This Agreement and any Purchase Orders issued hereunder shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
11.7 IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY DAMAGES RESULTING FROM LOSS
OF DATA OR USE, LOST PROFITS OR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES.
11.8 Both Parties agree to comply with all applicable laws, including but not
limited to the U.S. Export Control laws.
11.9 Cross Indemnification. In the event any act or omission of a party or its
employees, servants, agents, or representatives causes or results in (i) damage
to or destruction of property of the other party or third parties, and/or (ii)
death or injury to persons including, but not limited to, employees or invitees
of either party, then such party shall indemnify, defend, and hold the other
party harmless from and against any and all claims, actions, damages, demands,
liabilities, costs, and expenses including reasonable attorneys' fees and
expenses, resulting therefrom. The indemnifying party shall pay or reimburse the
other party promptly for all such damage, destruction, death or injury.
11.10 Insurance During the term of this Agreement, MSI shall at all times
maintain at its own cost the following minimum insurance coverage with a
financially solvent insurance company and, upon request of SNI shall furnish
certificates evidencing the following insurance: (i) workers' compensation as
required by the laws of the state where Services are to be performed, (ii)
employer's liability insurance at a limit of not less than One Hundred Thousand
Dollars ($100,000) each accident, Five Hundred Thousand Dollars ($500,000)
disease policy limit, and One Hundred Thousand Dollars ($100,000) each employee
disease limit, (ill) commercial general liability insurance (occurrence) basis
form and automobile liability coverage) with a minimum of One Million Dollars
($1,000,000) combined single limit per occurrence, insuring MSI from claims for
personal injury (including bodily injury and death) and property damage which
may arise from or in connection with the performance of Services of from the
provision of Products hereunder. SNI shall be named an additional insured and
MSI's insurer shall be required by MSI to notify SNI of any material change or
cancellation of these coverage's before expiration of these policies; and (iv)
any other insurance coverage which SNI considers reasonably necessary or
appropriate under the circumstances of the applicable Purchase order, which
requirement for insurance shall be communicated to MSI prior to or
<PAGE> 8
concurrently with the purchase order for which such coverage is required. In the
event MSI fails to provide the required continuous insurance coverage, SNI may
charge MSI and MSI shall pay SNI, SNI actual expense incurred in purchasing
similar protection or a reasonable estimate thereof and the value of any claims,
actions, damages, liabilities, costs and expenses paid by SNI which would not
have been paid by SNI if MSI had complied with the requirements of this section.
12.0 CONFIDENTIAL INFORMATION AND ADVERTISING
12.1 MSI shall maintain as confidential and shall not disclose to any person
outside its employ, nor use for purposes other than performance of this
Agreement, any specifications, drawings, blueprints, data, business information,
or other confidential information which MSI learns by virtue of this Agreement,
except as required by law, and after written notice to SNI. Upon termination of
this Agreement, MSI shall promptly return to SNI all confidential material and
all copies.
13.0 CHANGES
13.1 No changes shall be made by MSI to manufacturer's Products or services as
ordered by SNI in form, fit, function, design, or appearance without SNI's prior
written approval.
Pricing
See SCHEDULE A
14.0 MATERIAL AVAILABILITY
14.1 SNI agrees to reasonably assist MSI in obtaining the required materials for
MSI to perform its material obligations hereunder. This may include, but shall
not be limited to, MSI acquiring materials from SNI's third party vendors or
assignment of vendor contracts from SNI to MSI. This may also include the
procurement from SNI of SNI's own proprietary materials which are required by
MSI to fulfill its obligations hereunder. The parties agree to focus on both
quality and price when ascertaining which materials are to be used by MSI, and
which vendors to use, in the performance of services hereunder.
15.0 FORCE MAJEURE
15.1 Neither party shall be liable in any way, whatsoever, to the other party in
the event that the performance of this Agreement, or any part' thereof, is
delayed through causes beyond the reasonable control of the delaying party, such
as, but not limited to, acts of God, acts of
<PAGE> 9
civil or military authorities, fires, industrial disputes, floods, wars and
riots. In the event of such delay, the performance of this Agreement or any part
affected by such cause(s) shall be suspended or so loss and to the extent that
such cause(s) prevents or delays its performance. The delaying party shall
immediately and fully inform the other party of such delay. In the event the
delay exceeds thirty (30) days (or is anticipated to exceed thirty (30) days),
the parties shall meet to mutually decide what action should be taken with
respect to the work and this Agreement. Both parties undertake to make "best
efforts" to recover from such situations as timely as possible with minimal
impact on the other party.
16.0 TERMINATION FOR CAUSE
16.1 The occurrence of any of the following constitutes a breach and is cause
for the termination of this Agreement and/or its purchase orders.
16.1.1 MSI or SNI fails to performs to perform any material provision of this
Agreement and such failure continues for thirty (30) days following written
notice, or fifteen (15) days if such breach has to do with a failure to make
payment.
16.1.2 Either party assigns this Agreement, or any obligation or right
hereunder, other than to a parent or subsidiary company without the prior
written consent of the other party.
16.1.3 If there is any material change in business organization status for
either party, such as combination with or acquisition by another company which
alters the business strategy and capabilities of either SNI or MSI.
16.1.3 Either party commits any act of bankruptcy or insolvency.
17.0 NOTICES
17.1 Any notice given under this Agreement shall be written or sent by telex or
facsimile. Written notice shall be sent by registered mail or certified mail,
postage prepaid, return receipt requested, or by any other overnight delivery
service, which delivers to the noticed destination, and provides proof of
delivery to the sender. Any telex or facsimile notice must be followed within
three (3) days by written notice. All notices shall be effective when first
received at the following addresses:
<PAGE> 10
If to MSI If to SNI
Micro-Media Solutions, Inc. Siemens Nixdorf Information Systems, Inc
Attn: President Attn: Legal Department
501 Waller 3860 North First Street
Austin, Texas 78702 San Jose, CA 95134
18.0 APPROVALS
(IN WITNESS WHEREOF, )the parties have executed this Agreement effective as of
23rd day of September 1998.
Micro-Media Solutions, Inc. Siemens Nixdorf Information Systems, Inc.
Name: Mitchell C Kettrick Name: Rick Krause
Signature: /s/ Mitchell C Kettrick Signature: /s/ Rick Krause
Title: Vice-President Title: General Manager
Date: 9/23/98 Date: 9/24/98
Name: Jan Andersson
Signature: /s/ Jan Andersson
Title: Vice-President
Date: 9/25/98
Schedule A
MSI Integration Fee $ 79.00 per system
(This includes all P.O.S. systems, Sears, & ATM machines with any value
add. Value Add is defined as any or all of the following: testing,
serializing, peripheral installation & unpackage /repackage.)
MSI Handling Fee (Not Including ATM) $ 12.00 per shipped package
MSI Handling Fee (ATM) $ 22.00 per shipped package
(This includes serializing from out side the box.)
The price schedule is subject to changes upon mutual agreement of MSI and SNI.
Overtime shall be negotiated and billed on a case by case basis as needed.
Micro-Media Solutions, Inc. Siemens Nixdorf
Information Systems, Inc.
Name: Mitchell C Kettrick Name: Rick Krause
Signature: /s/ Mitchell C Kettrick Signature: /s/ Rick Krause
Title: Vice-President Title: General Manager
Date: 9/23/98 Date: 9/24/98
Name: Jan Andersson
Signature: /s/ Jan Andersson
Title: Vice-President
Date: 9/25/98
<PAGE> 1
EXHIBIT 10.8
SECOND ADDENDUM TO LEASE AGREEMENT
THIS SECOND ADDENDUM TO LEASE AGREEMENT (this "Second Addendum") is by and
between WBH, LTD., a Texas limited partnership ("Landlord"), and MICRO MEDIA
SOLUTIONS, INC., a Texas corporation ("Tenant"), and amends that one certain
Lease Agreement dated the 6th day of June, 1994, by and between W.B. Houston &
Co. ("Original Landlord"), as Landlord, and Micro Solutions, as Tenant, covering
space in the building located at 1202 East Fifth Street, Austin, Texas, as
amended by Addendum to Lease Agreement dated March 11, 1996, by and between
Original Landlord and Tenant adding the approximately 19,100 square feet of
space in the building located at 1210 East Fifth (such Lease Agreement as so
amended being hereinafter referred to as the "Lease").
WHEREAS, Landlord has acquired the Project from Original Landlord and is the
successor in interest of the Original Landlord under the Lease; and
<PAGE> 2
WHEREAS, Tenant previously transacted business under the name Micro Solutions,
and entered into the Lease in such capacity; and
WHEREAS, Landlord and Tenant desire to amend the Lease as hereinafter set forth.
NOW, THEREFORE, Landlord and Tenant hereby agree that the Lease be amended as
follows:
1. Premises. As a result of the Addendum to Lease Agreement referenced above,
the building located at 1210 East Fifth Street ("1210 East Fifth") was leased to
Tenant. As used in the Lease, the term "Premises" shall mean the original
premises in the Lease Agreement (e.g., 1202 East Fifth Street, also known as 501
Waller) and 1210 East Fifth. The term "Building" shall mean and include the
original Building described in the Lease and the Building located at 1210 East
Fifth. The "Site" shall mean Lots 7-12, Block 4, Outlot 3, Division A, City of
Austin, Travis County, Texas. The "Project" shall mean the Building and the
Site.
2.Term. The term of this Lease is hereby extended for a period ending July 31,
2008.
3. Rent During Extension Term. Beginning effective April 1, 2001, Total Monthly
Rental and Additional Rental shall be revised as follows:
(a) Total Monthly Rental shall be in the following amounts:
April 1, 2001 through March 31, 2002 - $14,040.00 per month.
April 1, 2002 through March 31, 2003 - $14,917.50 per month.
April 1, 2003 through March 31, 2004 - $15,795.00 per month.
April 1, 2004 through March 31, 2005 - $16,672.50 per month.
April 1, 2005 through March 31, 2006 - $17,550.00 per month.
April 1, 2006 through March 31, 2007 - $18,422.50 per month.
April 1, 2007 through March 31, 2008 - $19,305.00 per month.
April 1, 2008 through July 31, 2008 - $20,182.50 per month.
(b)Section 3.2 of the Lease shall be revised in its entirety to read as follows:
3.2 Additional Rental. In addition to the Total Monthly Rental, Tenant agrees to
pay to Landlord as additional rent ("Additional Rental) an amount equal to the
Operating Expenses (as hereinafter defined) for each calendar year during the
term of this Lease. Tenant's liability for Additional Rental for any partial
year during the term of this Lease shall be prorated based upon the ratio of the
number of days within the term of this Lease for the partial year as compared to
the total number of calendar days in such year.
A. Operating Expenses: For the purposes of determining Additional Rental,
"Operating Expenses" shall mean the following costs and expenses paid or
incurred by Landlord in connection with the Project for a particular calendar
year or portion thereof, as determined by Landlord: all ad valorem taxes and
other real estate taxes and all special assessments
<PAGE> 3
(provided, however, that if pursuant to the authorizing legislation or the
taxing authority's requirements, Landlord shall have the right to elect to
either make a lump sum payment or cause such tax or assessments to be amortized
and paid over a period of years, such taxes and assessments for purposes of
computing Operating Expenses shall be amortized over the longest period of time
permitted by such authorizing legislation or requirements of the taxing
authority for the payment of such taxes or assessments); costs and expenses of
contesting the validity or amount of real estate taxes; and insurance premiums.
B. Monthly Payment of Estimated Additional Rental: The Operating Expenses for
each calendar year shall be estimated by Landlord, and written notice thereof
shall be given to Tenant. Upon receipt of said written notice from Landlord, the
estimated Additional Rental shall be due and payable as herein provided. Tenant
agrees to pay Landlord each month, at the same time the Total Monthly Rental is
due, an amount equal to one-twelfth (1/12) of the estimated annual Additional
Rental due for such year.
C. Revisions of Estimated Additional Rental: If real estate taxes, or any
portion of Operating Expenses increase during a calendar year, Landlord may
revise the estimated Additional Rental during such year by giving Tenant written
notice to that effect, and thereafter Tenant agrees to pay Landlord, in each of
the remaining months of such year, an additional amount equal to the amount of
such annual increase in the estimated Additional Rental divided by the number of
months remaining in such year.
D. Annual Adjustment of Additional Rental: After the end of each calendar year,
Landlord shall prepare and deliver to Tenant a statement showing Tenant's total
amount of Additional Rental. Within thirty (30) days after receipt of the
aforementioned statement, Tenant agrees to pay Landlord, or if Tenant has
overpaid, Landlord shall credit against the next Additional Rental payment or
payments due from Tenant, as the case may be, the difference between Tenant's
actual Additional Rental due for the preceding calendar year and the estimated
Additional Rental paid by Tenant during such year.
4. Maintenance. Section 7.1(i) shall be amended by the addition of the following
language at the end thereof:
Notwithstanding the foregoing, Landlord shall have the option to require Tenant
to maintain the electrical, mechanical (including HVAC) and plumbing systems
servicing the Premises or any part thereof, in which event Landlord shall
reimburse Tenant for the reasonable costs of such maintenance.
5. Tenant Improvement Allowance. (a) Landlord agrees to reimburse Tenant for
one-half of the costs of alterations, improvements, modifications or additions
to the Premises made by Tenant up to a total maximum payment by Landlord of
$10,000.00, provided that all such alterations, improvements, modifications and
additions have been consented to by Landlord pursuant to Section 9.1 of the
Lease and have been performed by a contractor approved by
<PAGE> 4
Landlord. Such reimbursement shall be made within ten (10) day after Tenant
presents Landlord with proof reasonably satisfactory to Landlord of the payment
of such amount.
(b) Tenant agrees to pay Landlord, in addition to all other amounts due
hereunder, the amount of $300.00 per month on the first day of each month
beginning July 1, 1998, and continuing through and including April 1, 2001.
6. Renewal Option. The parties acknowledge that Tenant has exercised the Option
set forth in Section 2.3 of the Lease. So long as Tenant is not then in default,
Tenant shall have another option (the "Second Option") to renew this Lease (but
only as to that portion of the Premises not subleased to GTE Intelligent Network
Services Incorporated ("GTE"), in the event and only in the event GTE exercises
its option to lease its subleased space directly from Landlord) for a five (5)
year term, beginning on the expiration of the Term of this Lease as extended in
Paragraph 1 above, and continuing for five (5) years thereafter, by notifying
Landlord in writing of its election at least nine (9) months prior to the end of
such Term of this Lease. Such renewal shall be on all of the terms and
conditions of this Lease in effect in the last month of the extended term of
this Lease which are not inconsistent herewith, except that the Total Monthly
Rental shall be at a market rental rate as determined by Landlord in its
reasonable judgment. Landlord shall give written notice (the "Rental Notice") to
Tenant of the Total Monthly Rental to be in effect during such renewal term
within thirty (30) days after receipt of Tenant's notice exercising the Second
Option, and Tenant shall have a right during the thirty (30) day period after
receipt of the Rental Notice within which to revoke the exercise of the Second
Option by giving written notice of revocation to Landlord within such thirty
(30) day period, in which event the Term of this Lease shall expire on May 31,
2008. If Tenant does not revoke its exercise of the Second Option within such
thirty (30) day period, then the Total Monthly Rental specified by Landlord the
Rental Notice shall be in effect during such renewal period.
7. Tenant's Insurance. The minimum levels of insurance required to be maintained
by Tenant pursuant to Section 8.3 of the Lease are as follows:
Bodily injury or death - $1,000,000.00
Property damage - $1,000,000.00
8. Defined Terms. All capitalized terms used herein shall have the meaning
ascribed in the Lease, unless a different meaning is given herein.
EXCEPT as expressly modified herein, the terms of the Lease shall remain in full
force and effect and Landlord and Tenant hereby ratify such terms, as herein
amended.
EXECUTED effective as of the 27 day of July 1998.
LANDLORD:
WBH, LTD., a Texas limited partnership
By: WBH GP, Inc., its general partner
By: /s/ Will Houston
Name: Will Houston
Title: President
TENANT:
MICRO MEDIA SOLUTIONS, INC., a Texas corporation
By: /s/ Jose Chavez
Name: Jose Chavez
Title: President
<PAGE> 1
Exhibit 10.9
This is to certify that Micro-Media Solutions, Inc. is an authorized
Hewlett-Packard Value Added Reseller
/s/ Newton Walpert
Newton Walpert, Channel Marketing Manager
Hewlett-Packard
<PAGE> 1
Exhibit 10.10
PLACEMENT AGREEMENT
OF
MICRO-MEDIA SOLUTIONS, INC.
November 11, 1997
EQUITY SERVICES, LTD.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Gentlemen:
The undersigned, Micro-Media Solutions, Inc., a Utah corporation (the
"Company"), confirms its agreement with Equity Services, Ltd., a Nevis company
("ESL") as follows:
<PAGE> 2
1. Description of Securities and Offering.
(a) ESL has agreed to privately place (the "Private Placement")
Four Hundred Thousand (400,000) units of the Company's securities (the
"Units"), each Unit consisting of one (1) share (the "Shares") of the Company's
Series A 5% Cumulative Convertible Non-Voting Preferred Stock (the "Series A
Preferred Stock"), each Share being immediately convertible into ten (10)
shares of the Company's common stock, and six (6) Class A warrants (the "Class
A Warrants"), at a price of Five and 30/100 Dollars ($5.30) per Unit (the
"Private Placement Price"), on or before November 14, 1997 (the "Closing").
The Shares shall have a cumulative dividend of 5% per annum, payable on
a fiscal quarterly basis, which shall be paid by the issuance of shares of the
common stock of the Company, par value $0.10 per share (the "Common Stock")
based on the thirty (30) day average closing bid price of the Common Stock
immediately prior to the dividend date. Each Class A Warrant included in the
Units will upon its exercise entitle the holder thereof to purchase one (1)
share of Common Stock and will be exercisable during a period beginning January
31, 1998, and ending two (2) years thereafter. The Class A Warrant exercise
price will be One Dollar and Fifty Cents ($1.50) per share subject to
adjustment as described below. Each Warrant will have anti-dilution provisions
for stock dividends, splits, mergers, sale of all or substantially all of the
Company's assets. The components of the Units will be separately transferrable
immediately after the Closing. The Warrant holders will agree that so long as
the Company remains certified as an Historically Underutilized Business
("HUB"), they will not exercise their Warrants and/or convert their preferred
stock in such a manner as to cause the Company to lose its HUB status.
Immediately upon the occurrence of the Closing, the Company shall grant
the holders of the Shares, the holders of the Common Stock issued upon
conversion of the Shares, the holders of the Common Stock issued as dividends
on the Shares and the holders of the Common Stock issued upon the exercise of
any of the Warrants one (1) demand registration right and "piggyback"
registration rights. The terms of these registration rights shall be as set
forth in a Registration Rights Agreement (herein so called) substantially in
the form attached hereto as Exhibit "A". The Company shall bear all expenses
in connection with the preparation and filing of such registration statements.
(b) The commissions to which ESL shall be entitled, and which the
Company shall pay, for such placement shall be as follows: (i) a sum equal to
seven percent (7%) of the total proceeds resulting from the placement of the
Units, payable in cash; and (ii) Twenty Thousand (20,000) Units (the "Placement
Agent's Units"). ESL shall be paid a commission of five percent (5%) of the
aggregate strike price paid upon the exercise of any Warrants. ESL shall also
be paid (i) a sum equal to three percent (3%) of the total proceeds resulting
from the placement of the Units as a non-accountable expense allowance and (ii)
an amount equal to the legal fees of ESL's counsel not to exceed Ten Thousand
and No/100 Dollars ($10,000.00). ESL will be paid the commission, fees, and
non-accountable expense allowance simultaneously with the Closing.
(c) In addition, the Company agrees to sell to ESL, for an
aggregate price of $100, a five (5) year option ("ESL Purchase Option") to
purchase up to Four Hundred Thousand
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 3
(400,000) shares of Common Stock ("ESL's Option Shares") at a price of
One Dollar and Fifty Cents ($1.50) per Option Share exercisable for a period of
five (5) years commencing January 31, 1998. The holders of ESL's Option Shares
and the Placement Agent's Units will have registration rights as set forth in
the Registration Rights Agreement substantially in the form attached hereto as
Exhibit "B".
2. Appointment of Placement Agent. ESL's appointment by the Company as
Placement Agent shall commence upon the date of the execution of this
Agreement, and shall continue until and through November 30, 1998, unless (i)
the Units shall be completely sold prior to that date, (ii) the offering has
been terminated by written agreement between ESL and the Company, or (iii) this
Agreement shall be terminated at a prior date as provided herein.
3. Release of Placement Agent. ESL's commitment to serve as Placement
Agent on behalf of the Company is made subject to the release of ESL: (i) in
the event of war, (ii) in the event of any material adverse change in the
business, property or financial condition of the Company (of which ESL shall be
the sole judge), (iii) in the event of any pending or threatened action, suit
or proceeding at law or in equity against the Company, or by any Federal, State
or other commission, board or agency wherein any unfavorable decision would
materially affect the business, property, financial condition or income of the
Company (of which ESL shall be the sole judge), (iv) in the event of a breach
by the Company of any covenant, representation or warranty contained in this
Agreement or (v) in the event of adverse market conditions (of which ESL shall
be the sole judge).
4. Representations and Warranties of the Company.
The Company represents and warrants to ESL as follows:
(a) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Utah, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification.
(b) The Company has registered shares of its Common Stock pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is in full compliance with all reporting requirements of the Exchange
Act, and the Common Stock is quoted on the NASDAQ Over-the-Counter Bulletin
Board (trading symbol: MSIA).
(c) The Company has furnished ESL with copies of the Company's
Business Plan dated July 3, 1997, most recent Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission (the "Commission") and all
Forms 10-QSB and 8-K filed thereafter, if any (collectively, the "Disclosure
Documents"). Immediately prior to the Closing, there will be no other capital
stock issued and outstanding, nor will there be outstanding any rights to
acquire,
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 4
commitments to issue or securities convertible into capital stock other than as
evidenced in the Disclosure Documents. The Disclosure Documents at the time of
their filing did not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made not
misleading.
(d) Except as shown on the Company's most recent audited financial
statements prepared by Salazar Accountants dated March 31, 1997, a copy of
which has been furnished to ESL, and as otherwise previously disclosed in
writing to ESL, the Company will have no other indebtedness outstanding
immediately prior to the Closing.
(e) Upon issuance at the Closing, in accordance with this
Agreement, the Units will be duly and validly authorized and issued, fully paid
and nonassessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. The shares of Common Stock, when issued and
delivered upon conversion of the Series A Preferred Stock or exercise of any of
the Warrants, the ESL Option Shares and the Placement Agent's Units, will be
duly and validly authorized and issued, fully paid and nonassessable, free from
all encumbrances and restrictions other than restrictions on transfer imposed
by applicable securities laws and/or this Agreement, and will not subject the
holders thereof to personal liability by reason of being such holders.
(f) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally, and the Company has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
(g) The execution and delivery of this Agreement, the issuance of
the Units, the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, the ESL Option Shares, the Placement Agent's Units, the
Warrants, the shares of Common Stock issuable upon exercise of any of the
Warrants, and the consummation of the transactions contemplated by the Investor
Subscription Agreement (herein so called) by the Company, will not conflict
with or result in a breach of or a default under any of the terms or provisions
of, the Company's articles of incorporation or By-laws, or of any material
provision of any indenture, mortgage, deed of trust or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets is bound, any material provision of any law, statute,
rule, regulation, or any existing applicable decree, judgment or order by any
court, federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company, or any of its
properties or assets and will not result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to the terms of any agreement or instrument
to which any of them is a party or by which any of them may be bound or to
which any of their property or any of them is subject.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 5
(h) No authorization, approval, filing with or consent of any
governmental body is required for the issuance and sale of the Units, except
for filings pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the "Act") or any state blue sky filings.
(i) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending or threatened
against or affecting the Company, or any of its properties, which would
reasonably be anticipated to result in any material adverse change in the
condition (financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Company.
(j) Subsequent to the dates as of which information is given in
the Disclosure Documents, except as contemplated herein, the Company has not
incurred any material liabilities or material obligations, direct or
contingent, or entered into any material transactions not in the ordinary
course of business, and there has not been any change in its capitalization or
any material adverse change in its condition (financial or otherwise) net
worth, results of operations or prospects, except as otherwise previously
disclosed to ESL.
(k) The Company has conducted, is conducting and will conduct its
business so as to comply in all material respects with all applicable statutes
and regulations, and the Company is not charged with and, to the knowledge of
the Company, is not under investigation with respect to any violation of any
statutes or regulations nor is it the subject of any pending or threatened
adverse proceedings by any regulatory authority having jurisdiction over its
business or operations.
(l) Except as set forth in the Disclosure Documents, the Company
has good and marketable title to all properties and assets described therein as
owned by it, free and clear of all liens, charges, encumbrances, or
restrictions.
(m) The Company has filed all necessary federal and state income
and franchise tax returns and has paid all taxes shown as due thereon, except
as previously disclosed to ESL.
(n) The Company has no knowledge of any tax deficiency that might
be asserted against it that might materially and adversely affect its business
or properties.
(o) The Company maintains insurance of the types and in amounts
generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies and businesses, including, but not
limited to, insurance covering all real and personal property owned or leased
by the Company against theft, damage, destruction, acts of vandalism, products
liability and all other risks customarily insured against, all of which
insurance is in full force and effect.
(p) No labor disturbance by the employees of the Company exists or
is imminent that could reasonably be expected to have a material adverse effect
on the conduct of the business, operations, financial condition, or income of
the Company.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 6
(q) Neither the Company nor any employee or agent of the Company
has made any payment of funds of the Company or received or retained any funds
in violation of law.
(r) Subject in part to the truth and accuracy of the subscriber's
representations set forth in the Investor Subscription Agreement, the offer,
sale and issuance of the Units are exempt from registration requirements of the
1933 Act, and neither the Company nor any authorized agent acting on its behalf
will take any action hereafter that will cause the loss of such exemption.
(s) The Company has no patents, trademarks, service marks,
copyrights, or licenses other than commercially available software licenses.
The Company is not aware that any of its executive officers is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency that would interfere with the use of his or her best
efforts to promote the interest of the Company or that would conflict with the
Company's business as proposed to be conducted.
(t) Except for agreements explicitly contemplated hereby or set
forth in the Disclosure Documents, there are no agreements between the Company
and any of its officers, directors, affiliates or any affiliate thereof.
(u) As of the Closing, no representation or warranty of the
Company contained in this Section 4, and no statement contained in any exhibit,
schedule, certificate, list, summary or other disclosure document provided or
to be provided to ESL pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact which is
necessary in order to make statements contained therein not misleading.
The representations, warranties and covenants of the Company contained in this
Agreement shall inure to the benefit of each subscriber to the Private
Placement contemplated by this Agreement and such subscribers shall constitute
identified third-party beneficiaries under this Agreement. No termination,
modification, or waiver of the representations, warranties and covenants of the
Company contained in this Agreement shall be permitted in any manner adversely
affecting their interests without their prior written consent.
5. Affirmative Covenants of the Company.
(a) Upon completion of the Private Placement, the Company will use
its best efforts to list shares of its Common Stock on The Nasdaq SmallCap
Market or a national securities exchange (such as AMEX or NYSE) and, at a
minimum, to maintain such listing for a period of five (5) years from the time
of such listing.
(b) The Company will engage a financial public relations firm
reasonably acceptable to ESL within ninety (90) days of Closing.
(c) The financial statements of the Company shall be audited by a
"Big Six" or such
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 7
other independent public accounting firm to which ESL may consent. Further,
the Company shall not effect a change in its accounting firm to other than a
"Big Six" firm for a period of two (2) years following the Closing.
(d) The Company shall be responsible for and shall bear all
expenses directly and necessarily incurred in connection with the Private
Placement, including but not limited to, the cost of preparing, printing and
delivering all placement and selling documents, including but not limited to
the Placement Agreement, Investor Subscription Agreements, Registration Rights
Agreements, Placement Agent's Option Agreements and blue sky memorandum and
stock certificates; blue sky fees, filing fees, legal fees and disbursements of
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of two (2) sets of bound closing volumes
for ESL and its counsel; the cost of three (3) tombstone advertisements, one
(1) of which shall be in a national business newspaper, one (1) of which shall
be in a major Texas newspaper and one (1) shall be in a publication chosen by
ESL; and an amount equal to the legal fees of ESL's counsel not to exceed Ten
Thousand Dollars ($10,000.00)(collectively, the "Company Expenses"). If the
Private Placement is not completed because the Company prevents it or because
of a breach by the Company of any covenants, representations or warranties
contained herein, the Company's liability for such expense allowance shall be
limited to Ten Thousand and No/100 Dollars ($10,000.00).
(e) The Company will, and will cause its subsidiaries, if any, to
do the following: (i) maintain and preserve its and their respective
businesses consistent with normal business practices; (ii) conduct its and
their respective business, taken together as a group, in an orderly, efficient
and customary manner consistent with normal business practices; and (iii) keep
and maintain all of its and their respective properties in good working order
and condition, ordinary wear and tear excepted.
(f) The Company will deliver to ESL for a period of three (3)
years from the Closing:
(i) within thirty (30) days after the close of each
quarter, a copy of its consolidated balance sheet as of the close of
such month and its profit and loss statement and surplus reconciliation
for that month, all prepared in accordance with generally accepted
accounting principles consistently applied, and certified as being
fairly presented in all material respects by the Company's President or
its Chief Financial Officer;
(ii) at any time within the period from thirty (30) days
prior to and until thirty (30) days after the start of any fiscal year,
financial projections of the Company and its subsidiaries, if any, for
such fiscal year prepared in reasonable detail, which financial
projections shall be presented to the Company's Board of Directors for
their approval at their regular meeting first following the preparation
of such projections;
(iii) promptly upon the filing thereof, all reports and
statements filed with the Commission (or any governmental authority
succeeding to any of its functions) or with any securities exchange;
and
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 8
(iv) such other information and data with respect to the
Company or any of its subsidiaries, if any, as from time to time may be
reasonably requested by ESL (including, without limitation, such other
information as the Company shall have supplied to any of its security
holders in their capacity as such) to the extent the Company possesses
such information or can acquire it without unreasonable effort or
expense.
(g) The Company will cause at least One Million and No/100 Dollars
($1,000,000.00) of "key man" life insurance to be written on the life of Jose
Chavez. Such "key man" life insurance will be kept in force for a minimum
period of either three (3) years from the Closing or the term of the employment
agreement between the Company and Jose Chavez, whichever is longer.
(h) For a period of three (3) years from the Closing, the Company,
at its expense, shall, upon request by ESL from time to time, provide ESL with
copies of the Company's daily transfer sheets.
(i) The Company and its President shall call a meeting of the
Board of Directors at such times as may be necessary but at least once every
fiscal quarter. The Board of Directors shall include at least two (2) non-
affiliated directors, which directors shall not be officers or employees of the
Company ("Outside Directors"). In addition, the Company will allow one (1)
designated representative of ESL to receive timely notice of, attend and make
comments at all meetings of its Board of Directors. (Such designated
representative shall also be sent all standard communications and notifications
from the Company to the members of its Board of Directors concerning annual and
special meetings in the same fashion and on the same basis, including with
respect to timing, as he would if he were a member of the Board of Directors.)
