U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
MEDIAX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada
(State or Other Jurisdiction of incorporation or organization)
84-1107138
(I.R.S. Employer Identification Number)
8522 National Boulevard, Suite 110, Culver City, California 90232
(310) 815-8002
(Address of Principal Executive Offices,
Including Zip Code and Telephone Number)
Nancy Poertner, President
MediaX Corporation
8522 National Boulevard, Suite 110,
Culver City, California 90232
Telephone (310) 815-8002
Facsimile (310) 815-8046
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
Copy to:
Richard O. Weed
Weed & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each class of Amount to maximum maximum Amount of
securities to be registered be offering price aggregate registration Fee
registered per unit offering price
- --------------------------- ---------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
$.0001 par value common 440,000 $3.40 $1,496,000 $415.89
stock underlying
Warrants
$.0001 par value common 2,074,000 $2.50(1) $5,185,000 $1,441.43
stock underlying 5%
Convertible Debenture
Total 2,514,000 $6,681,000 $1,857.32
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low prices of
MediaX's common stock on OTC Bulletin Board on September 22, 1999.
Pursuant to Rule 416, this registration statement also covers such indeterminate
number of shares of common stock as may become issuable upon conversion of the
Company's 5% Convertible Debenture or exercise of such Warrants (i) resulting
from any adjustment in the applicable Conversion Price of such Debentures of the
Exercise Price of such Warrants or (ii) to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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The Registrant may amend this registration statement. A registration statement
relating to these securities has been filed with the Securities and Exchange
Commission. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS
2,514,000 Shares of Common Stock
MediaX CORPORATION
This prospectus relates to the public offering, which is not being underwritten,
of 2,514,000 shares of common stock, par value $.0001 per share ("Common Stock")
of MediaX Corporation, a Nevada corporation (the "Registrant" or the "Company").
440,000 of the shares offered are shares underlying Warrants exercisable at
$3.40 per share. 2,074,000 of the shares offered are shares underlying the
Company's 5% Convertible Debenture. The Selling Stockholders may offer their
shares of common stock through public or private transactions, on or off the
NASDAQ OTC:BB, at prevailing market prices, or at privately negotiated prices.
The Company will not receive any of the proceeds from the sale of the shares of
Common Stock by the Selling Stockholders.
The Company's Common Stock is traded on NASDAQ OTC:BB, under symbol "MXMX." On
September 16, the last reported sale price for the common stock was $2.50 per
share.
You should carefully consider the risk factors beginning on page 6 of this
prospectus before purchasing any of the Common Stock offered by this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is September 23, 1999.
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THE COMPANY
GENERAL
MediaX Corporation (the "Registrant" or the "Company") was
incorporated under the laws of the State of Colorado on August 15, 1986 under
the name Fata Morgana, Inc. On September 15, 1988, the Company changed its name
to Edinburgh Capital, Inc. On May 13, 1994, the Company merged into Edinburgh
Capital, Inc. (a Nevada corporation) in order to change its state of domicile to
Nevada.
The Company was originally formed for the primary purpose of seeking
out acquisitions of properties, businesses, or merger candidates, without
limitation as to the nature of the business operations or geographic area of the
acquisition candidate. From inception through the date of completion of its
initial public offering of securities, the Company's activities were directed
toward the acquisition of operating capital.
The Company completed its initial public offering in October, 1989,
receiving net proceeds of approximately $245,000 from the sale of 30,000 Units
(each Unit consisting of 1,000 shares of the Company's no par value common
stock, and 100 common stock purchaser warrants exercisable at $.02) at $10 per
unit. The warrants expired in 1992.
During April 1994, the Company effected a 1 for 300 reverse stock
split and on February 23, 1996, the Company effected a 3.13 for 1 forward stock
split.
On February 23, 1996, the name of the Company was changed to Zeitgeist
Werks, Inc. On February 24, 1996, the Company acquired all of the issued and
outstanding shares of Zeitgeist, Inc., a Nevada corporation, in exchange for
1,250,000 shares of its common stock.
On June 27, 1996, MediaX, a California corporation, was merged into
Zeitgeist, Inc., and the Company issued 203,750 shares of its common stock to
the former shareholders of MediaX. On August 16, 1996 the Company changed its
name to MediaX Corporation.
During November 1998, the Company effected a 1 for 10 reverse stock
split. All financial information and share data in the remainder of this
prospectus give retroactive effect to the reverse stock split (including the two
aforementioned stock splits).