Further, for a period of five (5) years from the Closing, the holders of the
Series A Preferred Stock shall have the right to designate one (1) member of
the Board of Directors and the Company will cause such designee to be elected
to the Company's Board of Directors.
(j) The Company will cause the Board of Directors to maintain a
Compensation Committee, which shall be comprised of three (3) members, of which
one (1) member shall be a director designated by the holders of the Shares.
The Compensation Committee shall have authority with respect to the matters set
forth in clauses (i) and (ii) of paragraph (m) of this Section 5.
(k) The management of the Company shall prepare and deliver to
each member of the Board (including ESL's designee) monthly reports
highlighting business developments and activities, with those persons having
assigned responsibilities reporting on operations and activities in their areas
of responsibility.
(l) The Company will promptly send to ESL and each subscriber to
the Private Placement, in no event later than ninety (90) days following each
meeting (unless ESL or each such subscriber shall waive such right in writing)
copies of the complete minutes of each meeting of its Board of Directors,
executive and similar committees thereof.
(m) Without in any way limiting the generality of matters which
may be appropriate
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 9
for consideration or action by the Board of Directors, prior to taking action
with respect to any of the following items, the Board of Directors or, in the
case of clauses (i) and (ii), the Compensation Committee thereof, must approve
the following actions:
(i) Changes in officers and their compensation, including,
without limitation, all significant employee benefits other than health
care and similar insurance plans;
(ii) All incentive programs (and revisions thereto) for
employees such as stock option plans, equity plans, bonus plans, etc.;
(iii) Company budgets, which shall be submitted within the
period from thirty (30) days prior to and until thirty (30) days after
the commencement of each fiscal year covering sales, direct costs,
indirect costs, profit targets, capital expenditures, and cash flow;
(iv) Major appropriations in excess of Fifty Thousand
Dollars ($50,000.00) for any capital items not in the Company budget
for the fiscal year;
(v) Major new facilities and their location, excluding any
small leased facilities in the local area so long as their annual
rental obligation does not exceed Fifty Thousand Dollars ($50,000.00)
per year;
(vi) All matters pertaining to mergers and acquisitions,
without exception;
(vii) Purchase contracts of a major nature;
(viii) Sales contracts of an unusual size or complexity;
(ix) Sale or purchase of patents, rights, or any royalty or
license agreements;
(x) Warranty and distribution policies of an unusual
nature which are not representative of industry patterns;
(xi) Financing programs and policies applicable to public
offerings, private placements, and long-term debt;
(xii) Treasury policies;
(xiii) Selection of auditors and corporate counsel;
(xiv) Banking resolutions;
(xv) Cash policies such as pension funds, investments,
etc., other than normal bank deposits;
(xvi) All matters of litigation in which the Company is to
be the plaintiff or
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 10
other initiating party; and
(xvii) Conflict of interest matters.
(n) The management of the Company shall notify and consult with
the Board of Directors (by written, telegraphic or telephonic notice) prior to
taking any initial action with respect to any of the following matters (it
being understood that the Board of Directors will determine the propriety of
further or alternative action with respect to such matters at their next
meeting):
(i) All matters of personnel policies as they apply to any
labor agreements or organization of unions;
(ii) All matters of public policy, wherein the Company is
to be involved in any community, political, or religious cause or
program;
(iii) All matters of litigation that involve or may involve
the Company as a defendant;
(iv) Audit programs and policies; and
(v) Any operating decisions which in the judgment of the
President and Chief Executive Officer should be presented to the Board.
(o) ESL shall be paid a commission of five percent (5%) of the
aggregate price paid upon the exercise or redemption of any of the Warrants.
Any costs incurred by ESL in connection with the solicitation of Warrant
exercises or the redemption of Warrants shall be borne by the Company.
(p) The Company shall file a Certificate of Designation with the
Secretary of State of Utah, setting forth the rights and preferences of the
Series A Preferred Stock substantially in the form attached hereto as Exhibit
"C".
6. Negative Covenants of the Company.
(a) For a period of eight (8) months following the Closing, the
Company will not, without the prior written consent of ESL, grant any options
to purchase securities of the Company to employees that are exercisable at a
price below the greater of the Private Placement Price or the fair market value
of the securities on the date of grant.
(b) For a period of three (3) years following the Closing, the
Company will not, without the prior written consent of ESL, offer or sell any
of its securities in reliance on Regulation S of the Securities Act of 1933, as
amended.
(c) The Company will use its best efforts to cause all of (i) the
current directors and executive officers of the Company who are stockholders,
(ii) the holders of Five Hundred
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 11
Thousand (500,000) shares issued by the Company pursuant to a registration
statement filed on Form S-8 in January, 1997, and (iii) the holders of the Four
Hundred Eighty Thousand (480,000) shares of Common Stock controlled by Kenneth
O'Neal, agree that their shares will be subject to the provisions of a Lock-Up
Agreement (herein so called) substantially in the form attached hereto as
Exhibit "D". The shares subject to the Lock-Up Agreement shall not be
assignable or transferable. The Company will take all such steps necessary to
enforce the provisions of the Lock-Up Agreements, including, but not limited
to, notifying the Company's transfer agent of the existence of the Lock-Up
Agreements. The shares subject to the Lock-Up Agreement shall be released
therefrom in accordance with the terms of the Lock-Up Agreement.
(d) The Company will not use any proceeds from the Private
Placement to repay any indebtedness of the Company including but not limited to
any indebtedness to current executive officers or principal stockholders of the
Company, other than the aggregate sum of One Million One Hundred Thousand
Dollars ($1,100,000.00) payable to various vendors of the Company as disclosed
in the Company's most recent financial statements prepared by Salazar
Accountants dated March 31, 1997.
(e) The Company shall not, without the prior unanimous written consent
of ESL and the holders of the Series A Preferred Stock, create any new class or
series of stock having a dividend and/or liquidation preference senior to the
Series A Preferred Stock or increase the size of the authorized number of
shares of Series A Preferred Stock.
(f) The Company will not issue press releases without first providing
ESL a copy of the proposed prior to its dissemination for a period of eighteen
(18) months from the Closing or November 30, 1997, whichever is earlier.
(g) For a period of thirteen (13) months from the Closing or November
30, 1998, whichever is earlier, the compensation of the executive officers of
the Company shall be subject to the approval of ESL, which approval shall not
unreasonably be withheld.
(h) The Company will not sell any of its securities at a price lower
than the Private Placement Price for a period of twenty-four (24) months from
the Closing or November 30, 1997, whichever is earlier, without the prior
written consent of ESL.
7. Representations and Warranties of ESL.
ESL represents, warrants and covenants to the Company as follows:
(a) ESL has been duly incorporated and is validly existing and in
good standing under the laws of Nevis, with full corporate power and authority
to own, lease and operate its properties and to conduct its business as
currently conducted.
(b) This Agreement has been duly authorized, validly executed and
delivered on behalf of ESL and is a valid and binding agreement of ESL
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally, and ESL has full power and authority to execute and
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 12
deliver this Agreement and the other agreements and documents contemplated
hereby and to perform its obligations hereunder and thereunder.
8. Indemnification. The Company hereby agrees to indemnify and hold
harmless ESL and its officers, directors, shareholders, employees, agents and
attorneys against any and all losses, claims, damages, liabilities and expenses
incurred by each such person in connection with defending or any reasonable
investigation of colorable claims or liabilities, including any costs or
expenses incurred, to which any such indemnified party may become subject under
the Securities' Act, or under any other statute, at common law or otherwise,
insofar as such losses, claims, demands, liabilities and expenses arise out of
or are based upon, in whole or in part, (i) any untrue statement or alleged
untrue statement of a material fact made by the Company, (ii) any omission or
alleged omission of a material fact with respect to the Company, or (iii) any
breach of any representation, warranty or agreement made by the Company in this
Agreement.
9. Mergers and Acquisitions.
(a) The Company agrees that ESL will be paid a finder's fee of
seven percent (7%) of the first $1,000,000.00, six percent (6%) of the second
$1,000,000.00 and five percent (5%) of the next $5,000,000.00 ranging in
$1,000,000.00 increments down to two and one-half percent (2-1/2%) of the
excess (with a reduction by one-half percent (0.5%) for each $1,000,000.00
thereafter up to $9,000,000.00), if any, over $9,000,000.00 of the
consideration involved in any transaction (including mergers, acquisitions,
joint ventures and any other business for the Company introduced by ESL)
consummated by the Company, in which ESL introduced the other party to the
Company during a period ending five (5) years from the Closing (an "Introduced
Transaction") and with whom the Company did not have a prior relationship; and
(b) Any such finder's fee due to ESL will be paid in cash at the
closing of the particular Introduced Transaction for which the finder's fee is
due.
10. Conditions Precedent to Closing.
(a) Prior to the Closing, ESL shall have received legal opinions
addressed to ESL and each subscriber to the Private Placement from counsel for
the Company, confirming the representations and warranties of the Company
contained in Section 4, substantially in the form attached hereto as Exhibit
"E".
(b) ESL shall have received a fully executed Placement Agent's
Option Certificate from the Company for the options earned upon the Closing.
(c) ESL shall have received a fully executed Registration Rights
Agreement with respect to the Placement Agent's Units and the ESL Option Shares
from the Company for the ESL Option Shares and Placement Agent's Units earned
upon the Closing.
(d) ESL shall have received a fully-executed Lock-Up Agreement
from each shareholder of the Company as set forth in Paragraph 6(c).
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 13
(e) ESL shall have received a certified copy of the resolution of
the Board of Directors of the Company authorizing the transactions contemplated
herein.
(f) The Company shall have filed with the Office of the Secretary
of State of Utah a Certificate of Designation acceptable to ESL, substantially
in the form attached hereto as Exhibit "C".
(g) The Company shall have amended its Bylaws in such a manner so
as to make its Bylaws consistent with the terms and conditions of this
Agreement and the transactions contemplated herein, a copy of which will have
been provided to ESL.
(h) Prior to the Closing, the escrow agent, Cardinal International
Bank & Trust Co., Ltd. (the "Escrow Agent"), shall have received the
certificates representing the Placement Agent's Units earned for the Private
Placement.
(i) Prior to the Closing, the Escrow Agent, shall have received a
fully-executed subscription agreement from each subscriber to the Private
Placement.
(j) ESL shall have received an opinion addressed to ESL and each
subscriber to the Private Placement, from counsel satisfactory to ESL,
concerning the merger of the Company with and into Mountain State Resources
Corporation, in form and substance satisfactory to ESL.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective upon its execution by
ESL.
(b) This Agreement shall terminate on the earlier of November 30,
1997, or the Closing.
12. Parties. This Agreement shall inure to the benefit of and be
binding upon ESL, the Company and ESL's and its respective successors and
assigns. Except as provided for in Section 4 hereinabove, nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or corporation, other than the parties hereto and their respective
successors and assigns and the controlling persons, officers, directors,
employees, agents and attorneys of the parties, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. Except as provided in Section 4, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and assigns and
said controlling persons, officers, directors, employees, agents and attorneys,
and for the benefit of no other person or corporation.
13. Secondary Public Offering. ESL agrees and consents to the Company
conducting a secondary public offering of its Securities by means of an
underwritten offer at a price equal to or greater than the Private Placement
Price.
14. Notices. All notices and other communications provided for or
permitted hereunder shall
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 14
be made in writing by hand delivery, express overnight courier, registered
first class mail, overnight courier, or telecopied (followed by registered mail
or overnight courier), initially to the address set forth below, and thereafter
at such other address, notice of which is given in accordance with the
provisions of this Section 14.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to ESL:
Equity Services, Ltd
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Ms. Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; when received after being deposited in the regular mail;
the next business day after being deposited with an overnight courier, if
deposited with a nationally recognized, overnight courier service; when receipt
is acknowledged, if telecopied.
15. Attorneys' Fees. If any action is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs, in addition to any other
relief to which he is or may be entitled. This provision shall be construed as
applicable to the entire agreement.
16. Time of Essence. Time shall be of the essence of this Agreement.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 15
17. Construction. This Agreement shall be construed in accordance with the
internal laws of the State of Texas.
18. Execution. This Agreement may be executed in any number of
counterparts each of which taken together shall constitute one and the same
instrument.
19. Joint Drafting of Agreement. This Agreement has been prepared by the
joint efforts of the respective counsel for each of the parties hereto and
shall not be construed against a particular party simply by reason of such
party being the drafting party.
20. Entire Agreement. This Agreement constitutes the entire
understanding by and between the parties with respect to the subject matter
hereof. This Agreement can only be modified, including any extension of the
offering period, by a written agreement duly signed by persons authorized to
sign agreements on behalf of the respective parties.
21. Facsimile Signature. This Agreement may be executed by facsimile copy
and any such facsimile copy bearing the facsimile signature of any party hereto
shall have full legal force and effect and shall be binding against the party
having executed this Agreement by facsimile.
If the foregoing is in accordance with your understanding, please sign
below and return to us a counterpart hereof, and upon your acceptance hereof,
this letter and the acceptance hereof shall constitute a binding agreement
between ESL and the Company.
Very truly yours,
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ JOSE CHAVEZ, President
Accepted and agreed to as of the
date first above written by:
EQUITY SERVICES, LTD.
By:/s/ LYNN TURNQUEST, Director
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 16
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT - EIL
<PAGE> 17
EXHIBIT "B"
REGISTRATION RIGHTS AGREEMENT - ESL
<PAGE> 18
EXHIBIT "C"
CERTIFICATE OF DESIGNATION
<PAGE> 19
EXHIBIT "D"
LOCK-UP AGREEMENT
<PAGE> 20
EXHIBIT "E"
FORM OF LEGAL OPINION
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 11 day of November, 1997 by and between MICRO-MEDIA
SOLUTIONS, INC., a Utah corporation (the "Company") and EQUITY SERVICES, LTD.,
a Nevis company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) Twenty Thousand (20,000)
units of the Company's securities (the "Units"), each Unit consisting of one
(1) share of the Company's Series A 5% Cumulative Convertible Preferred Stock,
par value per share (the "Series A Preferred Stock") and six (6)
warrants (the "Warrants") to purchase one share each of common stock, par value
$0.010 per share, of the Company (the "Common Stock") pursuant to that certain
placement agreement by and between the Company and the Shareholder dated
November 11, 1997 (the "Placement Agreement") and (ii) an option to purchase up
to Four Hundred Thousand (400,000) shares of Common Stock pursuant to that
certain Placement Agent's Option Certificate dated November 11, 1997 (the
"Option Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series A Preferred Stock or exercise of any of the
Warrants and the Option Shares (collectively, the "Shares"); and the
Shareholder desires to obtain such registration rights, subject to the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
<PAGE> 21
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) any shares of Common Stock issuable upon
conversion of any of the Series A Preferred Stock or exercise of any of
the Warrants, (ii) the Option Shares, (iii) any shares of Common Stock
issued by way of a stock split, reorganization, merger or
consolidation, and (iv) any Common Stock issued as a dividend on the
Shares. For purposes of this Agreement, any Registrable Stock shall
cease to be Registrable Stock when (v) a registration statement
covering such Registrable Stock has been declared effective and such
Registrable Stock has been disposed of pursuant to such effective
registration statement, (w) such Registrable Stock is sold pursuant to
Rule 144 (or any similar provision then in force) under the 1933 Act,
(x) such Registrable Stock is eligible to be sold pursuant to Rule
144(k) under the 1933 Act, (y) such Registrable Stock has been
otherwise transferred, no stop transfer order affecting such stock is
in effect and the Company has delivered new certificates or other
evidences of ownership for such Registrable Stock not bearing any
legend indicating that such shares have not been registered under the
1933 Act, or (z) such Registrable Stock is sold by a person in a
transaction in which the rights under the provisions of this Agreement
are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of
1933, as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder, or
the spouse or children (or a trust exclusively for the benefit of the
spouse and/or children) of a Holder, or, in the case of a Holder that
is a partnership, its partners.
(g) The term "Person" shall mean an individual,
corporation, partnership, trust, limited liability company,
unincorporated organization or association or other entity, including
any governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules, regulations
or forms promulgated by the Commission shall include rules, regulations
and forms succeeding to the functions thereof, whether or not bearing
the same designation.
2. Demand Registration.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 22
(a) Commencing immediately upon the date of Closing (as
defined in the Placement Agreement), any Requesting Holders may make a
written request to the Company (specifying that it is being made
pursuant to this Section 2) that the Company file a registration
statement under the 1933 Act (or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act) covering
the registration of Registrable Stock. In such event, the Company shall
(x) within ten (10) days thereafter notify in writing all other Holders
of Registrable Stock of such request, and (y) use its best efforts to
cause to be registered under the 1933 Act all Registrable Stock that
the Requesting Holders and such other Holders have, within forty-five
(45) days after the Company has given such notice, requested be
registered.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved by
the Company, which approval shall not be unreasonably withheld;
provided, that all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
provided further, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2
to the contrary, if the managing underwriter of an underwritten
offering of the Registrable Stock requested to be registered pursuant
to this Section 2 advises the Requesting Holders in writing that in its
opinion marketing factors require a limitation of the number of shares
to be underwritten, the Requesting Holders shall so advise all Holders
of Registrable Stock that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Stock that may be
included in such underwritten offering shall be allocated among all
such Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of filing
the registration statement; provided, that in the event of such
limitation of the number of shares of Registrable Stock to be
underwritten, the Holders shall be entitled to an additional demand
registration pursuant to this Section 2. If any Holder of Registrable
Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing
underwriter and
REGISTRATION RIGHTS AGREEMENT
<PAGE> 23
the Requesting Holders. The securities so withdrawn shall also be
withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration
pursuant to this Section 2 during the period starting with the
fourteenth (14th) day immediately preceding the date of an anticipated
filing by the Company of, and ending on a date ninety (90) days
following the effective date of, a registration statement pertaining to
a public offering of securities for the account of the Company;
provided, that the Company shall actively employ in good faith all
reasonable efforts to cause such registration statement to become
effective; and provided further, that the Company's estimate of the
date of filing such registration statement shall be made in good faith.
(e) The Company shall be obligated to effect and pay for a
total of only two (2) registrations pursuant to this Section 2, unless
increased pursuant to Section 2.(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i) it
has been declared effective by the Commission, (ii) if it is a shelf
registration, it has remained effective for the period set forth in
Section 3.(b), (iii) the offering of Registrable Stock pursuant to such
registration is not subject to any stop order, injunction or other
order or requirement of the Commission (other than any such action
prompted by any act or omission of the Holders), and (iv) no limitation
of the number of shares of Registrable Stock to be underwritten has
been required pursuant to Section 2.(c) hereof.
3. Obligations of the Company. Whenever required under Section 2
to use its best efforts to effect the registration of any Registrable Stock,
the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in accordance
with the intended method of distribution thereof, and use its best
efforts to cause such registration statement to become effective as
promptly as practicable thereafter; provided that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to one (1) counsel selected by
the Requesting Holders copies of all such documents proposed to be
filed, and (ii) notify each such Holder of any stop order issued or
threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which will
terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the
REGISTRATION RIGHTS AGREEMENT
<PAGE> 24
expiration of the forty (40) or ninety (90) day period referred to in
Section 4(3) of the 1933 Act and Rule 174 thereunder, if applicable),
and comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each Holder and any underwriter of
Registrable Stock to be included in a registration statement copies of
such registration statement as filed and each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Stock
owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned by
such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.(d) hereof,
(ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock
and any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if such
time is after the period referred to in Section 3.(b)), of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances being made not misleading;
(g) make available for inspection by any selling Holder,
any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any
REGISTRATION RIGHTS AGREEMENT
<PAGE> 25
such Inspector, as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, in connection with such
registration statement. Records or other information which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records or other information is
necessary to avoid or correct a misstatement or omission in the
registration statement, or (ii) the release of such Records or other
information is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. Each selling Holder shall, upon
learning that disclosure of such Records or other information is sought
in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records or other information deemed
confidential;
(h) furnish, at the request of any Requesting Holder, on
the date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect to such shares of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders as to such matters as such underwriters or the
Requesting Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter dated such
date, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and if such Registrable Stock is
not being sold through underwriters, then to the Requesting Holders
and, if such accountants refuse to deliver such letter to such Holder,
then to the Company (i) stating that they are independent certified
public accountants within the meaning of the 1933 Act and that, in the
opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act, and (ii) covering such other financial
matters (including information as to the period ending not more than
five (5) business days prior to the date of such letter) with respect
to the registration in respect of which such letter is being given as
the Requesting Holders may reasonably request and as would be customary
in such a transaction;
(i) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of at
least twelve (12) months beginning with the first full month after the
effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section
REGISTRATION RIGHTS AGREEMENT
<PAGE> 26
11(a) of the 1933 Act; and
(k) use its best efforts to cause all such Registrable
Stock to be listed on The Nasdaq Small Cap Market and/or any other
securities exchange on which similar securities issued by the Company
are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.(f) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 3.(f) hereof.
4. Incidental Registration. Commencing immediately after the
date of Closing (as defined in the Investor Agreement), if the Company
determines that it shall file a registration statement under the 1933 Act
(other than a registration statement on a Form S-4 or S-8 or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders) on any form that would also permit the
registration of the Registrable Stock and such filing is to be on its behalf
and/or on behalf of selling holders of its securities for the general
registration of its common stock to be sold for cash, at each such time the
Company shall promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than thirty (30) days from the date
of such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. Upon the written request of any Holder received
by the Company no later than twenty (20) days after the date of the Company's
notice, the Company shall use its best efforts to cause to be registered under
the 1933 Act all of the Registrable Stock that each such Holder has so
requested to be registered. If, in the written opinion of the managing
underwriter or underwriters (or, in the case of a non-underwritten offering, in
the written opinion of the placement agent, or if there is none, the Company),
the total amount of such securities to be so registered, including such
Registrable Stock, will exceed the maximum amount of the Company's securities
which can be marketed (i) at a price reasonably related to the then current
market value of such securities, or (ii) without otherwise materially and
adversely affecting the entire offering, then the amount of Registrable Stock
to be offered for the accounts of Holders shall be reduced pro rata to the
extent necessary to reduce the
REGISTRATION RIGHTS AGREEMENT
<PAGE> 27
total amount of securities to be included in such offering to the
recommended amount; provided, that if securities are being offered for the
account of other Persons as well as the Company, such reduction shall not
represent a greater fraction of the number of securities intended to be offered
by Holders than the fraction of similar reductions imposed on such other
Persons other than the Company over the amount of securities they intended to
offer.
5. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law,
each Holder whose Registrable Stock is included in a registration
statement agrees not to effect any public sale or distribution of the
issue being registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the 1933 Act,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of such registration statement
(except as part of the registration), if and to the extent requested by
the Company in the case of a nonunderwritten public offering or if and
to the extent requested by the managing underwriter or underwriters in
the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others.
The Company agrees (i) not to effect any public sale or distribution of
any securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of any registration statement
in which Holders are participating (except as part of such
registration), if and to the extent requested by the Holders in the
case of a non-underwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of an
underwritten public offering; and (ii) that any agreement entered into
after the date of this Agreement pursuant to which the Company issues
or agrees to issue any securities convertible into or exchangeable or
exercisable for such securities (other than pursuant to an effective
registration statement) shall contain a provision under which holders
of such securities agree not to effect any public sale or distribution
of any such securities during the periods described in (i) above, in
each case including a sale pursuant to Rule 144 under the 1933 Act.
6. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and
pay the underwriting commissions and discounts applicable to the Registrable
Stock offered for their account in connection with any registrations, filings
and qualifications made pursuant to this Agreement.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 28
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such Holder
(within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged
untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein (in case of a
prospectus or preliminary prospectus, in the light of the circumstances
under which they were made) not misleading. The Company will also
indemnify any underwriters of the Registrable Stock, their officers and
directors and each Person who controls such underwriters (within the
meaning of the 1933 Act) to the same extent as provided above with
respect to the indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company (within
the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein (in the
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information with respect to such Holder so
furnished in writing by such Holder. Notwithstanding the foregoing, the
liability of each such Holder under this Section 7.(b) shall be limited
to an amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises out
of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonably satisfactory to such indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to the indemnifying party
shall itself not create liability except to the extent of any injury
caused thereby. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include
REGISTRATION RIGHTS AGREEMENT
<PAGE> 29
as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation. If the indemnifying party IS not
entitled to, or elects not to, assume the defense of a claim, it will
not be obligated to pay the fees and expenses of more than one (1)
counsel with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnity
provided for in this Section 7 is unavailable to, or is insufficient to
hold harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties; and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 7.(c), any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7.
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires,
REGISTRATION RIGHTS AGREEMENT
<PAGE> 30
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
9. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it
has complied with such requirements.
10. Transfer of Registration Rights. The registration rights of
any Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this
Section 10, no transfer of Registrable Stock shall cause such Registrable Stock
to lose such status.
11. Mergers, Etc. The Company shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving
corporation shall, prior to such merger, consolidation or reorganization, agree
in writing to assume the obligations of the Company under this Agreement, and
for that purpose references hereunder to "Registrable Stock" shall be deemed to
be references to the securities which the Holders would be entitled to receive
in exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation which may be
immediately sold to the public without registration under the 1933 Act, or
(iii) securities of the acquiring corporation which the acquiring corporation
has agreed to register within ninety (90) days of completion of the transaction
for resale to the public pursuant to the 1933 Act.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 31
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the Holders in this
Agreement.
(b) Remedies. Each Holder, in addition to being entitled
to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive (to the
extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of the Holders of
at least a majority of the Registrable Stock then outstanding affected
by such amendment, modification, supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Texas applicable to contracts made and to be performed wholly within
that state, without regard to the conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person or
by telecopy or by overnight courier guaranteeing no later than second
business day delivery, directed to (i) the Company at the address set
forth below its signature hereof or (ii) a Holder at the address of the
Administrator set forth below its signature hereof. Any party may
change its address for notice by giving ten (10) days advance written
notice to the other parties. Every notice or other communication
hereunder shall be deemed to have been duly given or served on the
REGISTRATION RIGHTS AGREEMENT
<PAGE> 32
date on which personally delivered, or on the date actually received,
if sent by telecopy or overnight courier service, with receipt
acknowledged.
(i) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions
contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full
force and effect notwithstanding any breach or purported breach of, or
relating to, the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
Name: JOSE CHAVEZ
Title: President
501 Waller
Austin, Texas 78702
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
REGISTRATION RIGHTS AGREEMENT
<PAGE> 34
EQUITY SERVICES, LTD.
By: /s/ Lynn Turnquest
Name: LYNN TURNQUEST
Title: Director
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
INSERT FILE ON DISK
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED SALE,
TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER
THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing January 31, 1998 and before the Expiration Date (as
defined below) Four Hundred Thousand (400,000) shares (the "Option Shares") of
fully paid and non-assessable shares of the common stock, $0.10 par value per
share (the "Common Stock"), of MICRO-MEDIA SOLUTIONS, INC., a Utah corporation
(the "Company") at a purchase price of One Dollar and Fifty Cents ($1.50) per
REGISTRATION RIGHTS AGREEMENT
<PAGE> 35
Option Share (the "Strike Price"), in lawful money of the United States of
America by bank or certified check, subject to adjustment as hereinafter
provided.
m. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
n. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the
Holder, commencing on January 31, 1998, and before the Expiration Date (as
defined below) by delivering to the Company written notice of exercise (the
"Exercise Notice"), stating the number of Option Shares to be purchased
thereby, accompanied by bank or certified check payable to the order of the
Company for the Option Shares being purchased. Within ten (10) days of the
Company's receipt of the Exercise Notice accompanied by the consideration for
the Option Shares being purchased, the Company shall issue and deliver to the
Holder a certificate representing the Option Shares being purchased. In the
case of exercise for less than all of the Option Shares represented by this
Option Certificate, the Company shall cancel this Option Certificate upon the
surrender hereof and shall execute and deliver a new Option Certificate for the
remaining balance of such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on January 31, 2003 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
o. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this
Option shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition
REGISTRATION RIGHTS AGREEMENT
<PAGE> 36
may be effectuated without registration under the Act."
p. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
q. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of this Option Certificate and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to the Company, or in the
case of mutilation, upon surrender and cancellation of the mutilated Option
Certificate, the Company shall execute and deliver in lieu thereof, a new
Option Certificate representing an equal number of Option Shares exercisable
thereunder.
r. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock
and the Strike Price per Option Share pursuant to this Option shall be subject
to adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall
be issued upon the exercise of this Option, but in lieu thereof the Company
shall purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed
to be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 37
s. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise of
this Option will have registration rights beginning on the date of execution of
this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
t. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Act.
c. The Holder (i) is not a citizen or resident of the United
States of America, (ii) is not an entity organized under any laws of any state
of the United States of America and (iii) does not have any offices in the
United States of America.
u. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall
bear all expenses incurred in connection with each registration pursuant to
this Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and
pay the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 38
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by,
and construed in accordance with, the laws of the State of Texas, without
reference to its principles regarding conflicts of laws.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By:
---------------------------------
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 39
JOSE CHAVEZ, President
ATTEST:
-------------------------
Name:
Title: Secretary
Date: November , 1997
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 40
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to shares of
Common Stock covered hereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date:
-------------------- -----------------------------
Name:
Address:
Signature
-----------------------------
<PAGE> 41
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between ESL and MSI
"OptionCert-A"
MICRO-MEDIA SOLUTIONS, INC.
(A Utah Corporation)
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
Effective November 11, 1997
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (1) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (2) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER
THE SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR OTHER JURISDICTION. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION"
AND "UNITED STATES" HAVE THE MEANING GIVEN THEM BY REGULATION S UNDER THE
SECURITIES ACT.
THIS CERTIFIES THAT, for value received, EQUITY SERVICES, LTD. or
registered assigns ("Holder"), is entitled to purchase, subject to the
conditions set forth below, at any time or from time to time during the
Exercise Period (as defined in subsection 1.2, below), 120,000 shares
("Shares") of fully paid and non-assessable Common Stock, $0.10 par value
("Common Stock"), of MICRO-MEDIA SOLUTIONS, INC., a Utah corporation (the
"Company"), at the per share purchase price (the "Warrant Price") set forth in
subsection 1.1, subject to the further provisions of this Warrant. The term
"Warrants" as used herein shall mean this Warrant and all instruments issued by
the Company which are substantially identical to this Warrant (except for the
name of the holder and the number of securities purchasable by the holder).
1. EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised, and
the Common Stock covered hereby may be purchased, are as follows:
1.1 Warrant Price. The Warrant Price shall be equal to $1.50 per
share, subject to
<PAGE> 42
adjustment as provided in Section 4, below.
1.2 Method Of Exercise. The holder of this Warrant, may at any
time beginning January 3, 1998, and prior to January 31, 2000, or such later
date as the Company may in its sole discretion determine (the "Exercise
Period"), exercise in whole or in part the purchase rights evidenced by this
Warrant. Such exercise shall be effected by:
(a) the surrender of the Warrant, together with a duly executed copy of
the form of subscription attached hereto, to the Secretary of the Company at
its principal offices;
(b) the payment to the Company, by cash, check payable to its order or
wire transfer, of an amount equal to the aggregate Warrant Price for the number
of Shares for which the purchase rights hereunder are being exercised; and
(c) the delivery to the Company, if necessary, to assure compliance
with federal and state securities laws, of an instrument executed by the holder
certifying that the Shares are being acquired for the sole account of the
holder and not with a view to any resale or distribution.