DESCRIPTION OF BUSINESS
As a result of the Company's acquisition of all of the issued and
outstanding shares of Zeitgeist, Inc. and MediaX, Inc., the Company has a new
management and a new business plan. The Company will operate primarily in
e-commerce, multimedia services and product development. It has obtained rights
to intellectual properties, and produces and publishes multimedia software and
content mainly for the Internet and for Satellite broadcasting channels. The
Company intends to maintain strict control of both quality and costs and to
retain profit margins that are traditionally dispersed across many small
companies, by taking a comprehensive approach to production and electronic
distribution of its products.
Management believes that due to the varied and extensive expertise of
its President, Executive Vice President and outside director in the areas of:
artist and record company management, film production, software development and
distribution and proprietary technology development, the Company will bridge the
entertainment and technology markets and enter into the Internet e-commerce
market.
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PRINCIPAL PRODUCTS AND SERVICES
New Products and Services
The Company designs and hosts high-value celebrity web sites such as
rodstewartlive.com and divinemusik.com and others. The web site entertainment
content includes live-chats, on-line shopping for artist specific merchandise
and the production of Internet events such as live concerts that are globally
broadcast on the Internet. The Company has established affiliate relationships
with companies like Broadcast.com, AOL, Yahoo! and others for this purpose. In
February 1999, the Company initiated amuZnet.com, an e-commerce site offering
more than 260,000 entertainment titles on CDS, DVDs and Videos by major record
labels and studios and over 4,000 independent music labels for purchase on-line.
The Company purposely directs the high-traffic generated by the celebrity web
sites through amuZnet.com with a simple link. This site is constantly updated
and developed into a "destination site" serving increasing revenue streams
through its e-commerce model.
The Company plans to provide the same services on an interactive
satellite channel, which will be launched late 1999 or early 2000. Contracts are
signed with EchoStar, one of the largest satellite providers, to implement this
model for interactive satellite distribution.
Historical Products and Services
The Company has developed, produced and marketed software products for
the information entertainment and development tool sector of the software
industry in the form of software distributed on floppy disks and CD-ROM. Three
released CD-ROM products are "On the Road with BB King, "Queensryche's Promised
Land" and "Peter Norton - PC Guru" distributed by MCA, EMI Records and the
Company, respectively.
The Company was selected by Apple Computer to produce the Welcome
Experience for their limited edition Twentieth Anniversary Macintosh which was
introduced on March 19, 1997. The multimedia presentation featured leading-edge
animation, digital video, interactive 3D graphics, original soundtrack and
theater quality audio which highlighted Macintosh's extreme multimedia
capabilities.
In December 1997, the Company released and distributed "Peter Norton -
PC Guru." During the fourth quarter of 1998, it was determined that this product
would not gain significant additional sales beyond 1998; therefore, the Company
has ceased distribution of the product.
The "Big Brother" project, based on George Orwell's novel "1984", is
currently in the final stages of production. The Company obtained production and
exclusive publishing rights during December 1996 from Newspeak Media, Inc. The
Company is in discussions with several leading publishers regarding the
licensing of the product and hopes to conclude an agreement within the calendar
year.
RISK FACTORS
Before purchasing the shares offered by this prospectus, you should
carefully consider the risks described below, in addition to the other
information presented in this prospectus or incorporated by reference into this
prospectus. If any of the following risks actually occur, they could adversely
effect the Company's business, financial condition or results of operations. In
such case, the trading price of the Company's common stock could decline and you
may lose all or part of your investment.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND EXPECTATION OF FUTURE
LOSSES. MediaX was formed in 1996, and began selling software products in 1997
and music related products through e- commerce in February 1999. Accordingly,
the Company has only a limited operating history on which to base an evaluation
of its business and prospects. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and
rapidly evolving markets such as e-commerce. Such risks include, but are not
limited to, possible inability to respond promptly to changes in a rapidly
evolving and unpredictable business environment and the risk of inability to
manage growth. To address these risks, the Company must, among other things,
expand its customer base, successfully implement its new business and marketing
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strategies, continue to develop and upgrade its Web site and
transaction-processing systems, provide superior customer service, respond to
competitive developments, and attract and retain qualified personnel. If the
Company is not successful in addressing such risks, it will be materially
adversely affected.
SINCE INCEPTION, THE COMPANY HAS INCURRED SIGNIFICANT LOSSES, AND AS
OF JUNE 30, 1999 HAD ACCUMULATED LOSSES OF $ 6 MILLION. For the six months ended
June 30, 1999 and the year ended December 31, 1998, the Company's net loss was
$902,248 and $2,762,066, respectively. The Company intends to invest heavily in
marketing and promotion, technology, and development of its administrative
organization. As a result, the Company believes that it will incur substantial
operating losses for the foreseeable future, and that the rate at which such
losses will be incurred may increase significantly from current levels. Because
the Company has few sales and small product gross margins, achieving
profitability given planned investment levels depends upon the Company's ability
to generate and sustain substantially increased revenue levels. There can be no
assurance that the Company will be able to generate sufficient revenues to
achieve or sustain profitability in the future.
WORKING CAPITAL DEFICIENCY. At June 30, 1999, the Company had negative
working capital of $291,669 as compared to negative working capital of
$1,773,728 at December 31, 1998. The Company's success and ongoing financial
viability is contingent upon the success of its new e-commerce model, the
licensing of "Big Brother" and the generation of related cash flows. There is no
assurance that such contingencies will be met in the future to meet the capital
needs of the Company. Should there be any significant delays in the release of
new products, or lack of acceptance in the marketplace for such products if
released, or if the Company's working capital needs otherwise exceed its
resources, the adverse consequences would be severe. The generation of the
Company's current growth and the expansion of the Company's current business
involve significant financial risk and require significant capital investment.
GOING CONCERN. The Company has experienced recurring net losses and
has limited liquid resources. Management's intent is to increase the Company's
sales and to continue searching for additional sources of capital. In the
interim, the Company will continue operating with minimal overhead and
administrative functions will be provided by key employees and consultants, some
of whom are compensated primarily in the form of the Company's common stock. The
Company may need to utilize its common stock to fund its operations through
fiscal 1999. Accordingly, the financial statements incorporated by reference
herein have been presented under the assumption the Company will continue as a
going concern.
DEPENDENCE ON CONTINUED GROWTH OF ONLINE COMMERCE. The Company's
long-term viability is substantially dependent upon the widespread consumer
acceptance and use of the Internet as a medium of commerce. Use of the Internet
as a means of effecting retail transactions is at an early stage of development,
and demand and market acceptance for recently introduced services and products
over the Internet is very uncertain. The Company cannot predict the extent to
which consumers will be willing to shift their purchasing habits from
traditional retailers to online retailers. The Internet may not become a viable
commercial marketplace. In addition, the Internet's viability as a commercial
marketplace could be adversely affected by delays in the development of services
or due to increased government regulation. Changes in or insufficient
availability of telecommunications services to support the Internet also could
result in slower response times and could adversely affect usage of the Internet
generally and MediaX in particular. Moreover, adverse publicity and consumer
concern about the security of transactions conducted on the Internet and the
privacy of users may also inhibit the growth of commerce on the Internet. If the
use of the Internet does not continue to grow or grows more slowly than
expected, or if the infrastructure for the Internet does not effectively support
growth that may occur, the Company would be materially adversely affected.
COMPETITION. The Company is a minor participant among companies which
engage in multimedia and Internet content development. Many of these companies
have significantly greater capitalization and experience in this industry. The
online commerce market is new, rapidly evolving and intensely competitive, and
the Company expects that competition will further intensify in the future.
Barriers to entry are minimal, and current and new competitors can launch new
sites at a relatively low cost. In addition, the broader retail music industry
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is intensely competitive. The Company currently competes with a variety of
companies, including other established online vendors and traditional retailers
of entertainment, music and multimedia products. Many of these traditional
retailers also support dedicated Web sites which compete directly with the
Company.
There can be no assurance that the Company will be able to compete
successfully against current and future competitors. New technologies and the
expansion of existing technologies may increase the competitive pressures of the
Company.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL. The
Company's success is substantially dependent on the ability and experience of
its senior management and other key personnel, particularly Nancy Poertner,
President, and Rainer Poertner, Chairman of the Board. Moreover, to accommodate
its anticipated growth, the Company may need to expand its employee base.
Competition for personnel, particularly persons having software development and
other technical expertise, is intense, and there can be no assurance that the
Company will retain existing personnel or hire additional, qualified personnel.
The inability of the Company to retain and attract the necessary personnel or
the loss of services of any of its key personnel could have a material adverse
effect on the Company.
INCREASED RELIANCE UPON STRATEGIC ALLIANCES. The Company increasingly
relies on strategic alliances and online and traditional advertising to attract
users to its Web site. The Company has entered into strategic alliances with
Broadcast.com, AOL, and Yahoo!. The Company's ability to generate increased
revenues largely will depend on increased traffic and purchases through these
alliances. There can be no assurance that the Company's strategic alliances will
generate a substantial number of new customers or net sales or that the
Company's infrastructure will be sufficient to handle the increased traffic that
may result therefrom. Moreover, there can also be no assurance that the Company
will be able to renew successful advertising programs or maintain its strategic
alliances beyond their initial terms or that additional third-party alliances
will be available to the Company on acceptable commercial terms or at all. The
Company expects to promote its brand name through a campaign that includes
online and radio advertising. The inability to maintain and further develop its
advertising campaign or strategic alliances could have a material adverse effect
on the Company.