1.3 Satisfaction with Requirements of Securities Act of 1933.
Notwithstanding the provisions of subsection 1.2(c) and Section 7, each and
every exercise of this Warrant is contingent upon the Company's satisfaction
that the issuance of Common Stock upon the exercise is exempt from the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and all applicable state securities laws. The holder of this Warrant agrees to
execute any and all documents deemed necessary by the Company to effect the
exercise of this Warrant. Holder represents and warrants that: (a) it is not a
citizen or resident of the United States of America, (b) it is not an entity
organized under any laws of any state of the United States of America, and (c)
it does not have offices in the United States of America.
1.4 Issuance Of Shares and New Warrant. In the event the purchase
rights evidenced by this Warrant are exercised in whole or in part, one or more
certificates for the purchased Shares shall be issued as soon as practicable
thereafter to the person exercising such rights. Such holder shall also be
issued at such time a new Warrant representing the number of Shares (if any)
for which the purchase rights under this Warrant remain unexercised and
continuing in force and effect.
2. TRANSFERS
2.1 Transfers. Subject to Section 7 hereof, this Warrant and all
rights hereunder are transferable in whole or in part by the holder. The
transfer shall be recorded on the books of the Company upon the surrender of
this Warrant, properly endorsed, to the Secretary of the Company at its
principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer. In the event of a partial
transfer, the Company shall issue to the several holders one or more
appropriate new Warrants.
2.2 Registered Holder. Each holder agrees that until such time as
any transfer pursuant to subsection 2.1 is recorded on the books of the
Company, the Company may treat the registered holder of this Warrant as the
absolute owner; provided that nothing herein affects any
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 43
requirement that transfer of any Warrant or share of Common Stock issued or
issuable upon the exercise thereof be subject to compliance with the Securities
Act and all applicable state securities laws.
2.3 Form Of New Warrants. All Warrants issued in connection with
transfers of this Warrant shall bear the same date as this Warrant and shall be
substantially identical in form and provision to this Warrant except for the
number of Shares purchasable thereunder.
3. FRACTIONAL SHARES
Notwithstanding that the number of Shares purchasable upon the exercise
of this Warrant may have been adjusted pursuant to the terms hereof, the
Company shall nonetheless not be required to issue fractions of Shares upon
exercise of this Warrant or to distribute certificates that evidence fractional
shares nor shall the Company be required to make any cash payments in lieu
thereof upon exercise of this Warrant. Holder hereby waives any right to
receive fractional Shares.
4. ANTIDILUTION PROVISIONS
4.1 Stock Splits And Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of Common Stock, this Warrant
shall, after that subdivision or combination, evidence the right to purchase
the number of shares of Common Stock that would have been issuable as a result
of that change with respect to the Shares of Common Stock that were purchasable
under this Warrant immediately before that subdivision or combination. If the
Company shall at any time subdivide the outstanding shares of Common Stock, the
Warrant Price then in effect immediately before that subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock, the Warrant Price then in effect
immediately before that combination shall be proportionately increased. Any
adjustment under this section shall become effective at the close of business
on the date the subdivision or combination becomes effective.
4.2 Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or
a different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the holder of this
Warrant shall, on its exercise, be entitled to purchase for the same aggregate
consideration, in lieu of the Common Stock that the holder would have become
entitled to purchase but for such change, a number of shares of such other
class or classes of stock equivalent to the number of shares of Common Stock
that would have been subject to purchase by the holder on exercise of this
Warrant immediately before that change.
4.3 Reorganizations, Mergers, Consolidations Or Sale Of Assets.
If at any time there shall be a capital reorganization of the Company's Common
Stock (other than a stock split, combination, reclassification, exchange, or
subdivision of shares provided for elsewhere above) or merger or consolidation
of the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 44
the holder of this Warrant shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified in this Warrant and upon
payment of the Warrant Price then in effect, the number of shares of Common
Stock or other securities or property of the Company, or of the successor
corporation resulting from such merger or consolidation, to which a holder of
the Common Stock deliverable upon exercise of this Warrant would have been
entitled in such capital reorganization, merger or consolidation or sale if
this Warrant had been exercised immediately before that capital reorganization,
merger or consolidation or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the holder of this Warrant after the reorganization, merger,
consolidation, or sale to the end that the provisions of this Warrant
(including adjustment of the Warrant Price then in effect and number of Shares
purchasable upon exercise of this Warrant) shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other
property deliverable after that event upon exercise of this Warrant. The
Company shall, within thirty (30) days after making such adjustment, give
written notice (by first class mail, postage prepaid) to the registered holder
of this Warrant at the address of that holder shown on the Company's books.
That notice shall set forth, in reasonable detail, the event requiring the
adjustment and the method by which the adjustment was calculated and specify
the Warrant Price then in effect after the adjustment and the increased or
decreased number of Shares purchasable upon exercise of this Warrant. When
appropriate, that notice may be given in advance and be included as part of the
notice required under other provisions of this Warrant.
4.4 Common Stock Dividends; Distributions. In the event the
Company should at any time prior to the expiration of this Warrant fix a record
date for the determination of the holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock (hereinafter
referred to as the "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such distribution, split or subdivision if no record date is
fixed), the Warrant Price shall be appropriately decreased and the number of
shares of Common Stock issuable upon exercise of the Warrant shall be
appropriately increased in proportion to such increase of outstanding shares.
4.5 Adjustments of Other Distributions. In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4.4, then, in
each such case for the purpose of this subsection 4.5, upon exercise of this
Warrant the holder hereof shall be entitled to a proportionate share of any
such distribution as though such holder was the holder of the number of shares
of Common Stock of the Company into which this Warrant may be exercised as of
the record date fixed for the determination of the holders of Common Stock of
the Company entitled to receive such distribution.
4.6 Certificate as to Adjustments. In the case of each adjustment
or readjustment of the Warrant Price pursuant to this Section 4, the Company
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause a certificate setting
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 45
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based, to be delivered to the holder
of this Warrant. The Company will, upon the written request at any time of the
holder of this Warrant, furnish or cause to be furnished to such holder a
certificate setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Common Stock issuable upon exercise of
the Warrant and the amount, if any, of other property at the time receivable
upon the exercise of the Warrant.
4.7 Reservation of Stock Issuable Upon Exercise. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
exercise of this Warrant such number of its shares of Common Stock as shall
from time to time be sufficient to effect the exercise of this Warrant and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of this Warrant, in addition to such
other remedies as shall be available to the holder of this Warrant, the Company
will use its best efforts to take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
5. RIGHTS PRIOR TO EXERCISE OF WARRANT
The Warrant holders will agree that so long as the Company remains
certified as an Historically Underutilized Business ("HUB"), they will not
exercise their Warrants and/or convert their preferred stock in such a manner
as to cause the Company to lose its HUB status. This Warrant does not entitle
the holder to any of the rights of a stockholder of the Company, including
without limitation, the right to receive dividends or other distributions, to
exercise any preemptive rights, to vote, or to consent or to receive notice as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a regular
cash dividend) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe for or
purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger, sale, transfer or lease of all or
substantially all of its property, assets, and business as an entirety) shall
be proposed and action by the Company with respect thereto has been approved by
the Company's Board of Directors,
Then in any one or more of said events the Company shall give notice in writing
of such event to
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 46
the holder at his last address as it shall appear on the Company's records at
least twenty (20) days prior to the date fixed as a record date or the date of
closing the transfer books for the determination of the stockholders entitled
to such dividends, distribution, or subscription rights, or for the
determination of stockholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. Failure to publish,
mail or receive such notice or any defect therein or in the publication or
mailing thereof shall not affect the validity of any action taken in connection
with such dividend, distribution or subscription rights, or such proposed
dissolution, liquidation or winding up. Each person in whose name any
certificate for shares of Common Stock is to be issued shall for all purposes
be deemed to have become the holder of record of such shares on the date on
which this instrument was surrendered and payment of the Warrant Price was
made, irrespective of the date of delivery of such stock certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares of Common Stock at the close of business on
the next succeeding date on which the stock transfer books are open.
6. SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and the holder thereof and their respective
successors and permitted assigns.
7. RESTRICTED SECURITIES
In order to enable the Company to comply with the Securities Act and
applicable state laws, the Company may require the holder as a condition of the
transfer or exercise of this Warrant, to give written assurance satisfactory to
the Company that the Warrant, or in the case of an exercise hereof the shares
subject to this Warrant, are being acquired for his own account, for investment
only, with no view to the distribution of the same, and that any disposition of
all or any portion of this Warrant or the Shares issuable upon the due exercise
of this Warrant shall not be made, unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b)(i) The holder has notified the Company of the proposed disposition
and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) the holder has
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
securities under the Securities Act and applicable state law.
The holder acknowledges that this Warrant is, and each of the shares of
Common Stock issuable upon the due exercise hereof will be, a restricted
security, that he understands the provisions of Rule 144 of the Securities and
Exchange Commission, and that the certificate or certificates evidencing such
shares of Common Stock will bear a legend substantially similar to the
following:
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 47
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
They may not be sold, transferred or otherwise disposed of in the absence of an
effective registration statement covering these securities under the said Act
or laws, or an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder."
8. LOSS OR MUTILATION
Upon receipt by the Company of satisfactory evidence of the ownership
of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in
the case of loss, theft, or destruction, upon receipt by the Company of
indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt
of such Warrant and upon surrender and cancellation of such Warrant, the
Company shall execute and deliver in lieu thereof a new Warrant representing
the right to purchase an equal number of shares of Common Stock.
9. NOTICES
All notices, requests, demands and other communications under this
Warrant shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be
given, or on the date of mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows: if to the holder, at his address as shown in the
Company records; and if to the Company, at its principal office. Any party may
change its address for purposes of this subsection by giving the other party
written notice of the new address in the manner set forth above.
10. GOVERNING LAW
This Warrant and any dispute, disagreement or issue of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the laws of the State of Texas without regard to
conflicts of law.
DATED AS OF NOVEMBER 11, 1997
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ JOSE CHAVEZ, President
SUBSCRIPTION
Micro-Media Solutions, Inc.
501 Waller
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 48
Austin, Texas 78702
Gentlemen:
The undersigned, , hereby elects to
purchase, pursuant to the provisions to the foregoing Warrant held by the
undersigned, shares of the Common Stock, $0.10 par
value ("Common Stock"), of Micro-Media Solutions, Inc.
Payment of the purchase price per Share required under such Warrant accompanies
this subscription.
The undersigned hereby represents and warrants that absent an effective
registration statement covering the Warrants, the undersigned is acquiring such
stock for the account of the undersigned and not for resale or with a view to
distribution of such Common Stock or any part hereof; that the undersigned is
fully aware of the transfer restrictions affecting restricted securities under
the pertinent securities laws and the undersigned understands that the shares
purchased hereby are restricted securities and that the certificate or
certificates evidencing the same will bear a legend to that effect.
DATED: , 199 .
Signature:
Address:
MICRO-MEDIA SOLUTIONS, INC.
(A Utah Corporation)
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
Effective November 11, 1997
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 49
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF
REGULATION S UNDER THE SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), AND
IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR OTHER JURISDICTION. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANING GIVEN THEM BY REGULATION S
UNDER THE SECURITIES ACT.
THIS CERTIFIES THAT, for value received, ENTREPRENEURIAL INVESTORS,
LTD. or registered assigns ("Holder"), is entitled to purchase, subject to the
conditions set forth below, at any time or from time to time during the
Exercise Period (as defined in subsection 1.2, below), 2,400,000 shares
("Shares") of fully paid and non-assessable Common Stock, $0.10 par value
("Common Stock"), of MICRO-MEDIA SOLUTIONS, INC., a Utah corporation (the
"Company"), at the per share purchase price (the "Warrant Price") set forth in
subsection 1.1, subject to the further provisions of this Warrant. The term
"Warrants" as used herein shall mean this Warrant and all instruments issued by
the Company which are substantially identical to this Warrant (except for the
name of the holder and the number of securities purchasable by the holder).
3. EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised, and
the Common Stock covered hereby may be purchased, are as follows:
1.1 Warrant Price. The Warrant Price shall be equal to $1.50 per
share, subject to adjustment as provided in Section 4, below.
1.2 Method Of Exercise. The holder of this Warrant, may at any
time beginning January 3, 1998, and prior to January 31, 2000, or such later
date as the Company may in its sole discretion determine (the "Exercise
Period"), exercise in whole or in part the purchase rights evidenced by this
Warrant. Such exercise shall be effected by:
(a) the surrender of the Warrant, together with a duly executed copy
of the form of subscription attached hereto, to the Secretary of the Company at
its principal offices;
(b) the payment to the Company, by cash, check payable to its order or
wire transfer, of an amount equal to the aggregate Warrant Price for the number
of Shares for which the purchase rights hereunder are being exercised; and
(c) the delivery to the Company, if necessary, to assure compliance
with federal and state securities laws, of an instrument executed by the holder
certifying that the Shares are being acquired for the sole account of the
holder and not with a view to any resale or distribution.
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 50
1.3 Satisfaction with Requirements of Securities Act of 1933.
Notwithstanding the provisions of subsection 1.2(c) and Section 7, each and
every exercise of this Warrant is contingent upon the Company's satisfaction
that the issuance of Common Stock upon the exercise is exempt from the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and all applicable state securities laws. The holder of this Warrant agrees to
execute any and all documents deemed necessary by the Company to effect the
exercise of this Warrant. Holder represents and warrants that: (a) it is not a
citizen or resident of the United States of America, (b) it is not an entity
organized under any laws of any state of the United States of America, and (c)
it does not have offices in the United States of America.
1.4 Issuance Of Shares and New Warrant. In the event the purchase
rights evidenced by this Warrant are exercised in whole or in part, one or more
certificates for the purchased Shares shall be issued as soon as practicable
thereafter to the person exercising such rights. Such holder shall also be
issued at such time a new Warrant representing the number of Shares (if any)
for which the purchase rights under this Warrant remain unexercised and
continuing in force and effect.
4. TRANSFERS
2.1 Transfers. Subject to Section 7 hereof, this Warrant and all
rights hereunder are transferable in whole or in part by the holder. The
transfer shall be recorded on the books of the Company upon the surrender of
this Warrant, properly endorsed, to the Secretary of the Company at its
principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer. In the event of a partial
transfer, the Company shall issue to the several holders one or more
appropriate new Warrants.
2.2 Registered Holder. Each holder agrees that until such time as
any transfer pursuant to subsection 2.1 is recorded on the books of the
Company, the Company may treat the registered holder of this Warrant as the
absolute owner; provided that nothing herein affects any requirement that
transfer of any Warrant or share of Common Stock issued or issuable upon the
exercise thereof be subject to compliance with the Securities Act and all
applicable state securities laws.
2.3 Form Of New Warrants. All Warrants issued in connection with
transfers of this Warrant shall bear the same date as this Warrant and shall be
substantially identical in form and provision to this Warrant except for the
number of Shares purchasable thereunder.
3. FRACTIONAL SHARES
Notwithstanding that the number of Shares purchasable upon the
exercise of this Warrant may have been adjusted pursuant to the terms hereof,
the Company shall nonetheless not be required to issue fractions of Shares upon
exercise of this Warrant or to distribute certificates that evidence fractional
shares nor shall the Company be required to make any cash payments in lieu
thereof upon exercise of this Warrant. Holder hereby waives any right to
receive fractional Shares.
4. ANTIDILUTION PROVISIONS
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 51
4.1 Stock Splits And Combinations. If the Company shall at any
time subdivide or combine its outstanding shares of Common Stock, this Warrant
shall, after that subdivision or combination, evidence the right to purchase
the number of shares of Common Stock that would have been issuable as a result
of that change with respect to the Shares of Common Stock that were purchasable
under this Warrant immediately before that subdivision or combination. If the
Company shall at any time subdivide the outstanding shares of Common Stock, the
Warrant Price then in effect immediately before that subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock, the Warrant Price then in effect
immediately before that combination shall be proportionately increased. Any
adjustment under this section shall become effective at the close of business
on the date the subdivision or combination becomes effective.
4.2 Reclassification, Exchange and Substitution. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or
a different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares provided for above), the holder of this
Warrant shall, on its exercise, be entitled to purchase for the same aggregate
consideration, in lieu of the Common Stock that the holder would have become
entitled to purchase but for such change, a number of shares of such other
class or classes of stock equivalent to the number of shares of Common Stock
that would have been subject to purchase by the holder on exercise of this
Warrant immediately before that change.
4.3 Reorganizations, Mergers, Consolidations Or Sale Of Assets.
If at any time there shall be a capital reorganization of the Company's Common
Stock (other than a stock split, combination, reclassification, exchange, or
subdivision of shares provided for elsewhere above) or merger or consolidation
of the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
in this Warrant and upon payment of the Warrant Price then in effect, the
number of shares of Common Stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Common Stock deliverable upon exercise
of this Warrant would have been entitled in such capital reorganization, merger
or consolidation or sale if this Warrant had been exercised immediately before
that capital reorganization, merger or consolidation or sale. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the holder of this Warrant after
the reorganization, merger, consolidation, or sale to the end that the
provisions of this Warrant (including adjustment of the Warrant Price then in
effect and number of Shares purchasable upon exercise of this Warrant) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant. The Company shall, within thirty (30) days after making such
adjustment, give written notice (by first class mail, postage prepaid) to the
registered holder of this Warrant at the address of that holder shown on the
Company's books. That notice shall set forth, in reasonable detail, the event
requiring the adjustment and the method by which the adjustment was calculated
and specify the Warrant Price then in effect after the adjustment and the
increased or decreased number of Shares purchasable upon exercise of
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 52
this Warrant. When appropriate, that notice may be given in advance and be
included as part of the notice required under other provisions of this Warrant.
4.4 Common Stock Dividends; Distributions. In the event the
Company should at any time prior to the expiration of this Warrant fix a record
date for the determination of the holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock (hereinafter
referred to as the "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such distribution, split or subdivision if no record date is
fixed), the Warrant Price shall be appropriately decreased and the number of
shares of Common Stock issuable upon exercise of the Warrant shall be
appropriately increased in proportion to such increase of outstanding shares.
4.5 Adjustments of Other Distributions. In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4.4, then, in
each such case for the purpose of this subsection 4.5, upon exercise of this
Warrant the holder hereof shall be entitled to a proportionate share of any
such distribution as though such holder was the holder of the number of shares
of Common Stock of the Company into which this Warrant may be exercised as of
the record date fixed for the determination of the holders of Common Stock of
the Company entitled to receive such distribution.
4.6 Certificate as to Adjustments. In the case of each adjustment
or readjustment of the Warrant Price pursuant to this Section 4, the Company
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, to be delivered to the holder of this Warrant. The
Company will, upon the written request at any time of the holder of this
Warrant, furnish or cause to be furnished to such holder a certificate setting
forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Common Stock issuable upon exercise of
the Warrant and the amount, if any, of other property at the time receivable
upon the exercise of the Warrant.
4.7 Reservation of Stock Issuable Upon Exercise. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
exercise of this Warrant such number of its shares of Common Stock as shall
from time to time be sufficient to effect the exercise of this Warrant and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of this Warrant, in addition to such
other remedies as shall be available to the holder of this Warrant, the Company
will use its best efforts to take such corporate action as may, in the
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 53
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
5. RIGHTS PRIOR TO EXERCISE OF WARRANT
The Warrant holders will agree that so long as the Company remains
certified as an Historically Underutilized Business ("HUB"), they will not
exercise their Warrants and/or convert their preferred stock in such a manner
as to cause the Company to lose its HUB status. This Warrant does not entitle
the holder to any of the rights of a stockholder of the Company, including
without limitation, the right to receive dividends or other distributions, to
exercise any preemptive rights, to vote, or to consent or to receive notice as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a regular
cash dividend) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe for or
purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, sale, transfer or lease of all
or substantially all of its property, assets, and business as an entirety)
shall be proposed and action by the Company with respect thereto has been
approved by the Company's Board of Directors,
Then in any one or more of said events the Company shall give notice in writing
of such event to the holder at his last address as it shall appear on the
Company's records at least twenty (20) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividends, distribution, or subscription rights,
or for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
publish, mail or receive such notice or any defect therein or in the
publication or mailing thereof shall not affect the validity of any action
taken in connection with such dividend, distribution or subscription rights, or
such proposed dissolution, liquidation or winding up. Each person in whose name
any certificate for shares of Common Stock is to be issued shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which this instrument was surrendered and payment of the Warrant Price
was made, irrespective of the date of delivery of such stock certificate,
except that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares of Common Stock at the close of business on
the next succeeding date on which the stock transfer books are open.
6. SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit
of, and be binding
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 54
upon, the Company and the holder thereof and their respective successors and
permitted assigns.
7. RESTRICTED SECURITIES
In order to enable the Company to comply with the Securities Act and
applicable state laws, the Company may require the holder as a condition of the
transfer or exercise of this Warrant, to give written assurance satisfactory to
the Company that the Warrant, or in the case of an exercise hereof the shares
subject to this Warrant, are being acquired for his own account, for investment
only, with no view to the distribution of the same, and that any disposition of
all or any portion of this Warrant or the Shares issuable upon the due exercise
of this Warrant shall not be made, unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b)(i) The holder has notified the Company of the proposed disposition
and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) the holder has
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
securities under the Securities Act and applicable state law.
The holder acknowledges that this Warrant is, and each of the shares
of Common Stock issuable upon the due exercise hereof will be, a restricted
security, that he understands the provisions of Rule 144 of the Securities and
Exchange Commission, and that the certificate or certificates evidencing such
shares of Common Stock will bear a legend substantially similar to the
following:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
They may not be sold, transferred or otherwise disposed of in the absence of an
effective registration statement covering these securities under the said Act
or laws, or an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder."
8. LOSS OR MUTILATION
Upon receipt by the Company of satisfactory evidence of the ownership
of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in
the case of loss, theft, or destruction, upon receipt by the Company of
indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt
of such Warrant and upon surrender and cancellation of such Warrant, the
Company shall execute and deliver in lieu thereof a new Warrant representing
the right to purchase an equal number of shares of Common Stock.
9. NOTICES
All notices, requests, demands and other communications under this
Warrant shall be in writing and shall be deemed to have been duly given on the
date of service if served personally
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 55
on the party to whom notice is to be given, or on the date of mailing if mailed
to the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows: if to the
holder, at his address as shown in the Company records; and if to the Company,
at its principal office. Any party may change its address for purposes of this
subsection by giving the other party written notice of the new address in the
manner set forth above.
10. GOVERNING LAW
This Warrant and any dispute, disagreement or issue of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the laws of the State of Texas without regard to
conflicts of law.
DATED AS OF NOVEMBER 11, 1997
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ JOSE CHAVEZ, President
SUBSCRIPTION
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Gentlemen:
The undersigned, , hereby elects to
purchase, pursuant to the provisions to the foregoing Warrant held by the
undersigned, shares of the Common Stock, $0.10 par
value ("Common Stock"), of Micro-Media Solutions, Inc.
Payment of the purchase price per Share required under such Warrant accompanies
this subscription.
The undersigned hereby represents and warrants that absent an effective
registration statement covering the Warrants, the undersigned is acquiring such
stock for the account of the undersigned and not for resale or with a view to
distribution of such Common Stock or any part hereof; that the undersigned is
fully aware of the transfer restrictions affecting restricted securities under
the pertinent securities laws and the undersigned understands that the shares
purchased hereby are restricted securities and that the certificate or
certificates evidencing the same will bear a legend to that effect.
PLACEMENT AGENTS OPTION CERTIFICATE
<PAGE> 56
DATED: , 199 .
Signature:
Address:
PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 1
EXHIBIT 10.11
PLACEMENT AGREEMENT
OF
MICRO-MEDIA SOLUTIONS, INC.
January 31, 1998
EQUITY SERVICES, LTD.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Gentlemen:
The undersigned, Micro-Media Solutions, Inc., a Utah corporation (the
"Company"), confirms its agreement with Equity Services, Ltd., a Nevis company
("ESL") as follows:
22. Description of Securities and Offering.
(a) ESL has agreed to privately place (the "Private Placement")
Ninety Four Thousand Three Hundred Forty (94,340) shares (the "Shares") of the
Company's Series C 6% Cumulative Convertible Non-Voting Preferred Stock (the
"Series C Preferred Stock"), each Share being immediately convertible into ten
(10) shares of the Company's common stock, at a price of Ten and 60/100 Dollars
($10.60) per Share (the "Private Placement Price"), on or before February 3,
1998 (the "Closing").
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 2
The Shares shall have a cumulative dividend of six percent (6%) per
annum, payable on a fiscal quarterly basis, which shall be paid by the issuance
of shares of the common stock of the Company, par value $0.10 per share (the
"Common Stock") based on the thirty (30) day average closing bid price of the
Common Stock immediately prior to the dividend date.
Immediately upon the occurrence of the Closing, the Company shall
grant the holders of the Shares, the holders of the Common Stock issued upon
conversion of the Shares and the holders of the Common Stock issued as
dividends on the Shares one (1) demand registration right and "piggyback"
registration rights. The terms of these registration rights shall be as set
forth in a Registration Rights Agreement (herein so called) substantially in
the form attached hereto as Exhibit "A". The Company shall bear all expenses
in connection with the preparation and filing of such registration statements.
(b) The commissions to which ESL shall be entitled, and which the
Company shall pay, for such placement shall be as follows: (i) a sum equal to
seven percent (7%) of the total proceeds resulting from the placement of the
Shares, payable in cash; and (ii) Four Thousand Seven Hundred Seventeen (4,717)
Shares (the "Placement Agent's Shares"). ESL shall also be paid (i) a sum
equal to three percent (3%) of the total proceeds resulting from the placement
of the Shares as a non-accountable expense allowance and (ii) an amount equal
to the legal fees of ESL's counsel not to exceed Ten Thousand and No/100
Dollars ($10,000.00). ESL will be paid the commission, fees, and
non-accountable expense allowance simultaneously with the Closing.
(c) In addition, the Company agrees to sell to ESL, for an
aggregate price of $100, a five (5) year option ("ESL Purchase Option") to
purchase up to Forty Seven Thousand One Hundred Seventy (47,170) shares of
Common Stock ("ESL's Option Shares") at a price of Four Dollars ($4.00) per
Option Share exercisable for a period of five (5) years commencing January 31,
1999. The holders of ESL's Option Shares and the Placement Agent's Shares will
have registration rights as set forth in the Registration Rights Agreement
substantially in the form attached hereto as Exhibit "B".
23. Appointment of Placement Agent. ESL's appointment by the Company as
Placement Agent shall commence upon the date of the execution of this
Agreement, and shall continue until and through February 15, 1998, unless (i)
the Shares shall be completely sold prior to that date, (ii) the offering has
been terminated by written agreement between ESL and the Company, or (iii) this
Agreement shall be terminated at a prior date as provided herein.
24. Release of Placement Agent. ESL's commitment to serve as Placement
Agent on behalf of the Company is made subject to the release of ESL: (i) in
the event of war, (ii) in the event of any material adverse change in the
business, property or financial condition of the Company (of which ESL shall be
the sole judge), (iii) in the event of any pending or threatened action, suit
or proceeding at law or in equity against the Company, or by any Federal, State
or other commission, board or agency wherein any unfavorable decision would
materially affect the business, property, financial condition or income of the
Company (of which ESL shall be the sole judge), (iv) in the event of a breach
by the Company of any covenant, representation or warranty contained in this
Agreement or (v) in the event of adverse market conditions (of which ESL shall
be the sole judge).
25. Representations and Warranties of the Company.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 3
The Company represents and warrants to ESL as follows:
(a) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Utah, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification and failure to so register or qualify would have
a material adverse effect on the Company.
(b) The Company has registered shares of its Common Stock pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is in full compliance with all reporting requirements of the Exchange
Act, and the Common Stock is quoted on the NASDAQ Over-the-Counter Bulletin
Board (trading symbol: MSIA).
(c) The Company has furnished ESL with copies of the Company's
Business Plan dated July 3, 1997, most recent Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission (the "Commission") and all
Forms 10-QSB and 8-K, together with any amendments thereto, filed thereafter,
if any (collectively, the "Disclosure Documents"). Immediately prior to the
Closing, there will be no other capital stock issued and outstanding, nor will
there be outstanding any rights to acquire, commitments to issue or securities
convertible into capital stock other than as stated in the Disclosure Documents
and except for those rights to demand Three Hundred Thousand (300,000) shares
of Common Stock that is the subject of a dispute involving Argus Management,
Inc. ("Argus"). The Disclosure Documents at the time of their filing did not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made not misleading.
(d) Except as shown on the Company's most recent audited financial
statements prepared by Salazar Accountants dated March 31, 1997, a copy of
which has been furnished to ESL, and as otherwise previously disclosed in
writing to ESL or in the Disclosure Documents, the Company will have no other
indebtedness outstanding immediately prior to the Closing.
(e) Upon issuance at the Closing, in accordance with this
Agreement, the Shares will be duly and validly authorized and issued, fully
paid and nonassessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. The shares of Common Stock, when issued and
delivered upon conversion of the Series C Preferred Stock, the ESL Option
Shares and the Placement Agent's Shares, will be duly and validly authorized
and issued, fully paid and nonassessable, free from all encumbrances and
restrictions other than restrictions on transfer imposed by applicable
securities laws and/or this Agreement, and will not subject the holders thereof
to personal liability by reason of being such holders.
(f) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement of the
Company enforceable in
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 4
accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally, and the Company has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and
to perform its obligations hereunder and thereunder.
(g) The execution and delivery of this Agreement, the issuance of
the Shares, the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock, the ESL Option Shares, the Placement Agent's Shares, and the
consummation of the transactions contemplated by the Investor Subscription
Agreement (herein so called) by the Company, will not conflict with or result
in a breach of or a default under any of the terms or provisions of, the
Company's articles of incorporation or By-laws, or of any material provision of
any indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets is bound, any material provision of any law, statute,
rule, regulation, or any existing applicable decree, judgment or order by any
court, federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company, or any of its
properties or assets and will not result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to the terms of any agreement or instrument
to which any of them is a party or by which any of them may be bound or to
which any of their property or any of them is subject.
(h) No authorization, approval, filing with or consent of any
governmental body is required for the issuance and sale of the Shares, except
for filings pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the "Act") or any state blue sky filings.
(i) Except as previously disclosed in writing to ESL and except as
stated in the Disclosure Documents, there is no action, suit or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending or threatened against or affecting the Company, or any of its
properties, which could reasonably be anticipated to result in any material
adverse change in the condition (financial or otherwise) or in the earnings,
business affairs, business prospects, properties or assets of the Company.
(j) Subsequent to the dates as of which information is given in
the Disclosure Documents, except as contemplated herein, the Company has not
incurred any material liabilities or material obligations, direct or
contingent, or entered into any material transactions not in the ordinary
course of business, and there has not been any change in its capitalization or
any material adverse change in its condition (financial or otherwise) net
worth, results of operations or prospects, except as otherwise previously
disclosed to ESL.
(k) The Company has conducted, is conducting and will conduct its
business so as to comply in all material respects with all applicable statutes
and regulations, and the Company is not charged with and, to the knowledge of
the Company, is not under investigation with respect to any violation of any
statutes or regulations nor is it the subject of any pending or threatened
adverse proceedings by any regulatory authority having jurisdiction over its
business or operations.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 5
(l) Except as set forth in the Disclosure Documents, the Company
has good and indefeasible title to all properties and assets described therein
as owned by it, free and clear of all liens, charges, encumbrances, or
restrictions.