RISK OF SYSTEM FAILURE. The Company's business is dependent on the
efficient and uninterrupted operation of its computer and communications
hardware systems. The Company's systems and operations are vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. Any system interruptions, including
any interruptions in the Company's Internet connections or internal systems
problems, that result in the unavailability of the Company's Web site or reduced
transaction processing performance would reduce the attractiveness of the
Company's product offerings and could, therefore, materially adversely affect
the Company. Substantially all of the Company's computer and communications
hardware is located at a single leased facility in Santa Cruz, CA.
SECURITY RISKS. A significant barrier to online commerce is concern
regarding the security of transmission of confidential information. The Company
relies on outside third parties to facilitate the secure transmission of
confidential information, such as customer credit card numbers. Nevertheless,
the Company's infrastructure is potentially vulnerable to physical or electronic
computer break-ins, viruses and similar disruptive problems. A party who is able
to circumvent the Company's security measures could misappropriate proprietary
information or cause interruptions in the Company's operations. To the extent
that activities of the Company or third-party contractors involve the storage
and transmission of proprietary information, such as credit card numbers, such
security breaches could expose the Company to a risk of loss or litigation and
possible liability. Therefore, the Company may be required to expend significant
capital and other resources to protect against such security breaches or to
alleviate problems caused by such breaches. There can be no assurance that the
Company's security measures will prevent security breaches or that failure to
prevent such security breaches will not have a material adverse effect on the
Company.
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VOLATILITY OF STOCK PRICE. The market price of the Common Stock has
been, and is likely to remain, highly volatile as is frequently the case with
developmental stage public companies and Internet companies in particular.
Quarterly operating losses of the Company, deviations in losses of operations
from estimates of securities analysts, changes in general conditions in the
economy, in Internet commerce and in the music retailing industry, or other
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially. The equity markets have,
on occasion, experienced significant price and volume fluctuations that have
affected the market prices for many companies' securities and that have often
been unrelated to the operating performance of these companies. Any such
fluctuations that occur following completion of the Offering may adversely
affect the market price of the Common Stock.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. The Company is subject,
both directly and indirectly, to various laws and regulations relating to its
business, although there are few laws or regulations directly applicable to
access to the Internet. However, due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet. Such laws and regulations may cover issues such as
user privacy, pricing, content, copyrights, distribution and characteristics and
quality of products and services. Furthermore, the growth and development of the
market for online commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on those companies conducting
business online. The enactment of any additional laws or regulations may impede
the growth of the Internet which could, in turn, decrease the demand for the
Company's products and services and increase the Company's cost of doing
business, or otherwise have an adverse effect on the Company.
The applicability to the Internet of existing laws in various
jurisdictions is uncertain and could expose the Company to substantial
liability. The laws of certain foreign countries provide the owner of
copyrighted products with the exclusive right to expose, through sound and video
samples, copyrighted items for sale to the public and the right to distribute
such products. Any new legislation or regulation, or the application of existing
laws and regulations to the Internet could have a material adverse effect on the
Company.
The Company believes that its use of third party material on its Web
sites is permitted under current provisions of copyright law. However, legal
rights to certain aspects of Internet content and commerce are not clearly
settled and the Company's ability to rely upon one or more exemptions or
defenses under copyright law is uncertain. There can be no assurance that the
Company will be able to continue to provide rights to such information. The
failure to be able to offer such information could have a material adverse
effect on the Company.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission (the "FCC") in the same manner as other telecommunications services.
For example, America's Carriers Telecommunications Association has filed a
petition with the FCC for this purpose. In addition, because the growing
popularity and use of the Internet has burdened the existing telecommunications
infrastructure and many areas with high Internet use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees on such providers. If either of these petitions are granted,
or the relief sought therein is otherwise granted, the costs of communicating on
the Internet could increase substantially, potentially slowing the growth in use
of the Internet. Any such new legislation or regulation or application or
interpretation of existing laws could have a material adverse effect on the
Company's business, results of operations and financial condition.
POSSIBLE LIABILITY FOR PUBLISHING OR DISTRIBUTING CONTENT OVER THE
INTERNET. Due to the fact that the Company may be considered a publisher or
distributor of both its own and third party content, there is a potential that
claims will be made against the Company for defamation, negligence, copyright or
trademark infringement, invasion of privacy and publicity, unfair competition or
other theories based on the nature and content of such material. Such claims
have been brought, and sometimes successfully pressed, against online services
in the past. For example, claims could be made against the Company if material
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deemed inappropriate for viewing by young children could be accessed through the
Company Web sites. Although the Company carries general liability insurance, the
Company's insurance may not cover potential claims of this type or may not be
adequate to cover all costs incurred in defense of potential claims or to
indemnify the Company for all liability that may be imposed. Any cost or
imposition of liability that is not covered by insurance or is in excess of
insurance coverage could have a material adverse effect on the Company.
RELIANCE ON CERTAIN VENDORS. The Company relies primarily on one
provider for order fulfillment of recorded music titles and other related
products. The Company has no fulfillment operation or facility of its own and,
accordingly, is dependent upon maintaining its existing relationship or
establishing a new fulfillment relationship with one of the few other
fulfillment operations. There can be no assurance that the Company will maintain
its current relationship with it's primary fulfillment vendor beyond the term of
its existing agreement which expires on December 18, 2001 or that it will be
able to find an alternative, comparable vendor capable of providing fulfillment
services on terms satisfactory to the Company should its relationship with its
current fulfillment vendor terminate. An unanticipated termination of the
Company's relationship with it's current fulfillment vendor could materially
adversely affect the Company's results of operations.
YEAR 2000. The Year 2000 issue could result in system failures or
miscalculations causing disruptions of operations, including, among others, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities which may materially adversely affect the Company. To
date, the Company has experienced very few problems related to Year 2000
problems and the Company does not believe that it has material exposure to the
Year 2000 issue with respect to the Company's information systems as these
systems correctly defined the Year 2000.
The Company is currently conducting an analysis to determine the
extent to which the systems of third parties raise Year 2000 issues that may
affect the Company. However, we cannot assure that the providers the Company
uses to fill orders for direct-to-consumer products, will in fact be Year 2000
compliant on a timely basis. Generally, the Company is unable to predict the
extent to which the Year 2000 issue will affect its suppliers, or the extent to
which the Company would be vulnerable to its suppliers' failure to remediate any
Year 2000 issues on a timely basis. The failure of a major supplier subject to
the Year 2000 issue to convert its systems on a timely basis or a conversion
that is incompatible with the Company's systems could have a material adverse
effect on the Company, which is not currently quantifiable. In addition, most of
the purchases from the Company's on-line web site are made with credit cards,
and the Company's operations may be materially adversely affected to the extent
the Company's customers are unable to use their credit cards due to Year 2000
issues that are not rectified by credit card providers.
LIMITED PUBLIC MARKET. The Company's Common Stock is traded on the
Nasdaq OTC Bulletin Board which tends to be comprised of small businesses of
regional interest with limited trading activity. Although the Company intends to
submit an application to list the Common Stock on Nasdaq's National Market
System or Small Cap System as soon as it meets the listing qualifications, there
can be no assurance that the Company's securities will qualify for listing on
Nasdaq's National Market System or Small Cap System or on any other exchange.
NO DIVIDENDS. The Company has never declared or paid any dividends on
the Common Stock and does not anticipate paying any cash dividends on the Common
Stock in the foreseeable future.
AVAILABLE INFORMATION
The Company files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any document we file with the Commission at the
Commission's Public Reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information on
the public reference room. The Company's Commission filings are also available
to the public at the Commission's web site at http://www.sec.gov.
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The Commission allows the Company to "incorporate by reference" the
information the Company files with them, which means that the Company can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that the Company files later with the Commission
will automatically update and supersede this information. The Company
incorporates by reference the documents listed below and any future filings the
Company makes with the Commission under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act prior to the termination of the offerings described
in this prospectus:
(a) Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998;
(b) Quarterly Report on Form 10-QSB, for the quarterly periods ended March
31, 1999 and June 30, 1999;
You may request a copy of these filings, at no cost, by writing or
telephoning as follows:
MediaX Corporation
Attention: Investor Relations
8522 National Boulevard, Suite #110
Culver City, CA 90232
(310) 815-8002
This prospectus is part of a registration statement on Form S-3 the
Company filed with the SEC under the Securities Act. You should rely only on the
information or representations provided in this prospectus. The Company has not
authorized anyone to provide you with different information other than the
information contained in this prospectus. The Company is not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the document.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the matters
discussed in this prospectus are forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in such forward looking statements. Such risks
and uncertainties include, without limitation, the company's dependence on the
timely development, introduction and customer acceptance of products, the impact
of competition and downward pricing pressures, the ability of the company to
generate revenues and raise any needed capital, the effect of changing economic
conditions, and risks in technology development.
USE OF PROCEEDS
The Selling Stockholders are offering all of the shares of Common Stock
covered by this prospectus. The Company will not receive any proceeds from the
sales of these shares of Common Stock.