(m) The Company has filed all necessary federal and state income
and franchise tax returns and has paid all taxes shown as due thereon.
(n) The Company has no knowledge of any tax deficiency that might
be asserted against it that might materially and adversely affect its business
or properties.
(o) The Company maintains insurance of the types and in amounts
generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies and businesses, including, but not
limited to, insurance covering all real and personal property owned or leased
by the Company against theft, damage, destruction, acts of vandalism, products
liability and all other risks customarily insured against, all of which
insurance is in full force and effect.
(p) No labor disturbance by the employees of the Company exists or
is imminent that could reasonably be expected to have a material adverse effect
on the conduct of the business, operations, financial condition, or income of
the Company.
(q) Neither the Company nor any employee or agent of the Company
has made any payment of funds of the Company or received or retained any funds
in violation of law other than payment of potentially usurious interest and as
stated in the Disclosure Documents.
(r) Subject in part to the truth and accuracy of the subscriber's
representations set forth in the Investor Subscription Agreement, the offer,
sale and issuance of the Shares are exempt from registration requirements of
the 1933 Act, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that will cause the loss of such
exemption.
(s) The Company has no patents, trademarks, service marks,
copyrights, or licenses other than commercially available software licenses.
The Company is not aware that any of its executive officers is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency that would interfere with the use of his or her best
efforts to promote the interest of the Company or that would conflict with the
Company's business as proposed to be conducted.
(t) Except for agreements explicitly contemplated hereby or set
forth in the Disclosure Documents, there are no agreements between the Company
and any of its officers, directors, affiliates or any affiliate thereof, other
than employment agreements between the Company and its officers and directors.
(u) As of the Closing, no representation or warranty of the
Company contained in this Section 4, and no statement contained in any exhibit,
schedule, certificate, list, summary or other
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 6
disclosure document provided or to be provided to ESL pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact which is necessary in order to make statements contained therein
not misleading.
The representations, warranties and covenants of the Company contained in this
Agreement shall inure to the benefit of each subscriber to the Private
Placement contemplated by this Agreement and such subscribers shall constitute
identified third-party beneficiaries under this Agreement. No termination,
modification, or waiver of the representations, warranties and covenants of the
Company contained in this Agreement shall be permitted in any manner adversely
affecting their interests without their prior written consent. The
representations, warranties and covenants of the Company contained herein shall
survive the Closing.
26. Affirmative Covenants of the Company.
(a) The Company will use its best efforts to: (i) list shares of
its Common Stock on The Nasdaq SmallCap Market or a national securities
exchange (such as AMEX or NYSE) and (ii) at a minimum, to maintain such listing
for a period of five (5) years from the time of such listing.
(b) The Company will continue to engage the financial public
relations firm currently engaged by the Company.
(c) The financial statements of the Company shall be audited by a
"Big Six" or such other independent public accounting firm to which ESL may
consent. Further, the Company shall not effect a change in its accounting firm
to other than a "Big Six" firm for a period of two (2) years following the
Closing.
(d) The Company shall be responsible for and shall bear all
expenses directly and necessarily incurred in connection with the Private
Placement, including but not limited to, the cost of preparing, printing and
delivering all placement and selling documents, including but not limited to
the Placement Agreement, Investor Subscription Agreements, Registration Rights
Agreements, Placement Agent's Option Agreements and blue sky memorandum and
stock certificates; blue sky fees, filing fees, legal fees and disbursements of
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of two (2) sets of bound closing volumes
for ESL and its counsel; the cost of three (3) tombstone advertisements, one
(1) of which shall be in a national business newspaper, one (1) of which shall
be in a major Texas newspaper and one (1) shall be in a publication chosen by
ESL; the cost of five (5) lucite tombstones; and an amount equal to the legal
fees of ESL's counsel not to exceed Ten Thousand Dollars
($10,000.00)(collectively, the "Company Expenses"). If the Private Placement
is not completed because the Company prevents it or because of a breach by the
Company of any covenants, representations or warranties contained herein, the
Company's liability for such expense allowance shall be limited to Ten Thousand
and No/100 Dollars ($10,000.00).
(e) The Company will, and will cause its subsidiaries, if any, to
do the following: (i)
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 7
maintain and preserve its and their respective businesses consistent with
normal business practices; (ii) conduct its and their respective business,
taken together as a group, in an orderly, efficient and customary manner
consistent with normal business practices; and (iii) keep and maintain all of
its and their respective properties in good working order and condition,
ordinary wear and tear excepted.
(f) The Company will deliver to ESL for a period of three (3)
years from the Closing:
(i) within forty-five (45) days after the close of each
quarter, a copy of its consolidated balance sheet as of the close of
such month and its profit and loss statement and surplus
reconciliation for that month, all prepared in accordance with
generally accepted accounting principles consistently applied, and
certified as being fairly presented in all material respects by the
Company's President or its Chief Financial Officer;
(ii) at any time within the period from thirty (30) days
prior to and until thirty (30) days after the start of any fiscal
year, financial projections of the Company and its subsidiaries, if
any, for such fiscal year prepared in reasonable detail, which
financial projections shall be presented to the Company's Board of
Directors for their approval at their regular meeting first following
the preparation of such projections;
(iii) promptly upon the filing thereof, all reports and
statements filed with the Commission (or any governmental authority
succeeding to any of its functions) or with any securities exchange;
and
(iv) such other information and data with respect to the
Company or any of its subsidiaries, if any, as from time to time may
be reasonably requested by ESL (including, without limitation, such
other information as the Company shall have supplied to any of its
security holders in their capacity as such) to the extent the Company
possesses such information or can acquire it without unreasonable
effort or expense.
(g) The Company will continue to pay the premiums on the One
Million and No/100 Dollars ($1,000,000.00) of "key man" life insurance on the
life of Jose Chavez. Such "key man" life insurance will be kept in force for a
minimum period of either three (3) years from the Closing or the term of the
employment agreement between the Company and Jose Chavez, whichever is longer.
(h) For a period of three (3) years from the Closing, the Company,
at its expense, shall, upon request by ESL from time to time, provide ESL with
copies of the Company's daily transfer sheets.
(i) The Company and its President shall call a meeting of the
Board of Directors at such times as may be necessary but at least once every
fiscal quarter. As soon as practical after the Closing, the Board of Directors
shall include at least two (2) non-affiliated directors, which directors shall
not be officers or employees of the Company ("Outside Directors"). In
addition, the Company will allow one (1) designated representative of ESL to
receive timely notice of,
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 8
attend and make comments at all meetings of its Board of Directors. (Such
designated representative shall also be sent all standard communications and
notifications from the Company to the members of its Board of Directors
concerning annual and special meetings in the same fashion and on the same
basis, including with respect to timing, as he would if he were a member of the
Board of Directors.) Further, for a period of five (5) years from the Closing,
the holders of the Series C Preferred Stock shall have the right to designate
one (1) member of the Board of Directors and the Company will cause such
designee to be elected to the Company's Board of Directors.
(j) The Company will cause the Board of Directors to maintain a
Compensation Committee, which shall be comprised of three (3) members, of which
one (1) member shall be a director designated by the holders of the Shares.
The Compensation Committee shall have authority with respect to the matters set
forth in clauses (i) and (ii) of paragraph (m) of this Section 5.
(k) The Company will cause the Board of Directors to maintain an
Audit Committee, which shall be comprised of three (3) members, of which one
(1) member shall be a director designated by the holders of the Shares.
(l) The management of the Company shall prepare and deliver to
each member of the Board (including ESL's designee) monthly reports
highlighting business developments and activities, with those persons having
assigned responsibilities reporting on operations and activities in their areas
of responsibility.
(m) The Company will promptly send to ESL and each subscriber to
the Private Placement, in no event later than ninety (90) days following each
meeting (unless ESL or each such subscriber shall waive such right in writing)
copies of the complete minutes of each meeting of its Board of Directors,
executive and similar committees thereof.
(n) Without in any way limiting the generality of matters which
may be appropriate for consideration or action by the Board of Directors, prior
to taking action with respect to any of the following items, the Board of
Directors or, in the case of clauses (i) and (ii), the Compensation Committee
thereof, must approve the following actions:
(i) Changes in officers and their compensation,
including, without limitation, all significant employee benefits other
than health care and similar insurance plans;
(ii) All incentive programs (and revisions thereto) for
employees such as stock option plans, equity plans, bonus plans, etc.;
(iii) Company budgets, which shall be submitted within the
period from thirty (30) days prior to and until thirty (30) days after
the commencement of each fiscal year covering sales, direct costs,
indirect costs, profit targets, capital expenditures, and cash flow;
(iv) Major appropriations in excess of Fifty Thousand
Dollars ($50,000.00) for
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 9
any capital items not in the Company budget for the fiscal year;
(v) Major new facilities and their location, excluding
any small leased facilities in the local area so long as their annual
rental obligation does not exceed Fifty Thousand Dollars ($50,000.00)
per year;
(vi) All matters pertaining to mergers and acquisitions,
without exception;
(vii) Purchase contracts of a major nature;
(viii) Sales contracts of an unusual size or complexity;
(ix) Sale or purchase of patents, rights, or any royalty
or license agreements;
(x) Warranty and distribution policies of an unusual
nature which are not representative of industry patterns;
(xi) Financing programs and policies applicable to public
offerings, private placements, and long-term debt;
(xii) Treasury policies;
(xiii) Selection of auditors and corporate counsel;
(xiv) Banking resolutions;
(xv) Cash policies such as pension funds, investments,
etc., other than normal bank deposits;
(xvi) All matters of litigation in which the Company is to
be the plaintiff or other initiating party; and
(xvii) Conflict of interest matters.
(o) The management of the Company shall notify and consult with
the Board of Directors (by written, telegraphic or telephonic notice) prior to
taking any initial action with respect to any of the following matters (it
being understood that the Board of Directors will determine the propriety of
further or alternative action with respect to such matters at their next
meeting):
(i) All matters of personnel policies as they apply to
any labor agreements or organization of unions;
(ii) All matters of public policy, wherein the Company is
to be involved in any community, political, or religious cause or
program;
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 10
(iii) All matters of litigation that involve or may involve
the Company as a defendant, other than timely filing of appropriate
documents to avoid prejudicing the rights of the Company;
(iv) Audit programs and policies; and
(v) Any operating decisions which in the judgment of the
President and Chief Executive Officer should be presented to the
Board.
(p) The Company shall file a Certificate of Designation with the
Secretary of State of Utah, setting forth the rights and preferences of the
Series C Preferred Stock substantially in the form attached hereto as Exhibit
"C".
27. Negative Covenants of the Company.
(a) For a period of eighteen (18) months following the Closing,
the Company will not, without the prior written consent of ESL, grant any
options to purchase securities of the Company to employees that are exercisable
at a price below the greater of the Private Placement Price or the fair market
value of the securities on the date of grant.
(b) For a period of three (3) years following the Closing, the
Company will not, without the prior written consent of ESL, offer or sell any
of its securities in reliance on Regulation S of the Securities Act of 1933, as
amended.
(c) The Company will not use any proceeds from the Private
Placement to repay any indebtedness of the Company including but not limited to
any indebtedness to current executive officers or principal stockholders of the
Company, other than the aggregate sum of Four Hundred Eighty Thousand Dollars
($480,000.00), payable to various vendors of the Company that are not
affiliates.
(d) The Company shall not, without the prior unanimous written
consent of ESL and the holders of the Series C Preferred Stock, create any new
class or series of stock having a dividend and/or liquidation preference senior
to the Series C Preferred Stock or increase the size of the authorized number
of shares of Series C Preferred Stock.
(e) The Company will not issue press releases without first providing
ESL a copy of the proposed prior to its dissemination for a period of eighteen
(18) months from the Closing, or February 3, 1998, whichever is earlier.
(f) For a period of thirteen (13) months from the Closing or February
3, 1998, whichever is earlier, the compensation of the executive officers of
the Company shall be subject to the approval of ESL, which approval shall not
unreasonably be withheld.
(g) The Company will not sell any of its securities at a price lower
than the Private Placement Price for a period of twenty-four (24) months from
the Closing or February 3, 1998, whichever is earlier, without the prior
written consent of ESL.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 11
28. Representations and Warranties of ESL.
ESL represents, warrants and covenants to the Company as follows:
(a) ESL has been duly incorporated and is validly existing and in
good standing under the laws of Nevis, with full corporate power and authority
to own, lease and operate its properties and to conduct its business as
currently conducted.
(b) This Agreement has been duly authorized, validly executed and
delivered on behalf of ESL and is a valid and binding agreement of ESL
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally, and ESL has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and
to perform its obligations hereunder and thereunder.
29. Indemnification. The Company hereby agrees to indemnify and hold
harmless ESL and its officers, directors, shareholders, employees, agents and
attorneys against any and all losses, claims, damages, liabilities and expenses
incurred by each such person in connection with defending or any reasonable
investigation of colorable claims or liabilities, including any costs or
expenses incurred, to which any such indemnified party may become subject under
the Securities' Act, or under any other statute, at common law or otherwise,
insofar as such losses, claims, demands, liabilities and expenses arise out of
or are based upon, in whole or in part, (i) any untrue statement or alleged
untrue statement of a material fact made by the Company, (ii) any omission or
alleged omission of a material fact with respect to the Company, or (iii) any
breach of any representation, warranty or agreement made by the Company in this
Agreement.
30. Mergers and Acquisitions.
(a) The Company agrees that ESL will be paid a finder's fee of
seven percent (7%) of the first $1,000,000.00, six percent (6%) of the second
$1,000,000.00 and five percent (5%) of the next $5,000,000.00 ranging in
$1,000,000.00 increments down to two and one-half percent (2-1/2%) of the
excess (with a reduction by one-half percent (0.5%) for each $1,000,000.00
thereafter up to $9,000,000.00), if any, over $9,000,000.00 of the
consideration (stock or other property to be valued at the fair market value of
same on the date of receipt by the Company) involved in any transaction
(including mergers, acquisitions, joint ventures and any other business for the
Company introduced by ESL) consummated by the Company, in which ESL introduced
the other party to the Company during a period ending five (5) years from
November 11, 1997 (an "Introduced Transaction") and with whom the Company did
not have a prior relationship; and
(b) Any such finder's fee due to ESL will be paid in cash at the
closing of the particular Introduced Transaction for which the finder's fee is
due. This finder's fee is not in addition to the finder's fee contained in
that certain placement agreement dated November 11, 1997, by and between the
Company and ESL, but is merely a restatement thereof.
31. Conditions Precedent to Closing.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 12
(a) Prior to the Closing, ESL shall have received a legal opinion
addressed to ESL and each subscriber to the Private Placement from counsel for
the Company, confirming the representations and warranties of the Company
contained in Section 4, substantially in the form attached hereto as Exhibit
"D".
(b) ESL shall have received a fully executed Placement Agent's
Option Certificate from the Company for the options earned upon the Closing.
(c) ESL shall have received a fully executed Registration Rights
Agreement with respect to the Placement Agent's Shares and the ESL Option
Shares from the Company for the ESL Option Shares and Placement Agent's Shares
earned upon the Closing.
(d) ESL shall have received a certified copy of the resolution of
the Board of Directors of the Company authorizing the transactions contemplated
herein.
(e) The Company shall have filed with the Office of the Secretary
of State of Utah a Certificate of Designation acceptable to ESL, substantially
in the form attached hereto as Exhibit "C".
(f) The Company shall have amended its Bylaws in such a manner so
as to make its Bylaws consistent with the terms and conditions of this
Agreement and the transactions contemplated herein, a copy of which will have
been provided to ESL.
(g) Prior to the Closing, ESL shall have received the certificates
representing the Placement Agent's Shares earned for the Private Placement.
(h) Prior to the Closing, ESL shall have received a fully-executed
subscription agreement from each subscriber to the Private Placement.
32. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective upon its execution by
ESL.
(b) This Agreement shall terminate on the earlier of February 15,
1998, or the Closing.
33. Parties. This Agreement shall inure to the benefit of and be binding
upon ESL, the Company and ESL's and its respective successors and assigns.
Except as provided for in Section 4 hereinabove, nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person or
corporation, other than the parties hereto and their respective successors and
assigns and the controlling persons, officers, directors, employees, agents and
attorneys of the parties, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. Except as
provided in Section 4, this Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective successors and assigns and said controlling
persons, officers, directors, employees, agents and attorneys, and for the
benefit of no other person or corporation.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 13
34. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied (followed by registered mail or overnight courier), initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 13.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to ESL:
Equity Services, Ltd
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Ms. Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; when received after being deposited in the regular mail;
the next business day after being deposited with an overnight courier, if
deposited with a nationally recognized, overnight courier service; when receipt
is acknowledged, if telecopied.
35. Attorneys' Fees. If any action is necessary to enforce or interpret
the terms of this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs, in
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 14
addition to any other relief to which he is or may be entitled. This provision
shall be construed as applicable to the entire agreement.
36. Time of Essence. Time shall be of the essence of this Agreement.
37. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of Texas.
38. Execution. This Agreement may be executed in any number of
counterparts each of which taken together shall constitute one and the same
instrument.
39. Joint Drafting of Agreement. This Agreement has been prepared by the
joint efforts of the respective counsel for each of the parties hereto and
shall not be construed against a particular party simply by reason of such
party being the drafting party.
40. Entire Agreement. This Agreement constitutes the entire understanding
by and between the parties with respect to the subject matter hereof. This
Agreement can only be modified, including any extension of the offering period,
by a written agreement duly signed by persons authorized to sign agreements on
behalf of the respective parties.
41. Facsimile Signature. This Agreement may be executed by facsimile copy
and any such facsimile copy bearing the facsimile signature of any party hereto
shall have full legal force and effect and shall be binding against the party
having executed this Agreement by facsimile.
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 15
If the foregoing is in accordance with your understanding, please sign
below and return to us a counterpart hereof, and upon your acceptance hereof,
this letter and the acceptance hereof shall constitute a binding agreement
between ESL and the Company.
Very truly yours,
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
---------------------------------
JOSE CHAVEZ, President
Accepted and agreed to as of the
date first above written by:
EQUITY SERVICES, LTD.
By:/s/ Lynn Turnquest
LYNN TURNQUEST, Director
PLACEMENT AGREEMENT OF
MICRO-MEDIA SOLUTIONS, INC.
<PAGE> 16
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT -
Subscribers to Private Placement
EXHIBIT "B"
REGISTRATION RIGHTS AGREEMENT - ESL
EXHIBIT "C"
CERTIFICATE OF DESIGNATION
EXHIBIT "D"
FORM OF LEGAL OPINION
<PAGE> 17
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 31st day of January, 1998 by and between MICRO-MEDIA
SOLUTIONS, INC., a Utah corporation (the "Company") and EQUITY SERVICES, LTD.,
a Nevis company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) Four Thousand Seven Hundred
Seventeen (4,717) shares of the Company's Series C 6% Cumulative Convertible
Preferred Stock, stated value $10.60 per share (the "Series C Preferred Stock")
pursuant to that certain placement agreement by and between the Company and the
Shareholder dated January 31, 1998 (the "Placement Agreement") and (ii) an
option to purchase up to Forty Seven Thousand One Hundred Seventy (47,170)
shares of the Company's common stock, par value $0.10 per share (the "Common
Stock") pursuant to that certain Placement Agent's Option Certificate dated
January 31, 1998 (the "Option Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series C Preferred Stock and the Option Shares
(collectively, the "Shares"); and the Shareholder desires to obtain such
registration rights, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
13. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) any shares of Common Stock issuable upon
conversion of any of the Series C Preferred Stock, (ii) the Option
Shares, (iii) any shares of Common Stock
<PAGE> 18
issued by way of a stock split, reorganization, merger or
consolidation, and (iv) any Common Stock issued as a dividend on the
Shares. For purposes of this Agreement, any Registrable Stock shall
cease to be Registrable Stock when (v) a registration statement
covering such Registrable Stock has been declared effective and such
Registrable Stock has been disposed of pursuant to such effective
registration statement, (w) such Registrable Stock is sold pursuant to
Rule 144 (or any similar provision then in force) under the 1933 Act,
(x) such Registrable Stock is eligible to be sold pursuant to Rule
144(k) under the 1933 Act, (y) such Registrable Stock has been
otherwise transferred, no stop transfer order affecting such stock is
in effect and the Company has delivered new certificates or other
evidences of ownership for such Registrable Stock not bearing any
legend indicating that such shares have not been registered under the
1933 Act, or (z) such Registrable Stock is sold by a person in a
transaction in which the rights under the provisions of this Agreement
are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of
1933, as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder,
or the spouse or children (or a trust exclusively for the benefit of
the spouse and/or children) of a Holder, or, in the case of a Holder
that is a partnership, its partners.
(g) The term "Person" shall mean an individual,
corporation, partnership, trust, limited liability company,
unincorporated organization or association or other entity, including
any governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules,
regulations or forms promulgated by the Commission shall include
rules, regulations and forms succeeding to the functions thereof,
whether or not bearing the same designation.
14. Demand Registration.
(a) Commencing immediately upon the date of Closing (as
defined in the Placement Agreement), any Requesting Holders may make a
written request to the Company (specifying that it is being made
pursuant to this Section 2) that the Company file a registration
statement under the 1933 Act (or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act) covering
the registration of Registrable Stock. In such event, the Company
shall (x) within ten (10) days thereafter notify in writing all other
Holders of Registrable Stock of such request, and (y) use its best
efforts to cause to be registered under the 1933 Act all Registrable
Stock that the Requesting Holders and such other Holders have, within
forty-five (45) days after the Company has given such notice,
requested be registered.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 19
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to
distribute Registrable Stock through such underwritten offering shall
enter into an underwriting agreement in customary form with the
underwriter or underwriters. Such underwriter or underwriters shall be
selected by a majority in interest of the Requesting Holders and shall
be approved by the Company, which approval shall not be unreasonably
withheld; provided, that all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit
of such Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
provided further, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2
to the contrary, if the managing underwriter of an underwritten
offering of the Registrable Stock requested to be registered pursuant
to this Section 2 advises the Requesting Holders in writing that in
its opinion marketing factors require a limitation of the number of
shares to be underwritten, the Requesting Holders shall so advise all
Holders of Registrable Stock that would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Stock that
may be included in such underwritten offering shall be allocated among
all such Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of filing
the registration statement; provided, that in the event of such
limitation of the number of shares of Registrable Stock to be
underwritten, the Holders shall be entitled to an additional demand
registration pursuant to this Section 2. If any Holder of Registrable
Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so withdrawn
shall also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to
the contrary, the Company shall not be required to effect a
registration pursuant to this Section 2 during the period starting
with the fourteenth (14th) day immediately preceding the date of an
anticipated filing by the Company of, and ending on a date ninety (90)
days following the effective date of, a registration statement
pertaining to a public offering of securities for the account of the
Company; provided, that the Company shall actively employ in good
faith all reasonable efforts to cause such registration statement to
become effective; and provided further, that the Company's estimate of
the date of filing such registration statement shall be made in good
faith.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 20
(e) The Company shall be obligated to effect and pay for
a total of only two (2) registrations pursuant to this Section 2,
unless increased pursuant to Section 2.(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i)
it has been declared effective by the Commission, (ii) if it is a
shelf registration, it has remained effective for the period set forth
in Section 3.(b), (iii) the offering of Registrable Stock pursuant to
such registration is not subject to any stop order, injunction or
other order or requirement of the Commission (other than any such
action prompted by any act or omission of the Holders), and (iv) no
limitation of the number of shares of Registrable Stock to be
underwritten has been required pursuant to Section 2.(c) hereof.
15. Obligations of the Company. Whenever required under Section 2
to use its best efforts to effect the registration of any Registrable Stock,
the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in
accordance with the intended method of distribution thereof, and use
its best efforts to cause such registration statement to become
effective as promptly as practicable thereafter; provided that before
filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to one (1) counsel
selected by the Requesting Holders copies of all such documents
proposed to be filed, and (ii) notify each such Holder of any stop
order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove
it if entered;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which
will terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of
Registrable Stock to be included in a registration statement copies of
such registration statement as filed and each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable
Stock owned by such Holder;
REGISTRATION RIGHTS AGREEMENT
<PAGE> 21
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned
by such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3.(d)
hereof, (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock
and any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if such
time is after the period referred to in Section 3.(b)), of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances being made not misleading;
(g) make available for inspection by any selling Holder,
any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Inspector, as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement.
Records or other information which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid
or correct a misstatement or omission in the registration statement,
or (ii) the release of such Records or other information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each selling Holder shall, upon learning that disclosure
of such Records or other information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Records or other information deemed confidential;
REGISTRATION RIGHTS AGREEMENT
<PAGE> 22
(h) furnish, at the request of any Requesting Holder, on
the date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect to such shares of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and if
such Registrable Stock is not being sold through underwriters, then to
the Requesting Holders as to such matters as such underwriters or the
Requesting Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter dated such
date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver such
letter to such Holder, then to the Company (i) stating that they are
independent certified public accountants within the meaning of the
1933 Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, and (ii)
covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date
of such letter) with respect to the registration in respect of which
such letter is being given as the Requesting Holders may reasonably
request and as would be customary in such a transaction;
(i) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of
at least twelve (12) months beginning with the first full month after
the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933
Act; and
(k) use its best efforts to cause all such Registrable
Stock to be listed on The Nasdaq Small Cap Market and/or any other
securities exchange on which similar securities issued by the Company
are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 23
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3.(f) hereof,
such Holder will forthwith discontinue disposition of Registrable Stock
pursuant to the registration statement covering such Registrable Stock until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.(f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 3.(f) hereof.
16. Incidental Registration. Commencing immediately after the
date of Closing (as defined in the Investor Agreement), if the Company
determines that it shall file a registration statement under the 1933 Act
(other than a registration statement on a Form S-4 or S-8 or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders) on any form that would also permit the
registration of the Registrable Stock and such filing is to be on its behalf
and/or on behalf of selling holders of its securities for the general
registration of its common stock to be sold for cash, at each such time the
Company shall promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than thirty (30) days from the date
of such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. Upon the written request of any Holder received
by the Company no later than twenty (20) days after the date of the Company's
notice, the Company shall use its best efforts to cause to be registered under
the 1933 Act all of the Registrable Stock that each such Holder has so
requested to be registered. If, in the written opinion of the managing
underwriter or underwriters (or, in the case of a non-underwritten offering, in
the written opinion of the placement agent, or if there is none, the Company),
the total amount of such securities to be so registered, including such
Registrable Stock, will exceed the maximum amount of the Company's securities
which can be marketed (i) at a price reasonably related to the then current
market value of such securities, or (ii) without otherwise materially and
adversely affecting the entire offering, then the amount of Registrable Stock
to be offered for the accounts of Holders shall be reduced pro rata to the
extent necessary to reduce the total amount of securities to be included in
such offering to the recommended amount; provided, that if securities are being
offered for the account of other Persons as well as the Company, such reduction
shall not represent a greater fraction of the number of securities intended to
be offered by Holders than the fraction of similar reductions imposed on such
other Persons other than the Company over the amount of securities they
intended to offer.
17. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law,
each Holder whose Registrable Stock is included in a registration
statement agrees not to effect any public sale or distribution of the
issue being registered or a similar security of the Company, or
REGISTRATION RIGHTS AGREEMENT
<PAGE> 24
any securities convertible into or exchangeable or exercisable for
such securities, including a sale pursuant to Rule 144 under the 1933
Act, during the fourteen (14) days prior to, and during the ninety
(90) day period beginning on, the effective date of such registration
statement (except as part of the registration), if and to the extent
requested by the Company in the case of a nonunderwritten public
offering or if and to the extent requested by the managing underwriter
or underwriters in the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company and
Others. The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being registered, or
any securities convertible into or exchangeable or exercisable for
such securities, during the fourteen (14) days prior to, and during
the ninety (90) day period beginning on, the effective date of any
registration statement in which Holders are participating (except as
part of such registration), if and to the extent requested by the
Holders in the case of a non-underwritten public offering or if and to
the extent requested by the managing underwriter or underwriters in
the case of an underwritten public offering; and (ii) that any
agreement entered into after the date of this Agreement pursuant to
which the Company issues or agrees to issue any securities convertible
into or exchangeable or exercisable for such securities (other than
pursuant to an effective registration statement) shall contain a
provision under which holders of such securities agree not to effect
any public sale or distribution of any such securities during the
periods described in (i) above, in each case including a sale pursuant
to Rule 144 under the 1933 Act.
18. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and
pay the underwriting commissions and discounts applicable to the Registrable
Stock offered for their account in connection with any registrations, filings
and qualifications made pursuant to this Agreement.
19. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such
Holder (within the meaning of the 1933 Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement therein (in
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading. The Company
will also indemnify any underwriters of the
REGISTRATION RIGHTS AGREEMENT
<PAGE> 25
Registrable Stock, their officers and directors and each Person who
controls such underwriters (within the meaning of the 1933 Act) to the
same extent as provided above with respect to the indemnification of
the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission
of a material fact required to be stated in the registration
statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus or preliminary prospectus, in the
light of the circumstances under which they were made) not misleading,
to the extent, but only to the extent, that such untrue statement or
omission is contained in any information with respect to such Holder
so furnished in writing by such Holder. Notwithstanding the
foregoing, the liability of each such Holder under this Section 7.(b)
shall be limited to an amount equal to the initial public offering
price of the Registrable Stock sold by such Holder, unless such
liability arises out of or is based on willful misconduct of such
Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonably satisfactory to such indemnified party. Whether or not
such defense is assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably
withheld). Failure by such Person to provide said notice to the
indemnifying party shall itself not create liability except to the
extent of any injury caused thereby. No indemnifying party will
consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. If the indemnifying
party IS not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more
than one (1) counsel with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels.
(d) Contribution. If for any reason the indemnity
provided for in this Section 7 is unavailable to, or is insufficient
to hold harmless, an indemnified party, then the
REGISTRATION RIGHTS AGREEMENT
<PAGE> 26
indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on
the one hand and the indemnified party on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law, or provides a lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other but also
the relative fault of the indemnifying party and the indemnified party
as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties; and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth
in Section 7.(c), any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7.
20. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
21. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it
has complied with such requirements.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 27
22. Transfer of Registration Rights. The registration rights of
any Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this
Section 10, no transfer of Registrable Stock shall cause such Registrable Stock
to lose such status.
23. Mergers, Etc. The Company shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving
corporation shall, prior to such merger, consolidation or reorganization, agree
in writing to assume the obligations of the Company under this Agreement, and
for that purpose references hereunder to "Registrable Stock" shall be deemed to
be references to the securities which the Holders would be entitled to receive
in exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation which may be
immediately sold to the public without registration under the 1933 Act, or
(iii) securities of the acquiring corporation which the acquiring corporation
has agreed to register within ninety (90) days of completion of the transaction
for resale to the public pursuant to the 1933 Act.
24. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this
Agreement.
(b) Remedies. Each Holder, in addition to being entitled
to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by
it of the provisions of this Agreement and hereby agrees to waive (to
the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of the Holders of
at least a majority of the Registrable Stock then outstanding affected
by such amendment, modification, supplement, waiver or departure.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 28
(d) Successors and Assigns. Except as otherwise
expressly provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this
Agreement, express or implied, is intended to confer upon any Person
other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this
Agreement.
(e) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Texas applicable to contracts made and to be performed wholly within
that state, without regard to the conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used
for convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person
or by telecopy or by overnight courier guaranteeing no later than
second business day delivery, directed to (i) the Company at the
address set forth below its signature hereof or (ii) a Holder at the
address of the Administrator set forth below its signature hereof. Any
party may change its address for notice by giving ten (10) days
advance written notice to the other parties. Every notice or other
communication hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, or on the date
actually received, if sent by telecopy or overnight courier service,
with receipt acknowledged.
(i) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 29
(k) Enforceability. This Agreement shall remain in full
force and effect notwithstanding any breach or purported breach of, or
relating to, the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in
the Agreement as if fully set forth herein.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
--------------------------------
Name: JOSE CHAVEZ
Title: President
501 Waller
Austin, Texas 78702
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
EQUITY SERVICES, LTD.
By: /s/ Lynn Turnquest
Name: LYNN TURNQUEST
Title: Director
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
REGISTRATION RIGHTS AGREEMENT
<PAGE> 30
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION
UNDER THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing January 31, 1999 and before the Expiration Date (as
defined below) Forty Seven Thousand One Hundred Seventy (47,170) shares (the
"Option Shares") of fully paid and non-assessable shares of the common stock,
$0.10 par value per share (the "Common Stock"), of MICRO-MEDIA SOLUTIONS, INC.,
a Utah corporation (the "Company") at a purchase price of Four Dollars ($4.00)
per Option Share (the "Strike Price"), in lawful money of the United States of
America by bank or certified check, subject to adjustment as hereinafter
provided.
m. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
n. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the
Holder, commencing on January 31, 1999, and before the Expiration Date (as
defined below) by delivering to the Company written notice of exercise (the
"Exercise Notice"), stating the number of Option Shares to be purchased
thereby, accompanied by bank or certified check payable to the order of the
Company for the Option Shares being purchased. Within ten (10) days of the
Company's receipt of the Exercise Notice accompanied by the consideration for
the Option Shares being purchased, the Company shall issue and deliver to the
Holder a certificate representing the Option Shares being purchased. In the
case of exercise for less than all of the Option Shares represented by this
Option Certificate, the Company shall cancel this Option Certificate upon the
surrender hereof and shall execute and deliver a new Option Certificate for the
remaining balance of such Option Shares.
PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 31
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on January 31, 2004 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
o. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this
Option shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition may be effectuated
without registration under the Act."
p. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
q. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Option Certificate and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Option Certificate, the Company shall execute and deliver in lieu thereof, a
new Option Certificate representing an equal number of Option Shares
exercisable thereunder.
PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 32
r. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock
and the Strike Price per Option Share pursuant to this Option shall be subject
to adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall
be issued upon the exercise of this Option, but in lieu thereof the Company
shall purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed
to be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
s. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise
of this Option will have registration rights beginning on the date of execution
of this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
t. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Act.
PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 33
c. The Holder (i) is not a citizen or resident of the United
States of America, (ii) is not an entity organized under any laws of any state
of the United States of America and (iii) does not have any offices in the
United States of America.
u. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall
bear all expenses incurred in connection with each registration pursuant to
this Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and
pay the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 34
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by,
and construed in accordance with, the laws of the State of Texas, without
reference to its principles regarding conflicts of laws.
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PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 35
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
-----------------------------------
JOSE CHAVEZ, President
ATTEST: /s/ Mitchell Kettrick
-------------------------------
Name: Mitchell Kettrick
Title: Secretary
Date: January 31, 1998
PLACEMENT AGENT'S OPTION CERTIFICATE
<PAGE> 36
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to ______
shares of Common Stock covered hereby. Enclosed herewith is a bank or
certified check in the amount of $_________________.
Date: _____________________ ______________________________
Name:
Address:
Signature
______________________________
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between Holder and the Company
<PAGE> 1
EXHIBIT 10.12
PLACEMENT AGREEMENT
OF
MICRO-MEDIA SOLUTIONS, INC.
April 30, 1998
EQUITY SERVICES, LTD.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Gentlemen:
The undersigned, Micro-Media Solutions, Inc., a Utah corporation (the
"Company"), confirms its agreement with Equity Services, Ltd., a Nevis company
("ESL") as follows:
22. Description of Securities and Offering.
(a) ESL has agreed to privately place Two Hundred Thirty Five Thousand
Eight Hundred Forty Nine (235,849) shares (the "Shares") of the Company's
Series D 6% cumulative convertible non-voting preferred stock (the "Series D
Preferred Stock")(the "Private Placement") at a price of Ten and 60/100 Dollars
($10.60) per Share (the "Private Placement Price"). Subject to the terms and
conditions herein, the placement of the Shares is to occur as follows: (i) One
Hundred Eighty Nine Thousand Three Hundred Forty (189,340) Shares will be
placed on or before April 30, 1998 ("Phase I") and (ii) Forty Six Thousand Five
Hundred Nine (46,509) Shares will be placed on or before June 30, 1998 ("Phase
II"). The Shares shall have a cumulative dividend of six percent (6%) per
annum, payable on a fiscal quarterly basis, which shall be paid in cash, or at
the option of a holder of Series D Preferred Stock, by the issuance of shares
of the Company's common stock, par value $0.10 per share (the "Common Stock")
based on the thirty (30) days average closing bid price of the Common Stock
immediately prior to the dividend date. Each Share shall be immediately
convertible into ten (10) shares of Common Stock subject to adjustment. The
closing of Phase I of the Private Placement will occur on or before April 30,
1998 (the "Phase I Closing") and the closing of Phase II of the Private
Placement will occur on or before June 30, 1998 (the "Phase II Closing");
provided, however that ESL will be given an opportunity to review the Company's
achievement of the business and financial milestones set forth on Exhibit "E"
attached hereto, before proceeding with each subsequent Phase of the Private
Placement. The Series D Preferred Stock Holders will agree that so long as the
Company remains certified as an Historically Underutilized Business ("HUB"),
they will not convert their Series D Preferred Stock in such a manner as to
cause the Company to lose its HUB status.
<PAGE> 2
The Company shall grant the holders of the Shares, the holders of the
Common Stock issued as dividends on the Shares and the holders of the Common
Stock issued upon conversion of the Shares, one (1) demand registration right,
beginning immediately after the closing of each Phase of the Private Placement
contemplated herein and "piggyback" registration rights beginning on the date
of Closing of each Phase of the Private Placement. The terms of these
registration rights shall be as set forth in a Registration Rights Agreement
(herein so called) substantially in the form attached hereto as Exhibit "A".
(b) The commissions to which ESL shall be entitled for such placement
shall be as follows: (i) a sum equal to seven percent (7%) of the total
proceeds resulting from the placement of the Shares; and (ii) shares of Series
D Preferred Stock with value equal to five percent (5%) of the total proceeds
resulting from the placement of the Shares (the "Placement Agent's Shares").
ESL shall also be paid in cash (i) a sum equal to three percent (3%) of the
total proceeds resulting from the placement of the Shares as a non-accountable
expense allowance and (ii) an amount equal to the legal fees of ESL's counsel
not to exceed Ten Thousand and No/100 Dollars ($10,000.00). ESL will be paid
the commissions and the non-accountable expense allowance simultaneously with
the closing of each Phase in which they are earned. ESL will be paid an amount
equal to the legal fees of ESL's counsel simultaneously with the Phase I
Closing.
(c) In addition, the Company agrees to sell to ESL, for an aggregate
price of $100.00, a five (5) year option ("ESL Purchase Option") to purchase up
to Two Hundred Thirty Five Thousand Eight Hundred Fifty (235,850) shares of
Common Stock ("ESL Option Shares") at a price of $1.59 per Option Share
exercisable for a period of five (5) years commencing one (1) year after the
Phase II Closing or June 30, 1999, whichever is earlier, as follows: ESL shall
be entitled to purchase for Fifty Dollars ($50.00) an option to purchase up to
One Hundred Seventy Nine Thousand Three Hundred Forty (179,340) ESL Option
Shares immediately upon the occurrence of the Phase I Closing; and ESL shall be
entitled to purchase for Fifty Dollars ($50.00) an option to purchase up to
Fifty Six Thousand Five Hundred Ten (56,510) ESL Option Shares immediately upon
the occurrence of the Phase II Closing. The holders of ESL Option Shares and
the Placement Agent's Shares will have registration rights as set forth in a
Registration Rights Agreement (herein so called) substantially in the form
attached hereto as Exhibit "B".
23. Appointment of Placement Agent. ESL's appointment by the Company as
Placement Agent shall commence upon the date of the execution of this
Agreement, and shall continue until and through July 31, 1998, unless (i) the
Shares shall be completely sold prior to that date, (ii) the offering has been
terminated by written agreement between ESL and the Company, or (iii) this
Agreement shall be terminated at a prior date as provided herein.
<PAGE> 3
24. Release of Placement Agent. ESL's commitment to serve as Placement Agent on
behalf of the Company is made subject to the release of ESL: (i) in the event
of war involving the United States of America, (ii) in the event of any
material adverse change in the business, property or financial condition of the
Company as reasonably determined by ESL, (iii) in the event of any action, suit
or proceeding at law or in equity against the Company, or by any Federal, State
or other commission, board or agency wherein any unfavorable decision would
materially affect the business, property, financial condition or income of the
Company (as reasonably determined by ESL), (iv) in the event of a breach by the
Company of any material covenant, representation or warranty contained in this
Agreement or (v) in the event of adverse market conditions (of which ESL shall
be the sole judge).
25. Representations and Warranties of the Company.
The Company represents and warrants to ESL as follows:
(a) The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Utah with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification unless the failure to so register or qualify
would not have a material adverse effect on the financial condition of the
Company.
(b) The Company has registered shares of its Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is in full compliance with all reporting requirements of the Exchange
Act, and the Common Stock is quoted on the NASDAQ Over-the-Counter Bulletin
Board (trading symbol: MSIA).
(c) The Company has furnished ESL with copies of the Company's
Business Plan dated July 3, 1997, its most recent Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission (the "Commission") and all
Forms 8-K and 10-QSB filed thereafter, together with any amendments thereto, if
any (collectively, the "Disclosure Documents"). Immediately prior to the
closing of each Phase there will be no other capital stock issued and
outstanding, nor will there be outstanding any rights to acquire, commitments
to issue or securities convertible into capital stock other than as stated in
the Disclosure Documents and except for those rights to demand Three Hundred
Thousand (300,000) shares of Common Stock that is the subject of a dispute
involving Argus Management, Inc. ("Argus"). The Disclosure Documents at the
time of their filing did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made not
misleading.
(d) Except as shown on the Company's most recent audited financial
statements dated March 31, 1997, prepared by Salazar Accountants, the Company's
independent certified public accountants, the Company will have no other
indebtedness outstanding immediately prior to the closing of each Phase except
as incurred in the ordinary course of business or disclosed in writing prior to
the closing of each Phase to ESL and approved by ESL or as contained in the
Disclosure Documents.
<PAGE> 4
(e) Upon issuance at the closing of each Phase in accordance with this
Agreement, the Shares will be duly and validly authorized and issued, fully
paid and nonassessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. The shares of Common Stock, when issued and
delivered upon conversion of the Series D Preferred Stock, the ESL Option
Shares and the Placement Agent's Shares, will be duly and validly authorized
and issued, fully paid and nonassessable, free from all encumbrances and
restrictions other than restrictions on transfer imposed by applicable
securities laws and/or this Agreement, and will not subject the holders thereof
to personal liability by reason of being such holders.
(f) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally, and the Company has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
(g) The execution and delivery of this Agreement, the issuance of the
Shares, the shares of Common Stock issuable upon conversion of the Series D
Preferred Stock, the ESL Option Shares, and the Placement Agent's Shares and
the consummation of the transactions contemplated by the Investor Subscription
Agreement(s) (herein so called) by the Company, will not conflict with or
result in a breach of or a default under any of the terms or provisions of, the
Company's certificate of incorporation or By-laws, or of any material provision
of any indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets is bound, any material provision of any law, statute,
rule, regulation, or any existing applicable decree, judgment or order by any
court, federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company, or any of its
properties or assets and will not result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to the terms of any agreement or instrument
to which any of them is a party or by which any of them may be bound or to
which any of their property or any of them is subject.
(h) No authorization, approval, filing with or consent of any
governmental body is required for the issuance and sale of the Shares, except
for filings pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the "Act") or any state blue sky filings.
(i) Except as previously disclosed in writing to ESL and except as
stated in the Disclosure Documents, there is no action, suit or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending or threatened against or affecting the Company, or any of its
properties, which would reasonably be anticipated to result in any material
adverse change in the condition (financial or otherwise) or in the earnings,
business affairs, business prospects, properties or assets of the Company.
(j) Subsequent to the dates as of which information is given in the
Disclosure
<PAGE> 5
Documents, except as contemplated herein, the Company has not incurred any
material liabilities or material obligations, direct or contingent, or entered
into any material transactions not in the ordinary course of business, and
there has not been any change in its capitalization or any material adverse
change in its condition (financial or otherwise) net worth, results of
operations or prospects, except as otherwise previously disclosed to ESL.
(k) The Company has conducted, is conducting and will conduct its
business so as to comply in all material respects with all applicable statutes
and regulations, and the Company is not charged with and, to the knowledge of
the Company, is not under investigation with respect to any violation of any
statutes or regulations nor is it the subject of any pending or threatened
adverse proceedings by any regulatory authority having jurisdiction over its
business or operations.
(l) Except as set forth in the Disclosure Documents, the Company has
good and marketable title to all properties and assets described therein as
owned by it, free and clear of all liens, charges, encumbrances, or
restrictions.
(m) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon.
(n) The Company has no knowledge of any tax deficiency that might be
asserted against it that might materially and adversely affect its business or
properties.
(o) The Company maintains insurance of the types and in amounts
generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies and businesses, including, but not
limited to, insurance covering all real and personal property owned or leased
by the Company against theft, damage, destruction, acts of vandalism, products
liability and all other risks customarily insured against, all of which
insurance is in full force and effect.
(p) No labor disturbance by the employees of the Company exists or is
imminent that could reasonably be expected to have a material adverse effect on
the conduct of the business, operations, financial condition, or income of the
Company.
(q) Neither the Company nor any employee or agent of the Company has
made any payment of funds of the Company or received or retained any funds in
violation of law other than payment of potentially usurious interest and as
stated in the Disclosure Documents.
(r) Subject in part to the truth and accuracy of the subscriber's
representations set forth in the Investor Subscription Agreement, the offer,
sale and issuance of the Shares are exempt from registration requirements of
the 1933 Act, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that will cause the loss of such
exemption.
(s) The Company has no patents, trademarks, service marks, copyrights,
or licenses other than commercially available software licenses. After
reasonable investigation, the Company is not aware that any of its executive
officers is obligated under any contract (including
<PAGE> 6
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative agency
that would interfere with the use of his or her best efforts to promote the
interest of the Company or that would conflict with the Company's business as
proposed to be conducted.
(t) Except for agreements explicitly contemplated hereby or set forth
in the Disclosure Documents, there are no agreements between the Company and
any of its officers, directors, affiliates or any affiliate thereof, other than
employment agreements between the Company and its officers and directors.
(u) As of the date of the Phase I Closing and at such time as the
Phase II Closing, no representation or warranty of the Company contained in
this Section 4, and no statement contained in any exhibit, schedule,
certificate, list, summary or other disclosure document provided or to be
provided to ESL pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact which is
necessary in order to make statements contained therein not misleading.
The representations, warranties and covenants of the Company contained in this
Agreement shall inure to the benefit of each subscriber to the Private
Placement and such subscribers shall constitute identified third-party
beneficiaries under this Agreement. No termination, modification, or waiver of
the representations, warranties and covenants of the Company contained in this
Agreement shall be permitted in any manner adversely affecting their interests
without their prior written consent. The representations and warranties of the
Company contained in this Agreement shall survive the Phase I Closing and Phase
II Closing.
26. Affirmative Covenants of the Company.
(a) The Company will use its best efforts to: (i) list shares of its
Common Stock on The NASDAQ SmallCap Market or a national securities exchange
(such as AMEX or NYSE) and, (ii) at a minimum, to maintain such listing for a
period of five (5) years from the time of such listing;
(b) The financial statements of the Company shall be audited by a "Big
Six" or such other independent public accounting firm as ESL may consent to.
Further, the Company shall not effect a change in its accounting firm to other
than a "Big Six" firm for a period of two (2) years following the Closing.
(c) The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the Private Placement,
including but not limited to, the cost of preparing, printing and delivering
all placement and selling documents, including but not limited to the Placement
Agreement, Investor Subscription Agreement, Registration Rights Agreement,
Placement Agent's Option Agreement and blue sky memorandum and stock
certificates; blue sky fees, filing fees, legal fees and disbursements of
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of two (2) sets of bound closing volumes
for ESL and its counsel; the cost of three (3) tombstone advertisements, at
least one (1) of which shall be in a national business newspaper, one (1) of
<PAGE> 7
which shall be in a major Texas newspaper and one (1) shall be in a publication
chosen by ESL; an amount equal to the legal fees of ESL's counsel, not to
exceed Ten Thousand Dollars ($10,000.00) and the cost of five (5) lucite
tombstones for ESL and its counsel (collectively, the "Company Expenses"). If
the Private Placement is not completed because the Company prevents it or
because of a breach by the Company of any covenants, representations or
warranties contained herein, the Company will continue to be liable to ESL for
ESL's expenses and disbursements, but the Company's liability for such expenses
and disbursements shall be limited to Ten Thousand and No/100 Dollars
($10,000.00).
(d) The Company will, and will cause its subsidiaries, if any, to do
the following: (i) maintain and preserve its and their respective businesses;
(ii) conduct its and their respective business, taken together as a group, in
an orderly, efficient and customary manner; and (iii) keep and maintain all of
its and their respective properties in good working order and condition.
(e) The Company will deliver to ESL for a period of three (3) years
from the Phase II Closing or June 30, 1998, whichever is earlier:
(i) within forty-five (45) days after the close of each
calendar month, except with respect to the last month of each fiscal
year, a copy of its consolidated balance sheet as of the close of such
month and its profit and loss statement and surplus reconciliation for
that month, all prepared in accordance with generally accepted
accounting principles consistently applied, and certified as being
fairly presented in all material respects by the Company's President
or its Chief Financial Officer;
(ii) within forty-five (45) days after the close of each
calendar month, a copy of the internal accounting reports prepared by
the Company for its officers and/or directors;
(iii) at any time within the period from thirty (30) days
prior to and until thirty (30) days after the start of any fiscal
year, financial projections of the Company and its subsidiaries, if
any, for such fiscal year prepared in reasonable detail, which
financial projections shall be presented to the Company's Board of
Directors for their approval at their regular meeting first following
the preparation of such projections;
(iv) promptly upon the filing thereof, all reports and
statements filed with the Commission (or any governmental authority
succeeding to any of its functions) or with any securities exchange;
and
(v) such other information and data with respect to the
Company or any of its subsidiaries, if any, as from time to time may
be reasonably requested by ESL (including, without limitation, such
other information as the Company shall have supplied to any of its
security holders in their capacity as such) to the extent the Company
possesses such information or can acquire it without unreasonable
effort or expense.
(f) The Company will continue to pay the premiums and keep in force
One Million and No/100 Dollars ($1,000,000.00) of "key man" life insurance on
the life of Jose Chavez. Such "key man" life insurance will be kept in force
for a minimum period of either three (3) years
<PAGE> 8
from the Phase II Closing or the term of the employment agreement between the
Company and Jose Chavez, whichever is longer.
(g) For a period of three (3) years from the Closing, the Company, at
its expense, shall, upon request by ESL from time to time, provide ESL with
copies of the Company's daily transfer sheets.
(h) The Company and its President shall call a meeting of the Board of
Directors at such times as may be necessary but at least once every fiscal
quarter. In addition, the Company will allow one (1) designated representative
of ESL to receive timely notice of, attend and make comments at all meetings of
its Board of Directors. (Such designated representative shall also be sent all
standard communications and notifications from the Company to the members of
its Board of Directors concerning annual and special meetings in the same
fashion and on the same basis, including with respect to timing, as he would if
he were a member of the Board of Directors.) Further, for a period of five (5)
years from the Phase I Closing the holders of the Series D Preferred Stock
shall have the right to designate one (1) member of the Board of Directors and
the Company shall cause such designee to be elected to the Company's Board of
Directors.
(i) The Company will cause the Board of Directors to maintain a
Compensation Committee, which shall be comprised of three (3) members, of which
one (1) member shall be the designated representative of the holders of the
Series D Preferred Stock. The Compensation Committee shall have authority with
respect to the matters set forth in clauses (i) and (ii) of paragraph (m) of
this Section 5.
(j) The Company will cause the Board of Directors to maintain an Audit
Committee, which shall be comprised of three (3) members, of which one (1)
member shall be the designated representative of the holders of the Series D
Preferred Stock.
(k) The management of the Company shall prepare and deliver to each
member of the Board of Directors (including ESL's designee) monthly reports
highlighting business developments and activities, with those persons having
assigned responsibilities reporting on operations and activities in their areas
of responsibility.
(l) The Company will promptly send to ESL and each subscriber to the
Private Placement, in no event later than ninety (90) days following each
meeting (unless ESL and such subscriber shall waive such right in writing)
copies of the complete minutes of each meeting of its Board of Directors,
executive and similar committees thereof.
(m) Without in any way limiting the generality of matters which may be
appropriate for consideration or action by the Board of Directors, prior to
taking action with respect to any of the following items, the Board of
Directors or, in the case of clauses (i) and (ii), the Compensation Committee
thereof, must approve the following actions:
(i) Changes in officers and their compensation, including,
without limitation, all significant employee benefits other than
health care and similar insurance plans;
<PAGE> 9
(ii) All incentive programs (and revisions thereto) for
employees such as stock option plans, equity plans, bonus plans, etc.;
(iii) Company budgets, which shall be submitted within the
period from thirty (30) days prior to and until thirty (30) days after
the commencement of each fiscal year covering sales, direct costs,
indirect costs, profit targets, capital expenditures, and cash flow;
(iv) Major appropriations in excess of One Hundred Thousand
Dollars ($100,000.00) for any capital items not in the Company budget
for the fiscal year;
(v) Major new facilities and their location, excluding any
small leased facilities in the local area so long as their annual
rental obligation does not exceed One Hundred Thousand Dollars
($100,000.00) per year;
(vi) All matters pertaining to mergers and acquisitions,
without exception;
(vii) Purchase contracts of a major nature;
(viii) Sales contracts of an unusual size or complexity;
(ix) Sale or purchase of patents, rights, or any royalty or
license agreements, other than in the ordinary course of business;
(x) Warranty and distribution policies of an unusual nature
which are not representative of industry patterns;
(xi) Financing programs and policies applicable to public
offerings, private placements, and long-term debt;
(xii) Treasury policies;
(xiii) Selection of auditors and corporate counsel;
(xiv) Banking resolutions;
(xv) Cash policies such as pension funds, investments, etc.,
other than normal bank deposits;
(xvi) All matters of litigation in which the Company is to be
the plaintiff or other initiating party; and
(xvii) Conflict of interest matters.
(n) The management of the Company shall notify and consult with the
Board of Directors (by written, telegraphic or telephonic notice) prior to
taking any initial action with respect to any of the following matters (it
being understood that the Board of Directors will
<PAGE> 10
determine the propriety of further or alternative action with respect to such
matters at their next meeting):
(i) All matters of personnel policies as they apply to any
labor agreements or organization of unions;
(ii) All matters of public policy, wherein the Company is to
be involved in any community, political, or religious cause or
program;
(iii) All matters of litigation that involve or may involve
the Company as a defendant;
(iv) Audit programs and policies; and
(v) Any operating decisions which in the judgment of the
President and Chief Executive Officer should be presented to the
Board.
(o) The Company shall file a Certificate of Designation with the
Secretary of State of Utah setting forth the rights and preferences of the
Series D Preferred Stock substantially in the form attached hereto as Exhibit
"C".
(p) In the event that the Company enters into a transaction whereby
the existing Shareholders of the Company (including the holders of the Series D
Preferred Stock) are diluted by ten percent (10%) or more, or in the event that
an officer or director of the Company makes an offer to purchase ten percent
(10%) or more of the outstanding equity of the Company, the holders of the
Series D Preferred Stock shall have the preferential right, but not the
obligation, to purchase an equivalent amount of shares from the Company or the
offering officer or director, as the case may be, on equivalent terms.
(q) For a period of five (5) years from the Phase II Closing, or June
30, 1998, whichever is earlier, if the Company proposes to sell, dispose of or
otherwise transfer any Common Stock ("Securities")(each a "Disposing
Stockholder'), such Disposing Stockholder shall refrain from effecting such
transaction unless, prior to the consummation thereof, each holder of Series D
Preferred Stock (a "Stockholder") shall have been afforded the opportunity to
join in such sale on a pro rata basis, as hereinafter provided.
Prior to consummation of any proposed sale, disposition or
transfer of the Securities as described above, the Disposing Stockholder shall
cause the person or entity that proposes to acquire such shares (the "Proposed
Purchaser") to offer (the "Purchase Offer") in writing to each holder of Series
D Preferred Stock to purchase shares of Common Stock and Preferred Stock, as
the case may be, owned by such other Stockholder, such that the number of
shares of Common Stock or Preferred Stock, as the case may be, so offered to be
purchased from such Stockholder shall be equal to the product obtained by
multiplying the total number of shares of such Common Stock and Preferred
Stock, as the case may be, then owned by such Stockholder, computed on a fully
diluted basis, by a fraction, the numerator of which is the aggregate number of
shares of Common Stock and Preferred Stock, as the case may be, proposed to be
purchased by the Proposed Purchaser from all Stockholders (including all
Disposing
<PAGE> 11
Stockholders) and the denominator of which is the aggregate number of shares of
Common Stock and Preferred Stock, as the case may be, then outstanding,
computed on a fully diluted basis. Such purchase shall be made at the highest
price per share of Common Stock and on such other terms and conditions as the
Proposed Purchaser has offered to purchase shares of Common Stock or Preferred
Stock, as the case may be, to be sold by the Disposing Stockholder; the price
per unconverted share of Preferred Stock shall be its liquidation value. Each
Stockholder shall have twenty (20) days from the date of receipt of the
Purchase Offer in which to accept such Purchase Offer, and the closing of such
purchase shall occur within thirty (30) days after such acceptance or at such
other time as such Stockholder and the Proposed Purchaser may agree. The number
of shares of Common Stock and Preferred Stock, as the case may be, to be sold
to the Proposed Purchaser by the Disposing Stockholder or Stockholders shall be
reduced by the aggregate number of shares of Common Stock or Preferred Stock,
as the case may be, purchased by the Proposed Purchaser from the other
Stockholders pursuant to the acceptance by them of Purchase Offers in
accordance with the provisions of this subparagraph. In the event that a sale
or other transfer, subject to this subsection 5.(q) is to be made to a Proposed
Purchaser who is not a Stockholder, the Disposing Stockholder shall notify the
Proposed Purchaser that the sale or other transfer is subject to this Section
5.(q) and shall ensure that no sale or other transfer is consummated without
the Proposed Purchaser first complying with this Section 5.(q). It shall be the
responsibility of each Disposing Stockholder to determine whether any
transaction to which it is a party is subject to this Section 5.(q).
27. Negative Covenants of the Company.
(a) During the completion of the Private Placement and for a period of
eighteen (18) months following the Phase II Closing or June 30, 1998, whichever
is earlier, the Company will not, without the prior written consent of ESL,
grant any options to purchase securities of the Company to employees that are
exercisable at a price below the greater of the Private Placement Price or the
fair market value of the securities on the date of grant.
(b) For a period of three (3) years following the Closing, the Company
will not, without the prior written consent of ESL, offer or sell any of its
securities in reliance on Regulation S of the Securities Act of 1933, as
amended.
(c) The Company will not use any proceeds from the Private Placement
to repay any indebtedness of the Company, including but not limited to any
indebtedness to current executive officers or principal shareholders of the
Company except for indebtedness currently existing in favor of Bank One, N.A.
and other vendors as more fully set forth in Exhibit "F" attached hereto and
made a part hereof.
(d) The Company shall not, without the prior unanimous written consent
of ESL and the holders of the Series D Preferred Stock, create any new class or
series of stock having a dividend and/or liquidation preference senior to the
Series D Preferred Stock or increase the size of the authorized number of
shares of Series D Preferred Stock.
(e) The Company will not issue press releases without first providing
ESL a copy of the proposed release for ESL's approval prior to its
dissemination for a period of eighteen (18) months from the Phase I Closing, or
April 30, 1998, whichever is earlier.
<PAGE> 12
(f) For a period of thirteen (13) months from the Phase I Closing or
April 30, 1998, whichever is earlier, the compensation of the executive
officers of the Company shall be subject to the approval of ESL, which approval
shall not unreasonably be withheld.
(g) The Company will not sell any of its securities at a price lower
than the Private Placement Price for a period of twenty-four (24) months from
Phase II Closing or June 30, 1998, whichever is earlier, without the prior
written consent of ESL.
28. Representations and Warranties of ESL.
ESL represents, warrants and covenants to the Company as follows:
(a) ESL has been duly incorporated and is validly existing and in good
standing under the laws of Nevis, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as currently
conducted.
(b) This Agreement has been duly authorized, validly executed and
delivered on behalf of ESL and is a valid and binding agreement of ESL
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally, and ESL has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and
to perform its obligations hereunder and thereunder.
29. Indemnification. The Company hereby agrees to indemnify and hold
harmless ESL and its officers, directors, shareholders, employees, agents and
attorneys against any and all losses, claims, damages, liabilities and expenses
incurred by each such person insofar as such losses, claims, demands,
liabilities and expenses arise out of or are based upon, in whole or in part,
(i) any untrue statement or alleged untrue statement of a material fact made by
the Company in this Agreement or any exhibit, schedule, certificate, list,
summary or Disclosure Document provided to ESL, (ii) any omission or alleged
omission of a material fact with respect to the Company in this Agreement or
any exhibit, schedule, certificate, list, summary or Disclosure Document
provided to ESL, or (iii) any breach of any representation, warranty or
agreement made by the Company in this Agreement or any exhibit, schedule,
certificate, list, summary or Disclosure Document provided to ESL. This
indemnity shall also cover all costs and expenses accrued by an indemnified
Party in connection with defending or investigating any such claims or
liabilities, including any costs or expenses incurred, to which any such
indemnified party may become subject under the Securities' Act, or under any
other statute, at common law or otherwise.
30. Mergers and Acquisitions.
(a) The Company agrees that ESL will be paid a finder's fee of seven
percent (7%) of the first $1,000,000.00, six percent (6%) of the second
$1,000,000.00 and five percent (5%) of the next $5,000,000.00 ranging in
$1,000,000.00 increments down to two and one-half percent (2-1/2%) of the
excess (with a reduction by one-half percent (0.5%) for each $1,000,000.00
thereafter up to $9,000,000.00), if any, over $9,000,000.00 of the
consideration (stock or other property to be valued at the fair market value of
same on the date of receipt by the Company) involved in any transaction
(including mergers, acquisitions, joint ventures and any other
<PAGE> 13
business for the Company introduced by ESL) consummated by the Company, in
which ESL introduced the other party to the Company during a period ending five
(5) years from April 30, 1998 (an "Introduced Transaction") and with whom the
Company did not have a prior relationship; and
(b) Any such finder's fee due to ESL will be paid in cash at the
closing of the particular Introduced Transaction for which the finder's fee is
due. This finder's fee is not in addition to the finder's fee contained in that
certain placement agreement dated November 11, 1997, or that certain placement
agreement dated January 31, 1998, both by and between the Company and ESL, but
is merely a restatement thereof.