SELLING STOCKHOLDERS
The following table sets forth the number of shares owned by each of
the Selling Stockholders. All information contained in the table below is based
upon their beneficial ownership as of September 17, 1999. The Company is not
able to estimate the amount of shares that will be held by the selling
stockholders after the completion of this offering because those Selling
Stockholders may offer all or some of the shares and because there currently are
no agreements, arrangements or understandings with respect to the sale of any of
their shares other than those agreements and arrangements listed below. The
following table assumes that all of the shares being registered will be sold.
The Selling Stockholders are not making any representation that any shares
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10
<PAGE>
covered by the prospectus will be offered for sale. The Selling Stockholders
reserve the right to accept or reject, in whole or in part, any proposed sale of
the shares.
Of the shares offered hereby, all are being offered by certain purchasers of the
Company's 5% Convertible Debenture or Warrants who acquired such securities in
connection with a $2,200,000 private placement in August of 1999.
<TABLE>
<CAPTION>
Name and address of Selling Number of shares Percent of class of Number of shares
Stockholder beneficially owned shares beneficially offered hereby
prior to the offering owned prior to the
offering
- ---------------------------- --------------------- ------------------- ----------------
<S> <C> <C> <C>
Apple Investors, LLC 220,000 shares of 9.9% 658,815
c/o WEC Asset Management LLC common stock
One World Trade Center underlying Warrants
Suite 4563
New York, NY 10048 438,815 shares of
common stock
underlying 5%
Convertible Debenture(1)
</TABLE>
(1) Under the Registration Rights Agreement between the Company and Apple
Investors LLC, the Company agreed to register at least two times the number of
shares issuable upon conversion of the 5% Convertible Debenture on the date of
filing and such indeterminate number of shares of common stock as may become
issuable upon conversion of the Company's 5% Convertible Debenture or exercise
of such Warrants (i) resulting from any adjustment in the applicable Conversion
Price of such Debentures of the Exercise Price of such Warrants or (ii) to
prevent dilution resulting from stock splits, stock dividends or similar
transactions.
PLAN OF DISTRIBUTION
The Company is registering the common stock on behalf of the Selling
Stockholders. As used in this prospectus, the term "Selling Stockholders"
includes pledgees, transferees or other successors-in-interest selling shares
received from the Selling Stockholder, as a pledgor, a borrower or in connection
with other non-sale-related transfers after the date of this prospectus. This
prospectus may also be used by transferees of the Selling Stockholders,
including broker-dealers or other transferees who borrow or purchase the share
to settle or close out short sales of shares of common stock. The Selling
Stockholders will act independently of the Company in making decisions with
respect to the timing, manner, and size of each sale or non-sale related
transfer. The Company will not receive any of the proceeds of this offering.
The Selling Stockholders may sell their shares of common stock directly
to purchasers from time to time. Alternatively, they may from time to time offer
the common stock to or through underwriters, broker/dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders or the purchasers of such securities
for whom they may act as agents. The Selling Stockholders and any underwriters,
broker/dealers or agents that participate in the distribution of common stock
may be deemed to be "underwriters" within the meaning of the Securities Act and
any profit on the sale of such securities and any discounts, commissions,
concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
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11
<PAGE>
The Common Stock may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Common Stock may be effected by means of one or more of the
following transactions (which may involve block transactions):
- in the over-the-counter market or
- in transactions otherwise than on such exchanges or services,
including pursuant to Rule 144 or another exemption from
registration
In connection with sales of the common stock or otherwise, the Selling
Stockholders may enter into hedging transactions with broker/dealers, who in
turn may engage in short sales of the common stock in the course of hedging the
positions they assume. The Selling Stockholders may also sell common stock short
and deliver common stock to close out such short positions, or loan or pledge
common stock to broker/dealers who in turn may sell such securities.
At the time a particular offering of the common stock is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount common stock being offered and the terms of the offering,
including the name or names of any underwriters, broker/dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, and commissions or concessions allowed
or re-allowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the common stock will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers.
The Selling Stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of sales of the common stock by the Selling Stockholders. The
foregoing may affect the marketability of such securities.
EXPERTS
Davis & Co., CPA's, P.C., independent auditors, have audited the
Company's financial statements included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998, which is incorporated by reference
in this prospectus and elsewhere in the registration statement. The Company's
financial statements are incorporated by reference in reliance on Davis & Co.,
CPA's, P.C.'s report, given on their authority as experts in accounting and
auditing.
Richard O. Weed has expressed an opinion concerning the validity of the
securities being registered. Mr. Weed owns 31,000 shares of the Company's Common
Stock.
MATERIAL CHANGES
On May 27, 1999, the Company filed a registration statement on Form
S-3 covering 55,000 shares of the Company's common stock for the benefit of
three selling securities holders. On Monday, July 12, 1999, the Securities and
Exchange Commission declared the registration statement effective.
On July 28, 1999, the Company filed a post effective amendment to the
Form S-3 registration statement to register an additional 41,000 shares of the
Company's common stock. On August 13, 1999, the Securities and Exchange
Commission declared the amendment effective.
On August 24, 1999, the Company entered into a Securities Purchase
Agreement with Apple Investors, LLC. In exchange for $2,200,000, the Company
issued a 5% Convertible Debenture in the principal amount of $2,200,000 and a
Warrant to purchase 220,000 shares of the Company's common stock at $3.40 per
[C:\TEMPWORK\MEDIAX\S-3\MX0999]-1
12
<PAGE>
share to Apple Investors, LLC. The proceeds will be used by the Company for
working capital. The offer and sale of the securities was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
On September 10, 1999, the stockholders of the Company, holding a
majority of the voting power, took the following actions: (1) appointed Nancy
Poertner, Rainer Poertner, and Matthew MacLaurin to serve as Directors of the
Company until the next annual meeting of shareholders; (2) ratified and
confirmed the appointment of Davis & Co., CPAs, P.C. as the Company's
independent auditor for the fiscal year ending December 31, 1999; (3) approved
an amendment to the Company's articles of incorporation to increase the number
of authorized shares of $.0001 par value common stock to 25,000,000 shares; and
(4) approved and ratified the 1998 Amendment to the Company's Stock Option Plan.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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13
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION WITH RESPECT
TO THOSE SECURITIES TO WHICH IT RELATES TO ANY PERSONS IN ANY JURISDICTION WHERE
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN AT ITS DATE IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
Table of Contents
The Company ................................................[ ]
Risk Factors................................................[ ]
Available Information.......................................[ ]
Use of Proceeds.............................................[ ]
Selling Stockholders........................................[ ]
Plan of Distribution........................................[ ]
Experts.....................................................[ ]
MediaX CORPORATION
2,514,000 Shares of Common Stock
PROSPECTUS
September 23, 1999
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14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the expenses in connection with the issuance and
distribution of the Securities being registered, other than underwriting
discounts and commissions. We shall bear all such expenses. All amounts set
forth below are estimates, other than the SEC registration fee.
SEC Registration Fee $ 1,857.32
Accounting Fees and Expenses $ 5,000.00
Miscellaneous $ 10,000.00
-----------------
TOTAL $ 16,857.32
-----------------
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The only statute, charter provision, bylaw, contract, or other arrangement under
which any controlling person, director or officer of registrant is insured or
indemnified in any manner against any liability which they may incur in their
capacity as such is Sections 78.7502 and 78.751, the text of which is set forth
below.
Section 78.7502. Discretionary and mandatory indemnification of
officers, directors, employees and agents: General provisions
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court
deems proper.
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15
<PAGE>
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Section 78.751. Authorization required for discretionary
indemnification; advancement of expenses; limitation on indemnification and
advancement of expenses
1. Any discretionary indemnification under NRS 78.7502, unless ordered
by a court or advanced pursuant to subsection 2, may be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
2. The articles of incorporation, the bylaws or an agreement made by
the corporation may provide that the expenses of officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
3. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to NRS 78.7502 or for the
advancement of expenses made pursuant to subsection 2, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
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16
<PAGE>
EXHIBITS
# DESCRIPTION
- ------ --------------------
3.1(d) Certificate of Amendment to Filed electronically herewith
Articles to increase number
of shares of common stock to
25,000,000.
5.1 Opinion of Richard O. Weed Filed electronically herewith
10.22 Securities Purchase Agreement Filed electronically herewith
with Apple Investors, LLC
23.1 Consent of Davis & Co., CPA's, P.C. Filed electronically herewith
24.1 Consent of Richard O. Weed Filed electronically herewith
UNDERTAKINGS
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and
(iii) include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 5(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement of the securities offered, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the termination of the offering.
2. The Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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17
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form S-3 and has duly caused this registrations
statement to be signed on its behalf by the undersigned, thereon duly authorized
in the City of Culver City, California on September 23, 1999.