31. Conditions Precedent to Closing.
(a) ESL shall have received an opinion addressed to Equity Services,
Ltd. and each subscriber to the Private Placement, from Vial, Hamilton, Koch &
Knox, L.L.P., substantially in the form attached hereto as Exhibit "D".
(b) ESL shall have received a fully executed Placement Agent's Option
Certificate from the Company for the options earned upon the closing of each
Phase of the Private Placement before the closing of each Phase in which they
are earned.
(c) ESL shall have received a fully executed Registration Rights
Agreement with respect to the Placement Agent's Shares and the ESL Option
Shares from the Company for the Placement Agent's Shares and the ESL Option
Shares earned upon the closing of each Phase of the Private Placement.
(d) ESL shall have received a certified copy of the resolution of the
Board of Directors of the Company authorizing the transactions contemplated
herein.
(e) The Company shall have filed with the Office of the Secretary of
State of Utah a Certificate of Designation acceptable to ESL, substantially in
the form attached hereto as Exhibit "C".
(f) The Company shall have amended its Bylaws in such a manner as to
make its Bylaws consistent with the terms and conditions of this Agreement and
the transactions contemplated herein, a copy of which will have been provided
to ESL prior to the Phase I Closing.
(g) Prior to the closing of each of Phase(s) I and II, ESL shall have
received a certificate representing the Placement Agent's Shares earned for
each such Phase.
(h) Prior to the closing of each of Phase(s) I and II ESL shall have
received a fully executed subscription agreement from each subscriber to Phase
I and Phase II, respectively.
(i) Prior to the closing of each Phase of the Private Placement, ESL
shall have had the opportunity to review the business and financial milestones
of the Company set forth on Exhibit "E" and to ascertain the Company's
compliance therewith (in ESL's sole judgment). In
<PAGE> 14
the event that ESL determines that the Company is not in compliance with said
milestones, ESL will be released from its obligation to complete subsequent
Phases of the Private Placement.
32. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective upon its execution by ESL.
(b) This Agreement shall terminate on the earlier of July 31, 1998, or
the consummation of the Private Placement, provided the representations and
warranties of the Company contained herein shall survive any termination
hereof.
33. Parties. This Agreement shall inure to the benefit of and be binding
upon ESL, the Company and ESL's and its respective successors and assigns.
Except as provided for in Section 4 hereinabove, nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person or
corporation, other than the parties hereto and their respective successors and
assigns and the controlling persons, officers, directors, employees, agents and
attorneys of the parties, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and said controlling persons, officers,
directors, employees, agents and attorneys, and for the benefit of no other
person or corporation.
34. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied (followed by registered mail or overnight courier), initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 13.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
with a copy (which shall not constitute notice) to:
Vial, Hamilton, Koch & Knox, L.L.P.
1717 Main Street, Suite 4400
Dallas, Texas 75201-7388
Telephone: (214) 712-4400
Telecopier: (214) 712-4402
<PAGE> 15
if to ESL:
Equity Services, Ltd
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Ms. Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; when received after being deposited in the regular mail;
the next business day after being deposited with an overnight courier, if
deposited with a nationally recognized, overnight courier service; when receipt
is acknowledged, if telecopied (subject to follow up as discussed above).
35. Attorneys' Fees. If any action is necessary to enforce or interpret
the terms of this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs, in addition to any other relief to which
he is or may be entitled. This provision shall be construed as applicable to
the entire agreement.
36. Remedies. Each party hereto, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation to ESL for any loss
incurred by reason of a breach by the Company of the provisions of this
Agreement and the Company hereby agrees to waive (to the extent permitted by
law) the defense in any action for specific performance that a remedy of law
would be adequate.
37. Time of Essence. Time shall be of the essence of this Agreement.
38. Construction. This Agreement shall be construed in accordance with the
internal laws of the State of Texas.
39. Execution. This Agreement may be executed in any number of
counterparts each of which taken together shall constitute one and the same
instrument.
<PAGE> 16
40. Joint Drafting of Agreement. This Agreement has been prepared by the
joint efforts of the respective counsel for each of the parties hereto and
shall not be construed against a particular party simply by reason of such
party being the drafting party.
41. Entire Agreement. This Agreement, together with those certain Investor
Subscription Agreements by and between the Company and each subscriber to the
Private Placement, constitute the entire understanding by and between the
parties with respect to the subject matter hereof. This Agreement can only be
modified, including any extension of the offering period, by a written
agreement duly signed by persons authorized to sign agreements on behalf of the
respective parties.
42. Facsimile Signature. This Agreement may be executed by facsimile copy
and any such facsimile copy bearing the facsimile signature of any party hereto
shall have full legal force and effect and shall be binding against the party
having executed this Agreement by facsimile.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 17
If the foregoing is in accordance with your understanding, please sign
below and return to us a counterpart hereof, and upon your acceptance hereof,
this letter and the acceptance hereof shall constitute a binding agreement
between ESL and the Company.
Very truly yours,
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
-----------------------------
JOSE CHAVEZ,
President
Accepted and agreed to as of the
date first above written by:
EQUITY SERVICES, LTD.
By: /s/ Lynn Turnquest
-----------------------------
LYNN TURNQUEST, Director
<PAGE> 18
EXHIBIT "A"
Registration Rights Agreement - Subscribers to Private Placement
EXHIBIT "B"
Registration Rights Agreement - ESL
EXHIBIT "C"
Form of Certificate of Designation
EXHIBIT "D"
Form of Opinion
EXHIBIT "E"
Business and Financial Milestones
of Company
EXHIBIT "F"
Schedule of Indebtedness of the Company
of Company
10.12 Placement Agreement dated April 30, 1998 by and between Equity Services,
LTD and MSHI.
<PAGE> 19
d
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the day of June, 1998 by and between MICRO-MEDIA SOLUTIONS,
INC., a Utah corporation (the "Company") and EQUITY SERVICES, LTD., a Nevis
company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) Three Thousand Seventy Five
(3,075) shares of the Company's Series D 6% cumulative convertible preferred
stock, stated value $10.60 per share (the "Series D Preferred Stock") pursuant
to that certain placement agreement by and between the Company and the
Shareholder dated April 21, 1998 (the "Placement Agreement"), as amended by
that certain first amendment to the Placement Agreement by and between the
Company and the Shareholder dated May 30, 1998 (the "First Amendment") and (ii)
an option to purchase up to Sixty One Thousand Five Hundred Ten (61,510) shares
of the Company's common stock, par value $0.10 per share (the "Common Stock")
pursuant to that certain Placement Agent's Option Certificate dated June , 1998
(the "Option Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series D Preferred Stock and the Option Shares
(collectively, the "Shares"); and the Shareholder desires to obtain such
registration rights, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
25. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE> 20
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) any shares of Common Stock issuable upon
conversion of any of the Series D Preferred Stock, (ii) the Option
Shares, (iii) any shares of Common Stock issued by way of a stock
split, reorganization, merger or consolidation, and (iv) any Common
Stock issued as a dividend on the Shares. For purposes of this
Agreement, any Registrable Stock shall cease to be Registrable Stock
when (v) a registration statement covering such Registrable Stock has
been declared effective and such Registrable Stock has been disposed
of pursuant to such effective registration statement, (w) such
Registrable Stock is sold pursuant to Rule 144 (or any similar
provision then in force) under the 1933 Act, (x) such Registrable
Stock is eligible to be sold pursuant to Rule 144(k) under the 1933
Act, (y) such Registrable Stock has been otherwise transferred, no
stop transfer order affecting such stock is in effect and the Company
has delivered new certificates or other evidences of ownership for
such Registrable Stock not bearing any legend indicating that such
shares have not been registered under the 1933 Act, or (z) such
Registrable Stock is sold by a person in a transaction in which the
rights under the provisions of this Agreement are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of
1933, as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder,
or the spouse or children (or a trust exclusively for the benefit of
the spouse and/or children) of a Holder, or, in the case of a Holder
that is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated
organization or association or other entity, including any
governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules, regulations or
forms promulgated by the Commission shall include rules, regulations
and forms succeeding to the functions thereof, whether or not bearing
the same designation.
26. Demand Registration.
(a) Commencing immediately upon the date of Closing (as
defined in the Placement Agreement), any Requesting Holders may make a
written request to the Company (specifying that it is being made
pursuant to this Section 2) that the Company file a registration
statement under the 1933 Act (or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act) covering
the registration of Registrable Stock. In such event, the Company
shall (x) within ten (10) days thereafter notify in writing all other
Holders of Registrable Stock of such request, and (y) use its best
efforts to cause to
<PAGE> 21
be registered under the 1933 Act all Registrable Stock that the
Requesting Holders and such other Holders have, within forty-five (45)
days after the Company has given such notice, requested be registered.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved
by the Company, which approval shall not be unreasonably withheld;
provided, that all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
provided further, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to
the contrary, if the managing underwriter of an underwritten offering
of the Registrable Stock requested to be registered pursuant to this
Section 2 advises the Requesting Holders in writing that in its
opinion marketing factors require a limitation of the number of shares
to be underwritten, the Requesting Holders shall so advise all Holders
of Registrable Stock that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Stock that may be
included in such underwritten offering shall be allocated among all
such Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of filing
the registration statement; provided, that in the event of such
limitation of the number of shares of Registrable Stock to be
underwritten, the Holders shall be entitled to an additional demand
registration pursuant to this Section 2. If any Holder of Registrable
Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so withdrawn
shall also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration
pursuant to this Section 2 during the period starting with the
fourteenth (14th) day immediately preceding the date of an anticipated
filing by the Company of, and ending on a date ninety (90) days
following the effective date of, a registration statement pertaining
to a public offering of securities for the
<PAGE> 22
account of the Company; provided, that the Company shall actively
employ in good faith all reasonable efforts to cause such registration
statement to become effective; and provided further, that the
Company's estimate of the date of filing such registration statement
shall be made in good faith.
(e) The Company shall be obligated to effect and pay for a
total of only two (2) registrations pursuant to this Section 2, unless
increased pursuant to Section 2.(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i)
it has been declared effective by the Commission, (ii) if it is a
shelf registration, it has remained effective for the period set forth
in Section 3.(b), (iii) the offering of Registrable Stock pursuant to
such registration is not subject to any stop order, injunction or
other order or requirement of the Commission (other than any such
action prompted by any act or omission of the Holders), and (iv) no
limitation of the number of shares of Registrable Stock to be
underwritten has been required pursuant to Section 2.(c) hereof.
27. Obligations of the Company. Whenever required under Section 2 to
use its best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in
accordance with the intended method of distribution thereof, and use
its best efforts to cause such registration statement to become
effective as promptly as practicable thereafter; provided that before
filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to one (1) counsel
selected by the Requesting Holders copies of all such documents
proposed to be filed, and (ii) notify each such Holder of any stop
order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove
it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which
will terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such
registration statement as filed and each
<PAGE> 23
amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as
such Holder may reasonably request in order to facilitate the
disposition of the Registrable Stock owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned
by such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3.(d)
hereof, (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if such
time is after the period referred to in Section 3.(b)), of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances being made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Inspector, as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement.
Records or other information which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid
or correct a misstatement or omission in the registration statement,
or (ii) the release of such Records or other information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each selling Holder shall, upon learning that disclosure
of such Records or other information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at
<PAGE> 24
the Company's expense, to undertake appropriate action to prevent
disclosure of the Records or other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect to such shares of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and if
such Registrable Stock is not being sold through underwriters, then to
the Requesting Holders as to such matters as such underwriters or the
Requesting Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter dated such
date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver such
letter to such Holder, then to the Company (i) stating that they are
independent certified public accountants within the meaning of the
1933 Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, and (ii)
covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date
of such letter) with respect to the registration in respect of which
such letter is being given as the Requesting Holders may reasonably
request and as would be customary in such a transaction;
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of
at least twelve (12) months beginning with the first full month after
the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933
Act; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on The Nasdaq Small Cap Market and/or any other
securities exchange on which similar securities issued by the Company
are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
<PAGE> 25
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3.(f) hereof,
such Holder will forthwith discontinue disposition of Registrable Stock
pursuant to the registration statement covering such Registrable Stock until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.(f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 3.(f) hereof.
28. Incidental Registration. Commencing immediately after the date of
Closing (as defined in the Investor Agreement), if the Company determines that
it shall file a registration statement under the 1933 Act (other than a
registration statement on a Form S-4 or S-8 or filed in connection with an
exchange offer or an offering of securities solely to the Company's existing
stockholders) on any form that would also permit the registration of the
Registrable Stock and such filing is to be on its behalf and/or on behalf of
selling holders of its securities for the general registration of its common
stock to be sold for cash, at each such time the Company shall promptly give
each Holder written notice of such determination setting forth the date on
which the Company proposes to file such registration statement, which date
shall be no earlier than thirty (30) days from the date of such notice, and
advising each Holder of its right to have Registrable Stock included in such
registration. Upon the written request of any Holder received by the Company no
later than twenty (20) days after the date of the Company's notice, the Company
shall use its best efforts to cause to be registered under the 1933 Act all of
the Registrable Stock that each such Holder has so requested to be registered.
If, in the written opinion of the managing underwriter or underwriters (or, in
the case of a non-underwritten offering, in the written opinion of the
placement agent, or if there is none, the Company), the total amount of such
securities to be so registered, including such Registrable Stock, will exceed
the maximum amount of the Company's securities which can be marketed (i) at a
price reasonably related to the then current market value of such securities,
or (ii) without otherwise materially and adversely affecting the entire
offering, then the amount of Registrable Stock to be offered for the accounts
of Holders shall be reduced pro rata to the extent necessary to reduce the
total amount of securities to be included in such offering to the recommended
amount; provided, that if securities are being offered for the account of other
Persons as well as the Company, such reduction shall not represent a greater
fraction of the number of securities intended to be offered by Holders than the
fraction of similar reductions imposed on such other Persons other than the
Company over the amount of securities they intended to offer.
29. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each
Holder whose Registrable Stock is included in a registration statement
agrees not to effect any public sale or distribution of the issue
being registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale
<PAGE> 26
pursuant to Rule 144 under the 1933 Act, during the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the
effective date of such registration statement (except as part of the
registration), if and to the extent requested by the Company in the
case of a nonunderwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of
an underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others.
The Company agrees (i) not to effect any public sale or distribution
of any securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of any registration statement
in which Holders are participating (except as part of such
registration), if and to the extent requested by the Holders in the
case of a non-underwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of
an underwritten public offering; and (ii) that any agreement entered
into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any securities convertible into or
exchangeable or exercisable for such securities (other than pursuant
to an effective registration statement) shall contain a provision
under which holders of such securities agree not to effect any public
sale or distribution of any such securities during the periods
described in (i) above, in each case including a sale pursuant to Rule
144 under the 1933 Act.
30. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and
pay the underwriting commissions and discounts applicable to the Registrable
Stock offered for their account in connection with any registrations, filings
and qualifications made pursuant to this Agreement.
31. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such
Holder (within the meaning of the 1933 Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement therein (in
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading. The Company
will also indemnify any underwriters of the Registrable Stock, their
officers and directors and each Person who controls such underwriters
(within the meaning of the 1933 Act) to the same extent as provided
above with respect to the indemnification of the selling Holders.
<PAGE> 27
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission
of a material fact required to be stated in the registration
statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus or preliminary prospectus, in the
light of the circumstances under which they were made) not misleading,
to the extent, but only to the extent, that such untrue statement or
omission is contained in any information with respect to such Holder
so furnished in writing by such Holder. Notwithstanding the foregoing,
the liability of each such Holder under this Section 7.(b) shall be
limited to an amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises
out of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonably satisfactory to such indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to the indemnifying
party shall itself not create liability except to the extent of any
injury caused thereby. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation. If the indemnifying party IS not entitled
to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one (1) counsel
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect
to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or
counsels.
(d) Contribution. If for any reason the indemnity provided
for in this Section 7 is unavailable to, or is insufficient to hold
harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
<PAGE> 28
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or
indemnified parties; and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 7.(c), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7.
32. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
33. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it
has complied with such requirements.
34. Transfer of Registration Rights. The registration rights of any
Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with
<PAGE> 29
applicable securities laws; provided further, that the transferring Holder
shall give the Company written notice at or prior to the time of such transfer
stating the name and address of the transferee and identifying the securities
with respect to which the rights under this Agreement are being transferred;
provided further, that such transferee shall agree in writing, in form and
substance satisfactory to the Company, to be bound as a Holder by the
provisions of this Agreement; and provided further, that such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by such transferee is restricted under the 1933
Act. Except as set forth in this Section 10, no transfer of Registrable Stock
shall cause such Registrable Stock to lose such status.
35. Mergers, Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Stock" shall be deemed to be
references to the securities which the Holders would be entitled to receive in
exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation which may be
immediately sold to the public without registration under the 1933 Act, or
(iii) securities of the acquiring corporation which the acquiring corporation
has agreed to register within ninety (90) days of completion of the transaction
for resale to the public pursuant to the 1933 Act.
36. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this
Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by
it of the provisions of this Agreement and hereby agrees to waive (to
the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of the Holders of at least a
majority of the Registrable Stock then outstanding affected by such
amendment, modification, supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors
and assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any Person other than the
parties hereto or their
<PAGE> 30
respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas
applicable to contracts made and to be performed wholly within that
state, without regard to the conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person
or by telecopy or by overnight courier guaranteeing no later than
second business day delivery, directed to (i) the Company at the
address set forth below its signature hereof or (ii) a Holder at the
address of the Administrator set forth below its signature hereof. Any
party may change its address for notice by giving ten (10) days
advance written notice to the other parties. Every notice or other
communication hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, or on the date
actually received, if sent by telecopy or overnight courier service,
with receipt acknowledged.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full force
and effect notwithstanding any breach or purported breach of, or
relating to, the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
(m) Attorneys Fees. If any action is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs,
<PAGE> 31
in addition to any other relief to which he is or may be entitled.
This provision shall be construed as applicable to the entire
agreement.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
MICRO-MEDIA SOLUTIONS, INC.
By:/s/ Jose Chavez
-----------------------------------
Name: JOSE CHAVEZ
Title: President
501 Waller
Austin, Texas 78702
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
EQUITY SERVICES, LTD.
By:/s/Lynn Turnquest
Name: LYNN TURNQUEST
Title: Director
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 33
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the day of April, 1998 by and between MICRO-MEDIA SOLUTIONS,
INC., a Utah corporation (the "Company") and EQUITY SERVICES, LTD., a Nevis
company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) Nine Thousand Four Hundred
Sixty Seven (9,467) shares of the Company's Series D 6% cumulative convertible
preferred stock, stated value $10.60 per share (the "Series D Preferred Stock")
pursuant to that certain placement agreement by and between the Company and the
Shareholder dated April ____, 1998 (the "Placement Agreement") and (ii) an
option to purchase up to One Hundred Eighty Nine Thousand Three Hundred Forty
(189,340) shares of the Company's common stock, par value $0.10 per share (the
"Common Stock") pursuant to that certain Placement Agent's Option Certificate
dated April __, 1998 (the "Option Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series D Preferred Stock and the Option Shares
(collectively, the "Shares"); and the Shareholder desires to obtain such
registration rights, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
37. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) any shares of Common Stock issuable upon
conversion of any of the Series D Preferred Stock, (ii) the Option
Shares, (iii) any shares of Common Stock issued by way of a stock
split, reorganization, merger or consolidation, and (iv) any Common
Stock issued as a dividend on the Shares. For purposes of this
Agreement, any Registrable Stock shall cease
<PAGE> 34
to be Registrable Stock when (v) a registration statement covering
such Registrable Stock has been declared effective and such
Registrable Stock has been disposed of pursuant to such effective
registration statement, (w) such Registrable Stock is sold pursuant to
Rule 144 (or any similar provision then in force) under the 1933 Act,
(x) such Registrable Stock is eligible to be sold pursuant to Rule
144(k) under the 1933 Act, (y) such Registrable Stock has been
otherwise transferred, no stop transfer order affecting such stock is
in effect and the Company has delivered new certificates or other
evidences of ownership for such Registrable Stock not bearing any
legend indicating that such shares have not been registered under the
1933 Act, or (z) such Registrable Stock is sold by a person in a
transaction in which the rights under the provisions of this Agreement
are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of
1933, as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder,
or the spouse or children (or a trust exclusively for the benefit of
the spouse and/or children) of a Holder, or, in the case of a Holder
that is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated
organization or association or other entity, including any
governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules, regulations or
forms promulgated by the Commission shall include rules, regulations
and forms succeeding to the functions thereof, whether or not bearing
the same designation.
38. Demand Registration.
(a) Commencing immediately upon the date of Closing (as
defined in the Placement Agreement), any Requesting Holders may make a
written request to the Company (specifying that it is being made
pursuant to this Section 2) that the Company file a registration
statement under the 1933 Act (or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act) covering
the registration of Registrable Stock. In such event, the Company
shall (x) within ten (10) days thereafter notify in writing all other
Holders of Registrable Stock of such request, and (y) use its best
efforts to cause to be registered under the 1933 Act all Registrable
Stock that the Requesting Holders and such other Holders have, within
forty-five (45) days after the Company has given such notice,
requested be registered.
<PAGE> 35
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved
by the Company, which approval shall not be unreasonably withheld;
provided, that all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
provided further, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to
the contrary, if the managing underwriter of an underwritten offering
of the Registrable Stock requested to be registered pursuant to this
Section 2 advises the Requesting Holders in writing that in its
opinion marketing factors require a limitation of the number of shares
to be underwritten, the Requesting Holders shall so advise all Holders
of Registrable Stock that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Stock that may be
included in such underwritten offering shall be allocated among all
such Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of filing
the registration statement; provided, that in the event of such
limitation of the number of shares of Registrable Stock to be
underwritten, the Holders shall be entitled to an additional demand
registration pursuant to this Section 2. If any Holder of Registrable
Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so withdrawn
shall also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration
pursuant to this Section 2 during the period starting with the
fourteenth (14th) day immediately preceding the date of an anticipated
filing by the Company of, and ending on a date ninety (90) days
following the effective date of, a registration statement pertaining
to a public offering of securities for the account of the Company;
provided, that the Company shall actively employ in good faith all
reasonable efforts to cause such registration statement to become
effective; and provided further, that the Company's estimate of the
date of filing such registration statement shall be made in good
faith.
<PAGE> 36
(e) The Company shall be obligated to effect and pay for a
total of only two (2) registrations pursuant to this Section 2, unless
increased pursuant to Section 2.(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i)
it has been declared effective by the Commission, (ii) if it is a
shelf registration, it has remained effective for the period set forth
in Section 3.(b), (iii) the offering of Registrable Stock pursuant to
such registration is not subject to any stop order, injunction or
other order or requirement of the Commission (other than any such
action prompted by any act or omission of the Holders), and (iv) no
limitation of the number of shares of Registrable Stock to be
underwritten has been required pursuant to Section 2.(c) hereof.
39. Obligations of the Company. Whenever required under Section 2 to
use its best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in
accordance with the intended method of distribution thereof, and use
its best efforts to cause such registration statement to become
effective as promptly as practicable thereafter; provided that before
filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to one (1) counsel
selected by the Requesting Holders copies of all such documents
proposed to be filed, and (ii) notify each such Holder of any stop
order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove
it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which
will terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such
registration statement as filed and each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable
Stock owned by such Holder;
<PAGE> 37
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned
by such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3.(d)
hereof, (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if such
time is after the period referred to in Section 3.(b)), of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances being made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Inspector, as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement.
Records or other information which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid
or correct a misstatement or omission in the registration statement,
or (ii) the release of such Records or other information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each selling Holder shall, upon learning that disclosure
of such Records or other information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Records or other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration
<PAGE> 38
or, if such Registrable Stock is not being sold through underwriters,
on the date that the registration statement with respect to such
shares of Registrable Stock becomes effective, (1) a signed opinion,
dated such date, of the legal counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any,
and if such Registrable Stock is not being sold through underwriters,
then to the Requesting Holders as to such matters as such underwriters
or the Requesting Holders, as the case may be, may reasonably request
and as would be customary in such a transaction; and (2) a letter
dated such date, from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver such
letter to such Holder, then to the Company (i) stating that they are
independent certified public accountants within the meaning of the
1933 Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, and (ii)
covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date
of such letter) with respect to the registration in respect of which
such letter is being given as the Requesting Holders may reasonably
request and as would be customary in such a transaction;
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of
at least twelve (12) months beginning with the first full month after
the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933
Act; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on The Nasdaq Small Cap Market and/or any other
securities exchange on which similar securities issued by the Company
are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3.(f) hereof,
such Holder will forthwith discontinue disposition of Registrable Stock
pursuant to the registration statement covering such Registrable Stock until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.(f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such
<PAGE> 39
Holder's possession, of the prospectus covering such Registrable Stock current
at the time of receipt of such notice. In the event the Company shall give any
such notice, the Company shall extend the period during which such registration
statement shall be maintained effective pursuant to this Agreement (including
the period referred to in Section 3.(b)) by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 3.(f) hereof to and including the date when each selling Holder of
Registrable Stock covered by such registration statement shall have received
the copies of the supplemented or amended prospectus contemplated by Section
3.(f) hereof.
40. Incidental Registration. Commencing immediately after the date of
Closing (as defined in the Investor Agreement), if the Company determines that
it shall file a registration statement under the 1933 Act (other than a
registration statement on a Form S-4 or S-8 or filed in connection with an
exchange offer or an offering of securities solely to the Company's existing
stockholders) on any form that would also permit the registration of the
Registrable Stock and such filing is to be on its behalf and/or on behalf of
selling holders of its securities for the general registration of its common
stock to be sold for cash, at each such time the Company shall promptly give
each Holder written notice of such determination setting forth the date on
which the Company proposes to file such registration statement, which date
shall be no earlier than thirty (30) days from the date of such notice, and
advising each Holder of its right to have Registrable Stock included in such
registration. Upon the written request of any Holder received by the Company no
later than twenty (20) days after the date of the Company's notice, the Company
shall use its best efforts to cause to be registered under the 1933 Act all of
the Registrable Stock that each such Holder has so requested to be registered.
If, in the written opinion of the managing underwriter or underwriters (or, in
the case of a non-underwritten offering, in the written opinion of the
placement agent, or if there is none, the Company), the total amount of such
securities to be so registered, including such Registrable Stock, will exceed
the maximum amount of the Company's securities which can be marketed (i) at a
price reasonably related to the then current market value of such securities,
or (ii) without otherwise materially and adversely affecting the entire
offering, then the amount of Registrable Stock to be offered for the accounts
of Holders shall be reduced pro rata to the extent necessary to reduce the
total amount of securities to be included in such offering to the recommended
amount; provided, that if securities are being offered for the account of other
Persons as well as the Company, such reduction shall not represent a greater
fraction of the number of securities intended to be offered by Holders than the
fraction of similar reductions imposed on such other Persons other than the
Company over the amount of securities they intended to offer.
41. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each
Holder whose Registrable Stock is included in a registration statement
agrees not to effect any public sale or distribution of the issue
being registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the 1933 Act,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of such registration statement
(except as part of the registration), if and to the extent requested
by the Company in the case of a nonunderwritten public offering or if
and to the extent requested by the managing underwriter or
underwriters in the case of an underwritten public offering.
<PAGE> 40
(b) Restrictions on Public Sale by the Company and Others.
The Company agrees (i) not to effect any public sale or distribution
of any securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of any registration statement
in which Holders are participating (except as part of such
registration), if and to the extent requested by the Holders in the
case of a non-underwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of
an underwritten public offering; and (ii) that any agreement entered
into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any securities convertible into or
exchangeable or exercisable for such securities (other than pursuant
to an effective registration statement) shall contain a provision
under which holders of such securities agree not to effect any public
sale or distribution of any such securities during the periods
described in (i) above, in each case including a sale pursuant to Rule
144 under the 1933 Act.
42. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and
pay the underwriting commissions and discounts applicable to the Registrable
Stock offered for their account in connection with any registrations, filings
and qualifications made pursuant to this Agreement.
43. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such
Holder (within the meaning of the 1933 Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement therein (in
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading. The Company
will also indemnify any underwriters of the Registrable Stock, their
officers and directors and each Person who controls such underwriters
(within the meaning of the 1933 Act) to the same extent as provided
above with respect to the indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims,
<PAGE> 41
damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission
of a material fact required to be stated in the registration
statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus or preliminary prospectus, in the
light of the circumstances under which they were made) not misleading,
to the extent, but only to the extent, that such untrue statement or
omission is contained in any information with respect to such Holder
so furnished in writing by such Holder. Notwithstanding the foregoing,
the liability of each such Holder under this Section 7.(b) shall be
limited to an amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises
out of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonably satisfactory to such indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to the indemnifying
party shall itself not create liability except to the extent of any
injury caused thereby. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation. If the indemnifying party IS not entitled
to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one (1) counsel
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect
to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or
counsels.
(d) Contribution. If for any reason the indemnity provided
for in this Section 7 is unavailable to, or is insufficient to hold
harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to,
among other
<PAGE> 42
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified
parties; and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7.(c), any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7.
44. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
45. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it
has complied with such requirements.
46. Transfer of Registration Rights. The registration rights of any
Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer
<PAGE> 43
the further disposition of such securities by such transferee is restricted
under the 1933 Act. Except as set forth in this Section 10, no transfer of
Registrable Stock shall cause such Registrable Stock to lose such status.
47. Mergers, Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Stock" shall be deemed to be
references to the securities which the Holders would be entitled to receive in
exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation which may be
immediately sold to the public without registration under the 1933 Act, or
(iii) securities of the acquiring corporation which the acquiring corporation
has agreed to register within ninety (90) days of completion of the transaction
for resale to the public pursuant to the 1933 Act.
48. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this
Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by
it of the provisions of this Agreement and hereby agrees to waive (to
the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of the Holders of at least a
majority of the Registrable Stock then outstanding affected by such
amendment, modification, supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors
and assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any Person other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas
applicable to contracts made and to be performed wholly within that
state, without regard to the conflict of law rules thereof.
<PAGE> 44
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person
or by telecopy or by overnight courier guaranteeing no later than
second business day delivery, directed to (i) the Company at the
address set forth below its signature hereof or (ii) a Holder at the
address of the Administrator set forth below its signature hereof. Any
party may change its address for notice by giving ten (10) days
advance written notice to the other parties. Every notice or other
communication hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, or on the date
actually received, if sent by telecopy or overnight courier service,
with receipt acknowledged.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full force
and effect notwithstanding any breach or purported breach of, or
relating to, the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
(m) Attorneys Fees. If any action is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs, in addition to any
other relief to which he is or may be entitled. This provision shall
be construed as applicable to the entire agreement.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
MICRO-MEDIA SOLUTIONS, INC.
By:/s/ Jose Chavez
-----------------------------------
Name: JOSE CHAVEZ
Title: President
501 Waller
Austin, Texas 78702
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
EQUITY SERVICES, LTD.
By:/s/Lynn Turnquest
Name: LYNN TURNQUEST
Title: Director
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 46
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION
UNDER THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing June 30, 1999 and before the Expiration Date (as defined
below) One Hundred Eighty Nine Thousand Three Hundred Forty (189,340) shares
(the "Option Shares") of fully paid and non-assessable shares of the common
stock, $0.10 par value per share (the "Common Stock"), of MICRO-MEDIA
SOLUTIONS, INC., a Utah corporation (the "Company") at a purchase price of One
and 59/100 Dollars ($1.59) per Option Share (the "Strike Price"), in lawful
money of the United States of America by bank or certified check, subject to
adjustment as hereinafter provided.
n. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
o. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the Holder,
commencing on June 30, 1999, and before the Expiration Date (as defined below)
by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Option Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Option Shares being purchased. Within ten (10) days of the Company's
receipt of the Exercise Notice accompanied by the consideration for the Option
Shares being purchased, the Company shall issue and deliver to the Holder a
certificate representing the Option Shares being purchased. In the case of
exercise for less than all of the Option Shares represented by this Option
Certificate, the
<PAGE> 47
Company shall cancel this Option Certificate upon the surrender hereof and
shall execute and deliver a new Option Certificate for the remaining balance of
such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on June 30, 2004 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
p. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this Option
shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition may be effectuated
without registration under the Act."
q. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
r. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Option Certificate and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Option Certificate, the Company shall execute and deliver in lieu thereof, a
new Option Certificate representing an equal number of Option Shares
exercisable thereunder.
<PAGE> 48
s. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock and
the Strike Price per Option Share pursuant to this Option shall be subject to
adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall be
issued upon the exercise of this Option, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed to
be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
t. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise
of this Option will have registration rights beginning on the date of execution
of this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
u. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Act.
<PAGE> 49
c. The Holder (i) is not a citizen or resident of the United States of
America, (ii) is not an entity organized under any laws of any state of the
United States of America and (iii) does not have any offices in the United
States of America.
v. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall bear
all expenses incurred in connection with each registration pursuant to this
Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and pay
the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 50
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by, and
construed in accordance with, the laws of the State of Texas, without reference
to its principles regarding conflicts of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 51
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Joses Chavez
-----------------------------------
JOSE CHAVEZ, President
ATTEST: /s/ Mithell C. Kettrick
-----------------------------------
Name: MITCHELL C. KETTRICK
Title: Secretary
Date: April , 1998
---
<PAGE> 52
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to shares of
Common Stock covered hereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date:
----------------- -----------------------------------
Name:
Address:
Signature
-----------------------------------
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between Holder and the Company
<PAGE> 53
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION
UNDER THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing June 30, 1999 and before the Expiration Date (as defined
below) Sixty-One Thousand Five Hundred Ten (61,510) shares (the "Option
Shares") of fully paid and non-assessable shares of the common stock, $0.10 par
value per share (the "Common Stock"), of MICRO-MEDIA SOLUTIONS, INC., a Utah
corporation (the "Company") at a purchase price of One and 59/100 Dollars
($1.59) per Option Share (the "Strike Price"), in lawful money of the United
States of America by bank or certified check, subject to adjustment as
hereinafter provided.
w. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
x. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the Holder,
commencing on June 30, 1999, and before the Expiration Date (as defined below)
by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Option Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Option Shares being purchased. Within ten (10) days of the Company's
receipt of the Exercise Notice accompanied by the consideration for the Option
Shares being purchased, the Company shall issue and deliver to the Holder a
certificate representing the Option Shares being purchased. In the case of
exercise for less than all of the Option Shares represented by this Option
Certificate, the
<PAGE> 54
Company shall cancel this Option Certificate upon the surrender hereof and
shall execute and deliver a new Option Certificate for the remaining balance of
such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on June 30, 2004 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
y. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this Option
shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition may be effectuated
without registration under the Act."
z. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
aa. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Option Certificate and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Option Certificate, the Company shall execute and deliver in lieu thereof, a
new Option Certificate representing an equal number of Option Shares
exercisable thereunder.
<PAGE> 55
bb. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock and
the Strike Price per Option Share pursuant to this Option shall be subject to
adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall be
issued upon the exercise of this Option, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed to
be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
cc. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise
of this Option will have registration rights beginning on the date of execution
of this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
dd. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Act.
c. The Holder (i) is not a citizen or resident of the United States of
America, (ii) is not an entity organized under any laws of any state of the
United States of America and (iii) does not have any offices in the United
States of America.
<PAGE> 56
ee. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall bear
all expenses incurred in connection with each registration pursuant to this
Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and pay
the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 57
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 999-4268
Telecopier: (214) 999-4667
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by, and
construed in accordance with, the laws of the State of Texas, without reference
to its principles regarding conflicts of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 58
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
-----------------------------------
JOSE CHAVEZ, President
ATTEST:/s/ Mitchell C. Kettrick
-----------------------------------
Name: MITCHELL C. KETTRICK
Title: Secretary
Date: June , 1998
----
<PAGE> 59
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to shares of
Common Stock covered hereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date:
----------------- -----------------------------------
Name:
Address:
Signature
-----------------------------------
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between Holder and the Company
<PAGE> 60
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION
UNDER THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing June 30, 1999 and before the Expiration Date (as defined
below) Five Thousand (5,000) shares (the "Option Shares") of fully paid and
non-assessable shares of the common stock, $0.10 par value per share (the
"Common Stock"), of MICRO-MEDIA SOLUTIONS, INC., a Utah corporation (the
"Company") at a purchase price of One and 59/100 Dollars ($1.59) per Option
Share (the "Strike Price"), in lawful money of the United States of America by
bank or certified check, subject to adjustment as hereinafter provided.
ff. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
gg. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the Holder,
commencing on June 30, 1999, and before the Expiration Date (as defined below)
by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Option Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Option Shares being purchased. Within ten (10) days of the Company's
receipt of the Exercise Notice accompanied by the consideration for the Option
Shares being purchased, the Company shall issue and deliver to the Holder a
certificate representing the Option Shares being purchased. In the case of
exercise for less than all of the Option Shares represented by this Option
Certificate, the
<PAGE> 61
Company shall cancel this Option Certificate upon the surrender hereof and
shall execute and deliver a new Option Certificate for the remaining balance of
such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on June 30, 2004 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
hh. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this Option
shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition may be effectuated
without registration under the Act."
ii. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
jj. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Option Certificate and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Option Certificate, the Company shall execute and deliver in lieu thereof, a
new Option Certificate representing an equal number of Option Shares
exercisable thereunder.
<PAGE> 62
kk. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock and
the Strike Price per Option Share pursuant to this Option shall be subject to
adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall be
issued upon the exercise of this Option, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed to
be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
ll. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise
of this Option will have registration rights beginning on the date of execution
of this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
mm. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Act.
c. The Holder (i) is not a citizen or resident of the United States of
America, (ii) is not an entity organized under any laws of any state of the
United States of America and (iii) does not have any offices in the United
States of America.
<PAGE> 63
nn. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall bear
all expenses incurred in connection with each registration pursuant to this
Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and pay
the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 64
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 999-4268
Telecopier: (214) 999-4667
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by, and
construed in accordance with, the laws of the State of Texas, without reference
to its principles regarding conflicts of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 65
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
----------------------------------------
JOSE CHAVEZ, President
ATTEST: /s/ Mitchell C. Kettrick
-------------------------------------
Name: MITCHELL C. KETTRICK
Title: Secretary
Date: June , 1998
-----
<PAGE> 66
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to shares of
Common Stock covered hereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date:
----------------- -----------------------------------
Name:
Address:
Signature
-----------------------------------
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between Holder and the Company
<PAGE> 67
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION
UNDER THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing June 30, 1999 and before the Expiration Date (as defined
below) One Hundred Eighty Nine Thousand Three Hundred Forty (189,340) shares
(the "Option Shares") of fully paid and non-assessable shares of the common
stock, $0.10 par value per share (the "Common Stock"), of MICRO-MEDIA
SOLUTIONS, INC., a Utah corporation (the "Company") at a purchase price of One
and 59/100 Dollars ($1.59) per Option Share (the "Strike Price"), in lawful
money of the United States of America by bank or certified check, subject to
adjustment as hereinafter provided.
oo. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
pp. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the Holder,
commencing on June 30, 1999, and before the Expiration Date (as defined below)
by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Option Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Option Shares being purchased. Within ten (10) days of the Company's
receipt of the Exercise Notice accompanied by the consideration for the Option
Shares being purchased, the Company shall issue and deliver to the Holder a
certificate representing the Option Shares being purchased. In the case of
exercise for less than all of the Option Shares represented by this Option
Certificate, the
<PAGE> 68
Company shall cancel this Option Certificate upon the surrender hereof and
shall execute and deliver a new Option Certificate for the remaining balance of
such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on June 30, 2004 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
qq. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this Option
shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition may be effectuated
without registration under the Act."
rr. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
ss. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Option Certificate and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Option Certificate, the Company shall execute and deliver in lieu thereof, a
new Option Certificate representing an equal number of Option Shares
exercisable thereunder.
<PAGE> 69
tt. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock and
the Strike Price per Option Share pursuant to this Option shall be subject to
adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall be
issued upon the exercise of this Option, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed to
be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
uu. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise
of this Option will have registration rights beginning on the date of execution
of this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
vv. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Act.
<PAGE> 70
c. The Holder (i) is not a citizen or resident of the United States of
America, (ii) is not an entity organized under any laws of any state of the
United States of America and (iii) does not have any offices in the United
States of America.
ww. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall bear
all expenses incurred in connection with each registration pursuant to this
Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and pay
the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 71
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by, and
construed in accordance with, the laws of the State of Texas, without reference
to its principles regarding conflicts of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 72
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
----------------------------------------
JOSE CHAVEZ, President
ATTEST: /s/ Mitchell C. Kettrick
------------------------------------
Name: MITCHELL C. KETTRICK
Title: Secretary
Date: April 30, 1998
<PAGE> 73
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to shares of
Common Stock covered hereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date:
----------------- -----------------------------------
Name:
Address:
Signature
-----------------------------------
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between Holder and the Company
<PAGE> 1
EXHIBIT 10.13
FIRST AMENDMENT TO
PLACEMENT AGREEMENT
OF
MICRO-MEDIA SOLUTIONS, INC.
This First Amendment to Placement Agreement of Micro-Media Solutions,
Inc. (the "First Amendment") is executed to be effective as of the 30th day of
May, 1998, by and between Micro-Media Solutions, Inc., a Utah corporation (the
"Company") and Equity Services, Ltd., a Nevis company ("ESL").
Introductory Provisions
The following provisions are a part of and form the basis for this
First Amendment:
A. The Company and ESL previously entered into a placement agreement
dated April 21, 1998 (the "Placement Agreement") whereby ESL agreed to
privately place Two Hundred Thirty Five Thousand Eight Hundred Forty Nine
(235,849) shares (the "Shares") of the Company's Series D 6% cumulative
convertible non-voting preferred stock (the "Series D Preferred Stock").
B. As of the date of this First Amendment, ESL has received, in
response to its solicitations of interest, indications of interest in
purchasing more shares of Series D Preferred Stock than are currently available
for purchase.
C. ESL wishes to privately place additional shares of Series D
Preferred Stock on behalf of the Company and the Company wishes to issue and
sell additional shares of Series D Preferred Stock to accomodate the additional
interest in the Series D Preferred Stock
D. The Company and ESL desire to amend the Placement Agreement to
reflect the agreement of the parties set forth above along with various other
agreements of the parties.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1 of the Placement Agreement is deleted in its entirety and
the following is substituted therefor:
"1. Description of Securities and Offering.
(a) ESL has agreed to privately place Two Hundred Fifty Thousand Eight
Hundred Forty Nine (250,849) shares (the "Shares") of the Company's Series D 6%
cumulative convertible non-voting preferred stock (the "Series D Preferred
Stock")(the "Private Placement") at a price of Ten and 60/100 Dollars ($10.60)
per Share (the "Private Placement Price"). Subject to the terms and
<PAGE> 2
conditions herein, the placement of the Shares is to occur as follows: (i) One
Hundred Eighty Nine Thousand Three Hundred Forty (189,340) Shares will be
placed on or before April 30, 1998 ("Phase I") and (ii) Sixty One Thousand Five
Hundred Nine (61,509) Shares will be placed on or about June 30, 1998 ("Phase
II"). The Shares shall have a cumulative dividend of six percent (6%) per
annum, payable on a fiscal quarterly basis, which shall be paid in cash, or at
the option of a holder of Series D Preferred Stock, by the issuance of shares
of the Company's common stock, par value $0.10 per share (the "Common Stock")
based on the thirty (30) days average closing bid price of the Common Stock
immediately prior to the dividend date. Each Share shall be immediately
convertible into ten (10) shares of Common Stock subject to adjustment. The
closing of Phase I of the Private Placement will occur on or before April 30,
1998 (the "Phase I Closing") and the closing of Phase II of the Private
Placement will occur on or about June 30, 1998 (the "Phase II Closing");
provided, however that ESL will be given an opportunity to review the Company's
achievement of the business and financial milestones set forth on Exhibit "E"
attached hereto, before proceeding with each subsequent Phase of the Private
Placement. The Series D Preferred Stock Holders will agree that so long as the
Company remains certified as an Historically Underutilized Business ("HUB"),
they will not convert their Series D Preferred Stock in such a manner as to
cause the Company to lose its HUB status.
The Company shall grant the holders of the Shares, the holders of the
Common Stock issued as dividends on the Shares and the holders of the Common
Stock issued upon conversion of the Shares, one (1) demand registration right,
beginning immediately after the closing of each Phase of the Private Placement
contemplated herein and "piggyback" registration rights beginning on the date
of Closing of each Phase of the Private Placement. The terms of these
registration rights shall be as set forth in a Registration Rights Agreement
(herein so called) substantially in the form attached hereto as Exhibit "A".
(b) The commissions to which ESL shall be entitled for such placement
shall be as follows: (i) a sum equal to seven percent (7%) of the total
proceeds resulting from the placement of the Shares; and (ii) shares of Series
D Preferred Stock with value equal to five percent (5%) of the total proceeds
resulting from the placement of the Shares (the "Placement Agent's Shares").
ESL shall also be paid in cash (i) a sum equal to three percent (3%) of the
total proceeds resulting from the placement of the Shares as a non-accountable
expense allowance and (ii) an amount equal to the legal fees of ESL's counsel
not to exceed Ten Thousand and No/100 Dollars ($10,000.00). ESL will be paid
the commissions and the non-accountable expense allowance simultaneously with
the closing of each Phase in which they are earned. ESL will be paid an amount
equal to the legal fees of ESL's counsel simultaneously with the Phase I
Closing.
(c) In addition, the Company agrees to sell to ESL, for an aggregate
price of $100.00, a five (5) year option ("ESL Purchase Option") to purchase up
to Two Hundred Fifty Thousand Eight Hundred Fifty (250,850) shares of Common
Stock ("ESL Option Shares") at a price of $1.59 per Option Share exercisable
for a period of five (5) years commencing one (1) year after the Phase II
Closing or June 30, 1999, whichever is earlier, as follows: ESL shall be
entitled to purchase for Fifty Dollars ($50.00) an option to purchase up to One
Hundred Eighty Nine Thousand Three Hundred Forty (189,340) ESL Option Shares
immediately upon the occurrence of the Phase I Closing; and ESL shall be
entitled to purchase for Fifty Dollars ($50.00) an option to purchase up to
Sixty One Thousand Five Hundred Ten (61,510) ESL Option Shares immediately upon
the occurrence of the Phase II Closing. The holders of ESL Option Shares and
the Placement Agent's Shares will have
<PAGE> 3
registration rights as set forth in a Registration Rights Agreement (herein so
called) substantially in the form attached hereto as Exhibit "B"."
2. Section 13 of the Placement Agreement is deleted in its entirety
and the following is substituted therefor:
"13. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied (followed by registered mail or overnight courier), initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 13.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
with a copy (which shall not constitute notice) to:
Vial, Hamilton, Koch & Knox, L.L.P.
1717 Main Street, Suite 4400
Dallas, Texas 75201-7388
Telephone: (214) 712-4400
Telecopier: (214) 712-4402
if to ESL:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Ms. Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 999-4268
Telecopier: (214) 999-4667
<PAGE> 4
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; when received after being deposited in the regular mail;
the next business day after being deposited with an overnight courier, if
deposited with a nationally recognized, overnight courier service; when receipt
is acknowledged, if telecopied (subject to follow up as discussed above)."
3. Except as otherwise specified herein, the terms and provisions
hereof shall in no manner impair, limit, restrict or otherwise affect the
representations, warranties, covenants and obligations of the parties hereto as
evidenced by the Placement Agreement (and all Exhibits thereto).
4. Attorneys' Fees. If any action is necessary to enforce or interpret
the terms of this First Amendment, the prevailing party shall be entitled to
reasonable attorneys' fees and costs, in addition to any other relief to which
he is or may be entitled. This provision shall be construed as applicable to
the entire agreement.
5. Remedies. Each party hereto, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this First Amendment. The
Company agrees that monetary damages would not be adequate compensation to ESL
for any loss incurred by reason of a breach by the Company of the provisions of
this First Amendment and the Company hereby agrees to waive (to the extent
permitted by law) the defense in any action for specific performance that a
remedy of law would be adequate.
6. Time of Essence. Time shall be of the essence of this First
Amendment.
7. Construction. This First Amendment shall be construed in accordance
with the internal laws of the State of Texas.
8. Execution. This First Amendment may be executed in any number of
counterparts each of which taken together shall constitute one and the same
instrument.
9. Joint Drafting of First Amendment. This First Amendment has been
prepared by the joint efforts of the respective counsel for each of the parties
hereto and shall not be construed against a particular party simply by reason
of such party being the drafting party.
10. Entire Agreement. This First Amendment and the Placement
Agreement, together with those certain Investor Subscription Agreements by and
between the Company and each subscriber to the Private Placement, constitute
the entire understanding by and between the parties with respect to the subject
matter hereof. This First Amendment can only be modified, including any
extension of the offering period, by a written agreement duly signed by persons
authorized to sign agreements on behalf of the respective parties.
11. Facsimile Signature. This First Amendment may be executed by
facsimile copy and any such facsimile copy bearing the facsimile signature of
any party hereto shall have full legal force and effect and shall be binding
against the party having executed this First Amendment by facsimile.
<PAGE> 5
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
EXECUTED to be effective as of the date first written hereinabove.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
----------------------------
JOSE CHAVEZ,
President
Accepted and agreed to as of the
date first above written by:
EQUITY SERVICES, LTD.
By:/s/ Lynn Turnquest
------------------------------
LYNN TURNQUEST, Director
<PAGE> 6
EXHIBIT "A"
Registration Rights Agreement - Subscribers to Private Placement
EXHIBIT "B"
Registration Rights Agreement - ESL
EXHIBIT "E"
Business and Financial Milestones of the Companyd
<PAGE> 1
EXHIBIT 10.14
PLACEMENT AGREEMENT
OF
MICRO-MEDIA SOLUTIONS, INC.
October 13, 1998
EQUITY SERVICES, LTD.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Gentlemen:
The undersigned, MICRO-MEDIA SOLUTIONS, INC., a Utah corporation (the
"Company"), confirms its agreement with Equity Services, Ltd., a Nevis company
("ESL") as follows:
50. Description of Securities and Offering.
(a) ESL has agreed to privately place up to One Hundred Thousand
(100,000) shares (the "Shares") of the Company's Series E 6% Cumulative
Convertible Preferred Stock (the "Private Placement") at a price of Thirty
Dollars ($30.00) per Share (the "Private Placement Price"). The Shares shall
have a cumulative dividend of six percent (6%), payable on a fiscal quarterly
basis, which shall be paid in cash, or at the option of a holder of Series E
Preferred Stock, by the issuance of shares of Common Stock based on the thirty
(30) day average closing bid price of the Common Stock prior to the dividend
date. Each Share shall be immediately convertible into ten (10) shares of
Common Stock subject to adjustment. The closing of the Private Placement shall
occur on or before November 30, 1998 (the "Closing").
The Company shall grant the holders of the Shares, the holders of the
Common Stock issued as dividends on the Shares and the holders of the Common
Stock issued upon conversion of the Shares, one (1) demand registration right,
beginning immediately after the closing of the Private Placement contemplated
herein (the "Closing") and "piggyback" registration rights beginning on the
date of Closing. The terms of these registration rights shall be as set forth
in a Registration Rights Agreement (herein so called) substantially in the form
attached hereto as Exhibit "A".
(b) The commissions to which ESL shall be entitled for such placement
shall be as follows: (i) a sum equal to seven percent (7%) of the total
proceeds resulting from the placement of the Shares; and (ii) Shares with value
equal to five percent (5%) of the total proceeds resulting
<PAGE> 2
from the placement of the Shares (the "Placement Agent's Shares"). ESL shall
also be paid (i) a sum equal to three percent (3%) of the total proceeds
resulting from the placement of the Shares as a non-accountable expense
allowance and (ii) an amount equal to the legal fees of ESL's counsel not to
exceed Ten Thousand and No/100 Dollars ($10,000.00). ESL will be paid the
commissions, the non-accountable expense allowance and the legal fees of ESL's
counsel simultaneously with the Closing.
(c) In addition, the Company agrees to sell to ESL, for an aggregate
price of $100.00, a three (3) year option ("ESL Purchase Option") to purchase
up to shares of Common Stock in an amount equal to five percent (5%) of the
underlying Common Stock placed herein ("ESL Option Shares") at a price equal to
Four Dollars Fifty Cents ($4.50) per Option Share exercisable for a period of
three (3) years commencing one (1) year after the Closing. The holders of ESL
Option Shares and the Placement Agent's Shares will have registration rights as
set forth in a Registration Rights Agreement (herein so called) substantially
in the form attached hereto as Exhibit "B".
51. Appointment of Placement Agent. ESL's appointment by the Company as
Placement Agent shall commence upon the date of the execution of this
Agreement, and shall continue until and through November 30, 1998 unless (i)
the Shares shall be completely sold prior to that date, (ii) the offering has
been terminated by written agreement between ESL and the Company, or (iii) this
Agreement shall be terminated at a prior date as provided herein.
52. Release of Placement Agent. ESL's commitment to serve as Placement Agent on
behalf of the Company is made subject to the release of ESL: (i) in the event
of war involving the United States of America, (ii) in the event of any
material adverse change in the business, property or financial condition of the
Company as reasonably determined by ESL, (iii) in the event of any action, suit
or proceeding at law or in equity against the Company, or by any Federal, State
or other commission, board or agency wherein any unfavorable decision would
materially affect the business, property, financial condition or income of the
Company (as reasonably determined by ESL), (iv) in the event of a breach by the
Company of any material covenant, representation or warranty contained in this
Agreement or (v) in the event of adverse market conditions (of which ESL shall
be the sole judge).
53. Representations and Warranties of the Company.
The Company represents and warrants to ESL as follows:
(a) The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Utah, with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification unless the failure to so register or qualify
would not have a material adverse effect on the financial condition of the
Company.
<PAGE> 3
(b) The Company has registered shares of its Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is in full compliance with all reporting requirements of the Exchange
Act, and the Common Stock is quoted on the NASDAQ Over-the-Counter Bulletin
Board (trading symbol: MSIA).
(c) The Company has furnished ESL with copies of the Company's
Business Plan dated July 3, 1997, its most recent Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission (the "Commission") and all
Forms 8-K and 10-QSB filed thereafter, if any (collectively, the "Disclosure
Documents"). Except as disclosed in the Company's most recent 10-QSB filing
with the SEC, immediately prior to Closing there will be no other capital stock
issued and outstanding, nor will there be outstanding any rights to acquire,
commitments to issue or securities convertible into capital stock. The
Disclosure Documents at the time of their filing did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made not misleading.
(d) Except as shown on the Company's most recent audited financial
statements dated March 31, 1998, prepared by Brown, Graham & Co., the Company's
independent certified public accountants, the Company will have no other
indebtedness outstanding immediately prior to the Closing except as incurred in
the ordinary course of business or disclosed in writing prior to Closing to
ESL.
(e) Upon issuance at the Closing in accordance with this Agreement,
the Shares will be duly and validly authorized and issued, fully paid and
nonassessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. The shares of Common Stock, when issued and
delivered upon conversion of the Series E Preferred Stock, the ESL Option
Shares and the Placement Agent's Shares, will be duly and validly authorized
and issued, fully paid and nonassessable, free from all encumbrances and
restrictions other than restrictions on transfer imposed by applicable
securities laws and/or this Agreement, and will not subject the holders thereof
to personal liability by reason of being such holders.
(f) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally, and the Company has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
(g) The execution and delivery of this Agreement, the issuance of the
Shares, the shares of Common Stock issuable upon conversion of the Series E
Preferred Stock, the ESL Option Shares, and the Placement Agent's Shares and
the consummation of the transactions contemplated by the Investor Subscription
Agreement(s) (herein so called) by the Company, will not conflict with or
result in a breach of or a default under any of the terms or provisions of, the
Company's certificate of incorporation or By-laws, or of any material provision
of any indenture, mortgage, deed of trust
<PAGE> 4
or other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets is bound, any material provision of
any law, statute, rule, regulation, or any existing applicable decree, judgment
or order by any court, federal or state regulatory body, administrative agency,
or other governmental body having jurisdiction over the Company, or any of its
properties or assets and will not result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to the terms of any agreement or instrument
to which any of them is a party or by which any of them may be bound or to
which any of their property or any of them is subject.
(h) No authorization, approval, filing with or consent of any
governmental body is required for the issuance and sale of the Shares, except
for filings pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the "Act") or any state blue sky filings.
(i) Except as previously disclosed in writing to ESL and except as
stated in the Disclosure Documents, there is no action, suit or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending or threatened against or affecting the Company, or any of its
properties, which would reasonably be anticipated to result in any material
adverse change in the condition (financial or otherwise) or in the earnings,
business affairs, business prospects, properties or assets of the Company.
(j) Subsequent to the dates as of which information is given in the
Disclosure Documents, except as contemplated herein, the Company has not
incurred any material liabilities or material obligations, direct or
contingent, or entered into any material transactions not in the ordinary
course of business, and there has not been any change in its capitalization or
any material adverse change in its condition (financial or otherwise) net
worth, results of operations or prospects, except as otherwise previously
disclosed to ESL.
(k) The Company has conducted, is conducting and will conduct its
business so as to comply in all material respects with all applicable statutes
and regulations, and the Company is not charged with and, to the knowledge of
the Company, is not under investigation with respect to any violation of any
statutes or regulations nor is it the subject of any pending or threatened
adverse proceedings by any regulatory authority having jurisdiction over its
business or operations.
(l) Except as set forth in the Disclosure Documents, the Company has
good and marketable title to all properties and assets described therein as
owned by it, free and clear of all liens, charges, encumbrances, or
restrictions.
(m) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon.
(n) The Company has no knowledge of any tax deficiency that might be
asserted against it that might materially and adversely affect its business or
properties.
(o) The Company maintains insurance of the types and in amounts
generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies
<PAGE> 5
and businesses, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism, products liability and all other risks
customarily insured against, all of which insurance is in full force and
effect.
(p) No labor disturbance by the employees of the Company exists or is
imminent that could reasonably be expected to have a material adverse effect on
the conduct of the business, operations, financial condition, or income of the
Company.
(q) Neither the Company nor any employee or agent of the Company has
made any payment of funds of the Company or received or retained any funds in
violation of law other than payment of potentially usurious interest as stated
in the Disclosure Documents.
(r) Subject in part to the truth and accuracy of the subscriber's
representations set forth in the Investor Subscription Agreement, the offer,
sale and issuance of the Shares are exempt from registration requirements of
the 1933 Act, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that will cause the loss of such
exemption.
(s) The Company has no patents, trademarks, service marks copyrights
or licenses other than commercially available software licenses. After
reasonable investigation, the Company is not aware that any of its executive
officers is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
the use of his or her best efforts to promote the interest of the Company or
that would conflict with the Company's business as proposed to be conducted.
(t) Except for agreements explicitly contemplated hereby or set forth
in the Disclosure Documents, there are no agreements between the Company and
any of its officers, directors, affiliates or any affiliate thereof.
(u) As of the date of Closing, no representation or warranty of the
Company contained in this Section 4, and no statement contained in any exhibit,
schedule, certificate, list, summary or other disclosure document provided or
to be provided to ESL pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact which is
necessary in order to make statements contained therein not misleading.
The representations, warranties and covenants of the Company contained in this
Agreement shall inure to the benefit of each subscriber to the Private
Placement and such subscribers shall constitute identified third-party
beneficiaries under this Agreement. No termination, modification, or waiver of
the representations, warranties and covenants of the Company contained in this
Agreement shall be permitted in any manner adversely affecting their interests
without their prior written consent. The representations and warranties of the
Company contained in this Agreement shall survive the Closing.
54. Affirmative Covenants of the Company.
<PAGE> 6
(a) Upon completion of the Private Placement and upon meeting the
initial inclusion listing requirements, the Company will use its best efforts
to list shares of its Common Stock on The NASDAQ Small Cap Market or a national
securities exchange (such as AMEX or NYSE) and, at a minimum, to maintain such
listing for a period of five (5) years from the time of such listing;
(b) The financial statements of the Company shall be audited by a "Big
Six" or such other independent public accounting firm as ESL may consent to.
Further, the Company shall not effect a change in its accounting firm to other
than a "Big Six" firm for a period of two (2) years following the Closing. ESL
hereby consents to the engagement of Brown, Graham & Co., as the Company's
independent certified public accountants.
(c) The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the Private Placement,
including but not limited to, the cost of preparing, printing and delivering
all placement and selling documents, including but not limited to the Placement
Agreement, Investor Subscription Agreement, Registration Rights Agreement,
Placement Agent's Option Agreement and blue sky memorandum and stock
certificates; blue sky fees, filing fees, legal fees and disbursements of
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of two (2) sets of bound closing volumes
for ESL and its counsel; the cost of three (3) tombstone advertisements, at
least one (1) of which shall be in a national business newspaper, one (1) of
which shall be in a major Texas newspaper and one (1) shall be in a publication
chosen by ESL; an amount equal to the legal fees of ESL's counsel, not to
exceed Ten Thousand Dollars ($10,000.00) and the cost of five (5) lucite
tombstones for ESL and its counsel (collectively, the "Company Expenses"). If
the Private Placement is not completed because the Company prevents it or
because of a breach by the Company of any covenants, representations or
warranties contained herein, the Company's liability for such expense allowance
shall be limited to Ten Thousand and No/100 Dollars ($10,000.00).
(d) The Company will, and will cause its subsidiaries, if any, to do
the following: (i) maintain and preserve its and their respective businesses;
(ii) conduct its and their respective business, taken together as a group, in
an orderly, efficient and customary manner; and (iii) keep and maintain all of
its and their respective properties in good working order and condition.
(e) The Company will deliver to ESL for a period of three (3) years
from the Closing:
(i) within thirty (30) days after the close of each calendar
month, except with respect to the last month of each fiscal year, a
copy of its consolidated balance sheet as of the close of such month
and its profit and loss statement and surplus reconciliation for that
month, all prepared in accordance with generally accepted accounting
principles consistently applied, and certified as being fairly
presented in all material respects by the Company's President or its
Chief Financial Officer;
(ii) within thirty (30) days after the close of each calendar
month, a copy of the internal accounting reports prepared by the
Company for its officers and/or directors;
<PAGE> 7
(iii) at any time within the period from thirty (30) days
prior to and until thirty (30) days after the start of any fiscal
year, financial projections of the Company and its subsidiaries, if
any, for such fiscal year prepared in reasonable detail, which
financial projections shall be presented to the Company's Board of
Directors for their approval at their regular meeting first following
the preparation of such projections;
(iv) promptly upon the filing thereof, all reports and
statements filed with the Commission (or any governmental authority
succeeding to any of its functions) or with any securities exchange;
and
(v) such other information and data with respect to the
Company or any of its subsidiaries, if any, as from time to time may
be reasonably requested by ESL (including, without limitation, such
other information as the Company shall have supplied to any of its
security holders in their capacity as such) to the extent the Company
possesses such information or can acquire it without unreasonable
effort or expense.
(f) For a period of three (3) years from the Closing, the Company, at
its expense, shall, upon request by ESL from time to time, provide ESL with
copies of the Company's daily transfer sheets.
(g) The Company and its President shall call a meeting of the Board of
Directors at such times as may be necessary but at least once every fiscal
quarter. The Board of Directors shall include at least two (2) non-affiliated
directors to be elected within ninety (90) days of the Closing, which directors
shall not be officers or employees of the Company ("Outside Directors"). In
addition, the Company will allow one (1) designated representative of ESL to
receive timely notice of, attend and make comments at all meetings of its Board
of Directors. (Such designated representative shall also be sent all standard
communications and notifications from the Company to the members of its Board
of Directors concerning annual and special meetings in the same fashion and on
the same basis, including with respect to timing, as he would if he were a
member of the Board of Directors.) Further, for a period of five (5) years from
the Closing the holders of the Series E Preferred Stock shall have the right to
designate one (1) member(s) of the Board of Directors and the Company shall
cause such designee(s) to be elected to the Board of Directors of the Company.
(h) The management of the Company shall prepare and deliver to ESL and
each subscriber to the Private Placement (unless ESL and such subscribers shall
waive such right in writing) monthly reports highlighting business developments
and activities, with those persons having assigned responsibilities reporting
on operations and activities in their areas of responsibility.
(i) The Company will promptly send to ESL and each subscriber to the
Private Placement, in no event later than ninety (90) days following each
meeting (unless ESL and such subscriber shall waive such right in writing)
copies of the complete minutes of each meeting of its Board of Directors,
executive and similar committees thereof.
(j) Without in any way limiting the generality of matters which may be
appropriate for consideration or action by the Board of Directors, prior to
taking action with respect to any of the
<PAGE> 8
following items, the Board of Directors or, in the case of clauses (i) and
(ii), the Compensation Committee thereof, must approve the following actions:
(i) Changes in officers and their compensation, including,
without limitation, all significant employee benefits other than
health care and similar insurance plans;
(ii) All incentive programs (and revisions thereto) for
employees such as stock option plans, equity plans, bonus plans, etc.;
(iii) Company budgets, which shall be submitted within the
period from thirty (30) days prior to and until thirty (30) days after
the commencement of each fiscal year covering sales, direct costs,
indirect costs, profit targets, capital expenditures, and cash flow;
(iv) Major appropriations in excess of One Hundred Thousand
Dollars ($100,000.00) for any capital items not in the Company budget
for the fiscal year;
(v) Major new facilities and their location, excluding any
small leased facilities in the local area so long as their annual
rental obligation does not exceed One Hundred Thousand Dollars
($100,000.00) per year;
(vi) All matters pertaining to mergers and acquisitions,
without exception;
(vii) Purchase contracts of a major nature;
(viii) Sales contracts of an unusual size or complexity;
(ix) Sale or purchase of patents, rights, or any royalty or
license agreements, other than in the ordinary course of business;
(x) Warranty and distribution policies of an unusual nature
which are not representative of industry patterns;
(xi) Financing programs and policies applicable to public
offerings, private placements, and long-term debt;
(xii) Treasury policies;
(xiii) Selection of auditors and corporate counsel;
(xiv) Banking resolutions;
(xv) Cash policies such as pension funds, investments, etc.,
other than normal bank deposits;
<PAGE> 9
(xvi) All matters of litigation in which the Company is to be
the plaintiff or other initiating party; and
(xvii) Conflict of interest matters.
(k) The management of the Company shall notify and consult with the
Board of Directors (by written, telegraphic or telephonic notice) prior to
taking any initial action with respect to any of the following matters (it
being understood that the Board of Directors will determine the propriety of
further or alternative action with respect to such matters at their next
meeting):
(i) All matters of personnel policies as they apply to any
labor agreements or organization of unions;
(ii) All matters of public policy, wherein the Company is to
be involved in any community, political, or religious cause or
program;
(iii) All matters of litigation that involve or may involve
the Company as a defendant;
(iv) Audit programs and policies; and
(v) Any operating decisions which in the judgment of the
President and Chief Executive Officer should be presented to the
Board.
(l) The Company shall file a Certificate of Designation with the
Secretary of State of Utah setting forth the rights and preferences of the
Series E Preferred Stock substantially in the form attached hereto as Exhibit
"C".
55. Negative Covenants of the Company.
(a) For a period of eighteen (18) months following the Closing, the
Company will not, without the prior written consent of ESL, grant any options
to purchase securities of the Company to employees that are exercisable at a
price below the greater of the Private Placement Price or the fair market value
of the securities on the date of grant.
(b) For a period of three (3) years following the Closing, the Company
will not, without the prior written consent of ESL, offer or sell any of its
securities in reliance on Regulation S of the Securities Act of 1933, as
amended.
(c) The Company will not use any proceeds from the Private Placement
to repay any indebtedness of the Company, including but not limited to any
indebtedness to current executive officers or principal shareholders of the
Company except for indebtedness incurred in the ordinary course of business.
<PAGE> 10
(d) The Company shall not, without the prior written consent of ESL
and all holders of the Series E Preferred Stock, create any new class or series
of stock having a dividend and/or liquidation preference senior to the Series E
Preferred Stock or increase the size of the authorized number of shares of
Series E Preferred Stock.
(e) The Company will not issue press releases or engage in other
publicity without ESL's prior written consent prior to the completion of the
Private Placement and for a period of eighteen (18) months from the Closing.
(f) The Company will not sell any of its securities at a price lower
than the Private Placement Price for a period of twenty-four (24) months from
Closing or October ____, 1998, whichever is earlier, without the prior written
consent of ESL.
56. Representations and Warranties of ESL.
ESL represents, warrants and covenants to the Company as follows:
(a) ESL has been duly incorporated and is validly existing and in good
standing under the laws of Nevis, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as currently
conducted.
(b) This Agreement has been duly authorized, validly executed and
delivered on behalf of ESL and is a valid and binding agreement of ESL
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally, and ESL has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and
to perform its obligations hereunder and thereunder.
57. Indemnification. The Company hereby agrees to indemnify and hold harmless
ESL and its officers, directors, shareholders, employees, agents and attorneys
against any and all losses, claims, damages, liabilities and expenses incurred
by each such person in connection with defending or investigating any such
claims or liabilities, including any costs or expenses incurred, to which any
such indemnified party may become subject under the Securities' Act, or under
any other statute, at common law or otherwise, insofar as such losses, claims,
demands, liabilities and expenses arise out of or are based upon, in whole or
in part, (i) any untrue statement or alleged untrue statement of a material
fact made by the Company in this Agreement or any exhibit, schedule,
certificate, list, summary or Disclosure Document provided to ESL, (ii) any
omission or alleged omission of a material fact with respect to the Company in
this Agreement or any exhibit, schedule, certificate, list, summary or
Disclosure Document provided to ESL, or (iii) any breach of any representation,
warranty or agreement made by the Company in this Agreement or any exhibit,
schedule, certificate, list, summary or Disclosure Document provided to ESL.
<PAGE> 11
58. Mergers and Acquisitions.
(a) The Company agrees that ESL will be paid a finder's fee of five
percent (5%) of the first $1,000,000.00, four percent (4%) of the second
$1,000,000.00, three percent (3%) of the next $1,000,000.00, two percent (2%)
of the next $1,000,000.00 and one percent (1%) of the excess, if any, over
$4,000,000.00 of the consideration involved in any merger or acquisition
transaction (or equivalent) consummated by the Company, in which ESL introduced
the other party to the Company during a period ending five (5) years from the
Closing (an "Introduced Transaction"); and
(b) Any such finder's fee due to ESL will be paid in cash at the
closing of the particular Introduced Transaction for which the finder's fee is
due. This finder's fee is not in addition to the finder's fee contained in
those certain placement agreement's dated November 11, 1997, January 31, 1998
or April 30, 1998 all by and between the Company and ESL, but is merely a
restatement thereof.
59. Conditions Precedent to Closing.
(a) ESL shall have received an opinion addressed to Equity Services,
Ltd. and each subscriber to the Private Placement, from Vial, Hamilton, Koch &
Knox, L.L.P., confirming the representations and warranties of the Company
contained in Section 4 above, substantially in the form attached hereto as
Exhibit "D".
(b) ESL shall have received a fully executed Placement Agent's Option
Certificate from the Company.
(c) ESL shall have received a fully executed Registration Rights
Agreement with respect to the Placement Agent's Shares and the ESL Option
Shares from the Company.
(d) ESL shall have received a certified copy of the resolution of the
Board of Directors of the Company authorizing the transactions contemplated
herein.
(e) The Company shall have filed with the Office of the Secretary of
State of Delaware a Certificate of Designation acceptable to ESL, substantially
in the form attached hereto as Exhibit "C".
(f) The Company shall have amended its Bylaws in such a manner as to
make its Bylaws consistent with the terms and conditions of this Agreement and
the transactions contemplated herein, a copy of which will have been provided
to ESL prior to Closing.
(g) The escrow agent, MASCO, Ltd. (the "Escrow Agent") shall have
received a certificate representing the Placement Agent's Shares.
<PAGE> 12
60. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective upon its execution by ESL.
(b) This Agreement shall terminate on the earlier of November ____,
1998, or the consummation of the Private Placement.
61. Parties. This Agreement shall inure to the benefit of and be binding upon
ESL, the Company and ESL's and its respective successors and assigns. Except as
provided for in Section 4 herein above, nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto and their respective successors and assigns and
the controlling persons, officers, directors, employees, agents and attorneys
of the parties, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective
successors and assigns and said controlling persons, officers, directors,
employees, agents and attorneys, and for the benefit of no other person or
corporation.
62. Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopied (followed by
registered mail or overnight courier), initially to the address set forth
below, and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 13.
if to the Company:
MICRO-MEDIA SOLUTIONS, INC.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
with a copy (which shall not constitute notice) to:
VIAL, HAMILTON, KOCH & KNOX, L.L.P.
1717 Main Street, Suite 4400
Dallas, Texas 75201-7388
Attn: Gary Woolfolk, Esq.
Telephone: (214) 712-4400
Telecopier: (214) 712-4402
<PAGE> 13
if to ESL:
Equity Services, Ltd
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 999-4268
Telecopier: (214) 969-4667
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; when received after being deposited in the regular mail;
the next business day after being deposited with an overnight courier, if
deposited with a nationally recognized, overnight courier service; when receipt
is acknowledged, if telecopied (subject to follow up as discussed above).
63. Attorneys' Fees. If any action is necessary to enforce or interpret the
terms of this agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and costs, in addition to any other relief to which he is or
may be entitled. This provision shall be construed as applicable to the entire
agreement.
64. Remedies. Each party hereto, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement and hereby
agrees to waive (to the extent permitted by law) the defense in any action for
specific performance that a remedy of law would be adequate.
65. Time of Essence. Time shall be of the essence of this Agreement.
66. Construction. This Agreement shall be construed in accordance with the
internal laws of the State of Texas.
<PAGE> 14
67. Execution. This Agreement may be executed in any number of counterparts
each of which taken together shall constitute one and the same instrument.
68. Joint Drafting of Agreement. This Agreement has been prepared by the joint
efforts of the respective counsel for each of the parties hereto and shall not
be construed against a particular party simply by reason of such party being
the drafting party.
69. Entire Agreement. This Agreement, together with those certain Investor
Subscription Agreements by and between the Company and each subscriber to the
Private Placement, constitute the entire understanding by and between the
parties with respect to the subject matter hereof. This Agreement can only be
modified, including any extension of the offering period, by a written
agreement duly signed by persons authorized to sign agreements on behalf of the
respective parties.
70. Facsimile Signature. This Agreement may be executed by facsimile copy and
any such facsimile copy bearing the facsimile signature of any party hereto
shall have full legal force and effect and shall be binding against the party
having executed this Agreement by facsimile.
<PAGE> 15
If the foregoing is in accordance with your understanding, please sign
below and return to us a counterpart hereof, and upon your acceptance hereof,
this letter and the acceptance hereof shall constitute a binding agreement
between ESL and the Company.
Very truly yours,
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose G Chavez
---------------------------------
JOSE G. CHAVEZ, President
Accepted and agreed to as of the
date first above written by:
EQUITY SERVICES, LTD.
By:/s/ Lynn Turnquest
---------------------------------
LYNN TURNQUEST, Director
<PAGE> 16
EXHIBIT "A"
Registration Rights Agreement - Subscribers to Private Placement
EXHIBIT "B"
Registration Rights Agreement - ESL
EXHIBIT "C"
Form of Certificate of Designation
EXHIBIT "D"
Form of Opinion
<PAGE> 17
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 13th day of October, 1998 by and between MICRO-MEDIA
SOLUTIONS, INC., a Utah corporation (the "Company") and EQUITY SERVICES, LTD.,
a Nevis company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) Two Thousand Four Hundred
Seventy Five (2,475) shares of the Company's Series E 6% cumulative convertible
preferred stock, stated value $30.00 per share (the "Series E Preferred Stock")
pursuant to that certain placement agreement by and between the Company and the
Shareholder dated October 13, 1998 (the "Placement Agreement"), and (ii) an
option to purchase up to Forty Nine Thousand Five Hundred (49,500) shares of
the Company's common stock, par value $0.10 per share (the "Common Stock")
pursuant to that certain Placement Agent's Option Certificate dated October 13,
1998 (the "Option Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series E Preferred Stock and the Option Shares
(collectively, the "Shares"); and the Shareholder desires to obtain such
registration rights, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
49. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE> 18
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) any shares of Common Stock issuable upon
conversion of any of the Series E Preferred Stock, (ii) the Option
Shares, (iii) any shares of Common Stock issued by way of a stock
split, reorganization, merger or consolidation, and (iv) any Common
Stock issued as a dividend on the Shares. For purposes of this
Agreement, any Registrable Stock shall cease to be Registrable Stock
when (v) a registration statement covering such Registrable Stock has
been declared effective and such Registrable Stock has been disposed
of pursuant to such effective registration statement, (w) such
Registrable Stock is sold pursuant to Rule 144 (or any similar
provision then in force) under the 1933 Act, (x) such Registrable
Stock is eligible to be sold pursuant to Rule 144(k) under the 1933
Act, (y) such Registrable Stock has been otherwise transferred, no
stop transfer order affecting such stock is in effect and the Company
has delivered new certificates or other evidences of ownership for
such Registrable Stock not bearing any legend indicating that such
shares have not been registered under the 1933 Act, or (z) such
Registrable Stock is sold by a person in a transaction in which the
rights under the provisions of this Agreement are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of
1933, as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder,
or the spouse or children (or a trust exclusively for the benefit of
the spouse and/or children) of a Holder, or, in the case of a Holder
that is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated
organization or association or other entity, including any
governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules, regulations or
forms promulgated by the Commission shall include rules, regulations
and forms succeeding to the functions thereof, whether or not bearing
the same designation.
50. Demand Registration.
(a) Commencing immediately upon the date of Closing (as
defined in the Placement Agreement), any Requesting Holders may make a
written request to the Company (specifying that it is being made
pursuant to this Section 2) that the Company file a registration
statement under the 1933 Act (or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act) covering
the registration of Registrable Stock. In such event, the Company
shall (x) within ten (10) days thereafter notify in writing
<PAGE> 19
all other Holders of Registrable Stock of such request, and (y) use
its best efforts to cause to be registered under the 1933 Act all
Registrable Stock that the Requesting Holders and such other Holders
have, within forty-five (45) days after the Company has given such
notice, requested be registered.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved
by the Company, which approval shall not be unreasonably withheld;
provided, that all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
provided further, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to
the contrary, if the managing underwriter of an underwritten offering
of the Registrable Stock requested to be registered pursuant to this
Section 2 advises the Requesting Holders in writing that in its
opinion marketing factors require a limitation of the number of shares
to be underwritten, the Requesting Holders shall so advise all Holders
of Registrable Stock that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Stock that may be
included in such underwritten offering shall be allocated among all
such Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of filing
the registration statement; provided, that in the event of such
limitation of the number of shares of Registrable Stock to be
underwritten, the Holders shall be entitled to an additional demand
registration pursuant to this Section 2. If any Holder of Registrable
Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so withdrawn
shall also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration
pursuant to this Section 2 during the period starting with the
fourteenth (14th) day immediately preceding the date of an anticipated
filing by the Company of, and ending on a date ninety (90) days
following the
<PAGE> 20
effective date of, a registration statement pertaining to a public
offering of securities for the account of the Company; provided, that
the Company shall actively employ in good faith all reasonable efforts
to cause such registration statement to become effective; and provided
further, that the Company's estimate of the date of filing such
registration statement shall be made in good faith.
(e) The Company shall be obligated to effect and pay for a
total of only two (2) registrations pursuant to this Section 2, unless
increased pursuant to Section 2.(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i)
it has been declared effective by the Commission, (ii) if it is a
shelf registration, it has remained effective for the period set forth
in Section 3.(b), (iii) the offering of Registrable Stock pursuant to
such registration is not subject to any stop order, injunction or
other order or requirement of the Commission (other than any such
action prompted by any act or omission of the Holders), and (iv) no
limitation of the number of shares of Registrable Stock to be
underwritten has been required pursuant to Section 2.(c) hereof.
51. Obligations of the Company. Whenever required under Section 2 to
use its best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in
accordance with the intended method of distribution thereof, and use
its best efforts to cause such registration statement to become
effective as promptly as practicable thereafter; provided that before
filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to one (1) counsel
selected by the Requesting Holders copies of all such documents
proposed to be filed, and (ii) notify each such Holder of any stop
order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove
it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which
will terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
<PAGE> 21
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such
registration statement as filed and each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable
Stock owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned
by such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3.(d)
hereof, (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if such
time is after the period referred to in Section 3.(b)), of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances being made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Inspector, as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement.
Records or other information which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid
or correct a misstatement or omission in the registration statement,
or (ii) the release of such Records or other information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each selling
<PAGE> 22
Holder shall, upon learning that disclosure of such Records or other
information is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense,
to undertake appropriate action to prevent disclosure of the Records
or other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect to such shares of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and if
such Registrable Stock is not being sold through underwriters, then to
the Requesting Holders as to such matters as such underwriters or the
Requesting Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter dated such
date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver such
letter to such Holder, then to the Company (i) stating that they are
independent certified public accountants within the meaning of the
1933 Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, and (ii)
covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date
of such letter) with respect to the registration in respect of which
such letter is being given as the Requesting Holders may reasonably
request and as would be customary in such a transaction;
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of
at least twelve (12) months beginning with the first full month after
the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933
Act; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on The Nasdaq Small Cap Market and/or any other
securities exchange on which similar securities issued by the Company
are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
<PAGE> 23
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3.(f) hereof,
such Holder will forthwith discontinue disposition of Registrable Stock
pursuant to the registration statement covering such Registrable Stock until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.(f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 3.(f) hereof.
52. Incidental Registration. Commencing immediately after the date of
Closing (as defined in the Investor Agreement), if the Company determines that
it shall file a registration statement under the 1933 Act (other than a
registration statement on a Form S-4 or S-8 or filed in connection with an
exchange offer or an offering of securities solely to the Company's existing
stockholders) on any form that would also permit the registration of the
Registrable Stock and such filing is to be on its behalf and/or on behalf of
selling holders of its securities for the general registration of its common
stock to be sold for cash, at each such time the Company shall promptly give
each Holder written notice of such determination setting forth the date on
which the Company proposes to file such registration statement, which date
shall be no earlier than thirty (30) days from the date of such notice, and
advising each Holder of its right to have Registrable Stock included in such
registration. Upon the written request of any Holder received by the Company no
later than twenty (20) days after the date of the Company's notice, the Company
shall use its best efforts to cause to be registered under the 1933 Act all of
the Registrable Stock that each such Holder has so requested to be registered.
If, in the written opinion of the managing underwriter or underwriters (or, in
the case of a non-underwritten offering, in the written opinion of the
placement agent, or if there is none, the Company), the total amount of such
securities to be so registered, including such Registrable Stock, will exceed
the maximum amount of the Company's securities which can be marketed (i) at a
price reasonably related to the then current market value of such securities,
or (ii) without otherwise materially and adversely affecting the entire
offering, then the amount of Registrable Stock to be offered for the accounts
of Holders shall be reduced pro rata to the extent necessary to reduce the
total amount of securities to be included in such offering to the recommended
amount; provided, that if securities are being offered for the account of other
Persons as well as the Company, such reduction shall not represent a greater
fraction of the number of securities intended to be offered by Holders than the
fraction of similar reductions imposed on such other Persons other than the
Company over the amount of securities they intended to offer.
53. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each
Holder whose Registrable Stock is included in a registration statement
agrees not to effect any public sale or distribution of the issue
being registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale
<PAGE> 24
pursuant to Rule 144 under the 1933 Act, during the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the
effective date of such registration statement (except as part of the
registration), if and to the extent requested by the Company in the
case of a nonunderwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of
an underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others.
The Company agrees (i) not to effect any public sale or distribution
of any securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of any registration statement
in which Holders are participating (except as part of such
registration), if and to the extent requested by the Holders in the
case of a non-underwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of
an underwritten public offering; and (ii) that any agreement entered
into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any securities convertible into or
exchangeable or exercisable for such securities (other than pursuant
to an effective registration statement) shall contain a provision
under which holders of such securities agree not to effect any public
sale or distribution of any such securities during the periods
described in (i) above, in each case including a sale pursuant to Rule
144 under the 1933 Act.
54. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and
pay the underwriting commissions and discounts applicable to the Registrable
Stock offered for their account in connection with any registrations, filings
and qualifications made pursuant to this Agreement.
55. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such
Holder (within the meaning of the 1933 Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement therein (in
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading. The Company
will also indemnify any underwriters of the Registrable Stock, their
officers and directors and each Person who controls such underwriters
(within the meaning of the 1933 Act) to the same extent as provided
above with respect to the indemnification of the selling Holders.
<PAGE> 25
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission
of a material fact required to be stated in the registration
statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus or preliminary prospectus, in the
light of the circumstances under which they were made) not misleading,
to the extent, but only to the extent, that such untrue statement or
omission is contained in any information with respect to such Holder
so furnished in writing by such Holder. Notwithstanding the foregoing,
the liability of each such Holder under this Section 7.(b) shall be
limited to an amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises
out of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonably satisfactory to such indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to the indemnifying
party shall itself not create liability except to the extent of any
injury caused thereby. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation. If the indemnifying party IS not entitled
to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one (1) counsel
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect
to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or
counsels.
(d) Contribution. If for any reason the indemnity provided
for in this Section 7 is unavailable to, or is insufficient to hold
harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
<PAGE> 26
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or
indemnified parties; and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 7.(c), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7.
56. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
57. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it
has complied with such requirements.
58. Transfer of Registration Rights. The registration rights of any
Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with
<PAGE> 27
applicable securities laws; provided further, that the transferring Holder
shall give the Company written notice at or prior to the time of such transfer
stating the name and address of the transferee and identifying the securities
with respect to which the rights under this Agreement are being transferred;
provided further, that such transferee shall agree in writing, in form and
substance satisfactory to the Company, to be bound as a Holder by the
provisions of this Agreement; and provided further, that such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by such transferee is restricted under the 1933
Act. Except as set forth in this Section 10, no transfer of Registrable Stock
shall cause such Registrable Stock to lose such status.
59. Mergers, Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Stock" shall be deemed to be
references to the securities which the Holders would be entitled to receive in
exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely
of (i) cash, (ii) securities of the acquiring corporation which may be
immediately sold to the public without registration under the 1933 Act, or
(iii) securities of the acquiring corporation which the acquiring corporation
has agreed to register within ninety (90) days of completion of the transaction
for resale to the public pursuant to the 1933 Act.
60. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this
Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by
it of the provisions of this Agreement and hereby agrees to waive (to
the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of the Holders of at least a
majority of the Registrable Stock then outstanding affected by such
amendment, modification, supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors
and assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any Person other than the
parties hereto or their
<PAGE> 28
respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas
applicable to contracts made and to be performed wholly within that
state, without regard to the conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person
or by telecopy or by overnight courier guaranteeing no later than
second business day delivery, directed to (i) the Company at the
address set forth below its signature hereof or (ii) a Holder at the
address of the Administrator set forth below its signature hereof. Any
party may change its address for notice by giving ten (10) days
advance written notice to the other parties. Every notice or other
communication hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, or on the date
actually received, if sent by telecopy or overnight courier service,
with receipt acknowledged.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full force
and effect notwithstanding any breach or purported breach of, or
relating to, the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
(m) Attorneys Fees. If any action is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs, in addition to any
other relief to which he is or may be entitled. This provision shall
be construed as applicable to the entire agreement.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written herein above.
MICRO-MEDIA SOLUTIONS, INC.
By:/s/ Jose Chavez
---------------------------------
Name: JOSE CHAVEZ
Title: President
501 Waller
Austin, Texas 78702
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
EQUITY SERVICES, LTD.
By: /s/ Lynn Turnquest
---------------------------------
Name: LYNN TURNQUEST
Title: Director
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
<PAGE> 30
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION OF COUNSEL TO THE EFFECT THAT THE PROPOSED
SALE, TRANSFER OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION
UNDER THE ACT.
MICRO-MEDIA SOLUTIONS, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing October 13, 1999 and before the Expiration Date (as
defined below) Forty Nine Thousand Five Hundred (49,500) shares (the "Option
Shares") of fully paid and non-assessable shares of the common stock, $0.10 par
value per share (the "Common Stock"), of MICRO-MEDIA SOLUTIONS, INC., a Utah
corporation (the "Company") at a purchase price of Four Dollars and Fifty Cents
($4.50) per Option Share (the "Strike Price"), in lawful money of the United
States of America by bank or certified check, subject to adjustment as
hereinafter provided.
n. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Shares at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
o. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the Holder,
commencing on October 13, 1999, and before the Expiration Date (as defined
below) by delivering to the Company written notice of exercise (the "Exercise
Notice"), stating the number of Option Shares to be purchased thereby,
accompanied by bank or certified check payable to the order of the Company for
the Option Shares being purchased. Within ten (10) days of the Company's
receipt of the Exercise Notice accompanied by the consideration for the Option
Shares being purchased, the Company shall issue and deliver to the Holder a
certificate representing the Option Shares being purchased. In the
<PAGE> 31
case of exercise for less than all of the Option Shares represented by this
Option Certificate, the Company shall cancel this Option Certificate upon the
surrender hereof and shall execute and deliver a new Option Certificate for the
remaining balance of such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m.,
Austin, Texas time, on October 13, 2004 or if such date in the State of Texas
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Austin, Texas time, the next following day which in the State of Texas is
not a holiday or a day on which banks are authorized to close.
p. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned,
transferred, sold or otherwise disposed of unless (i) there is in effect a
registration statement under the Securities Act of 1933, as amended (the "Act")
covering such sale, transfer or other disposition or (ii) the Holder furnishes
to the Company an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer or other disposition
may be effected without registration under the Act, as well as other
documentation incidental to such sale, transfer or other disposition as the
Company's counsel shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this Option
shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel to the effect that the
proposed sale, transfer or disposition may be effectuated
without registration under the Act."
q. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of this Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Option. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of this
Option shall be duly and validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.
r. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Option Certificate and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to the Company, or
in the case of mutilation, upon surrender and cancellation of the mutilated
Option Certificate, the Company shall execute and deliver in lieu thereof, a
new Option Certificate representing an equal number of Option Shares
exercisable thereunder.
<PAGE> 32
s. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock and
the Strike Price per Option Share pursuant to this Option shall be subject to
adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which
the Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase
or decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall be
issued upon the exercise of this Option, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option shall be deemed to
be a shareholder of the Company from and after the time this Option is
exercised and the Option Shares therefor exercised have been paid for in full.
As soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon such exercise, to the person or persons entitled to receive the
same.
t. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise
of this Option will have registration rights beginning on the date of execution
of this Option Certificate. The terms of these registration rights shall be as
set forth in the Registration Rights Agreement by and between the Holder and
the Company, in substantially the form attached hereto as Exhibit "A".
u. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Act.
<PAGE> 33
c. The Holder (i) is not a citizen or resident of the United States of
America, (ii) is not an entity organized under any laws of any state of the
United States of America and (iii) does not have any offices in the United
States of America.
v. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall bear
all expenses incurred in connection with each registration pursuant to this
Option Certificate, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holder shall bear and pay
the underwriting commissions and discounts applicable to the Option Shares
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Option Certificate. The Holder shall pay
any and all brokerage fees and transfer taxes incidental to the sale or
exercise of this Option or the sale of the underlying shares issuable
hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 9b.
if to the Company:
Micro-Media Solutions, Inc.
501 Waller
Austin, Texas 78702
Attn: Jose Chavez, President
Telephone: (512) 476-6925
Telecopier: (512) 473-2371
if to Holder:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 999-4268
Telecopier: (214) 999-4667
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
c. Governing Law. This Option Certificate shall be governed by, and
construed in accordance with, the laws of the State of Texas, without reference
to its principles regarding conflicts of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 34
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
MICRO-MEDIA SOLUTIONS, INC.
By: /s/ Jose Chavez
---------------------------------
JOSE CHAVEZ, President
ATTEST:/s/ Mitchell C Kettrick
---------------------------------
Name: MITCHELL C. KETTRICK
Title: Secretary
Date: October 13, 1998
<PAGE> 35
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to shares of
Common Stock covered hereby. Enclosed herewith is a bank or certified check in
the amount of $ .
Date:
----------------------- ---------------------------------
Name:
Address:
Signature
---------------------------------
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
between Holder and the Company
<PAGE> 36
(B) Reports on Form 8-K
16.1
Form 8-K/A, Filed September 25, 1998: Reporting the dismissal of Jones, Jenson
& Company, LLC, Salt Lake City, Utah as the Company's independent accountants.
The former accountants were unofficially dismissed on June 11, 1997 but the
Company inadvertently neglected to obtain official dismissal until September
14, 1998.
16.2
Form 8-K, Filed September 17, 1998: Reporting the engagement of Salazar &
Associates, Austin, Texas as its independent accountants on June 11, 1997.
16.3
Form 8-K, Filed September 17, 1998: Reporting: (1). The dismissal of Salazar &
Associates, Austin, Texas as the Company's independent accountants on August
15, 1997. (2). The engagement of Brown, Graham & Company, PC, CPAs as the
Company's independent accountants on May 11, 1998.