MediaX CORPORATION
a Nevada corporation
By: /s/ Nancy Poertner
----------------------------------
Nancy Poertner,
Director and President
Pursuant to the requirement of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on September 23, 1999.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- ---------------------------------- -----------------
<S> <C> <C>
/s/ Nancy Poertner
- ----------------------------
Nancy Poertner President, Secretary, and Director September 23, 1999
/s/ Rainer Poertner
- ----------------------------
Rainer Poertner Director September 23, 1999
/s/ Matthew MacLaurin
- ----------------------------
Matthew MacLaurin Executive V.P. and Director September 23, 1999
/s/ Jackie Cabellon Controller (Principal Accounting
- ---------------------------- Officer)
Jackie Cabellon
</TABLE>
September 23, 1999
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18
EXHIBIT 3.1(d)
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
MEDIAX CORPORATION
The undersigned Nancy Poertner, President and Secretary of MEDIAX
CORPORATION does hereby certify:
FIRST: That the stockholders holding a majority of the voting power of
said corporation adopted a resolution to amend the original articles of
incorporation to increase the number of authorized shares of common stock
pursuant to NRS 78.207.
SECOND: The first paragraph of Article IV is hereby amended to read
as follows:
ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which this Corporation shall have
authority to issue is: Twenty Five Million (25,000,000) shares of $.0001 par
value each, which shares shall be designated "Common Stock"; and Ten Million
(10,000,000) shares of $.0001 par value each, which shares shall be designated
"Preferred Stock" and which may be issued in one or more series at the
discretion of the Board of Directors. In establishing a series the Board of
Directors shall give to it a distinctive designation so as to distinguish it
from the shares of all other series and classes, shall fix the number of shares
in such series, and the preferences, rights and restrictions thereof. All shares
on any one series shall be alike in every particular except as otherwise
provided by these Articles of Incorporation or the Nevada Business Corporation
Act.
Dated: September 10, 1999
/s/ Nancy Poertner
---------------------------------------
Nancy Poertner, President
/s/ Nancy Poertner
---------------------------------------
Nancy Poertner, Secretary
State of California
County of Los Angeles
On September 10, 1999, personally appeared before me, a Notary Public,
Nancy Poertner who acknowledged that she executed the above instrument.
---------------------------------------
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19
EXHIBIT 5.1
WEED & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
September 23, 1999
MediaX Corporation
8522 National Boulevard
Culver City, CA 90232
I have acted as counsel to MediaX Corporation (the "Company") and
certain Selling Stockholders (the "Selling Stockholders") in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of an
aggregate of 2,514,000 shares (the "Shares") of the Company's common stock, par
value $.0001 per share (the "Common Stock"), to be sold by the Selling
Stockholders upon the terms and subject to the conditions set forth in the
Company's registration statement on Form S-3 (the "Registration Statement").
In connection therewith, I have examined copies of the Company's
Certificate of Incorporation, Bylaws, the corporate proceedings with respect to
the offering of shares, and such other documents and instruments as I have
deemed necessary or appropriate for the expression of the opinions contacted
herein. In such examination, I have assumed the genuineness of all signatures,
the authenticity and completeness of all documents submitted to us as originals,
the conformity to the original documents of all documents submitted to us as
copies and the correctness of all statements of fact contained in such
documents.
Based on the foregoing, and having regard for such legal
considerations as I have deemed relevant, I am of the opinion that the Shares to
be sold by the Selling Stockholders by means of the Registration Statement, when
sold in accordance with the terms and conditions set forth in the Registration
Statement, will be duly and validly issued, fully paid and nonassessable.
This opinion is for the benefit of the Company and this opinion may
not be relied upon in any manner whatsoever by any other person or entity.
/s/ Richard O. Weed
- ------------------------
Richard O. Weed
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20
EXHIBIT 10.22
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of August 24, 1999, is
entered into by and between MEDIAX CORPORATION, a Nevada corporation (the
"Company"), and APPLE INVESTORS, LLC, a Delaware liability company (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering
this Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act; and
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to
issue, upon the terms and subject to the conditions of this Agreement, 22 units
(the "Units"), each Unit consisting of $100,000 principal amount of the
Company's 5% Convertible Debentures (the "Debentures") and warrants to purchase
10,000 shares of Common Stock of the Company (the "Warrants"). The Debentures
are convertible, at the holder's option, into the Company's common stock, par
value $.0001 per share (the "Common Stock"), on the terms set forth therein, and
the Warrants may be exercised for the purchase of Common Stock, on the terms set
forth therein. The Warrants, Debentures, and Common Stock shall collectively be
known as the "Securities."
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
Closing. The Purchaser hereby agrees to purchase from the
Company 22 Units on the Closing Date (as defined herein). The Debentures shall
be issued in substantially the form attached hereto as Exhibit A, and the
Warrants shall be issued in substantially the form attached hereto as Exhibit B.
The purchase price for each Unit shall be $100,000, and shall be payable in same
day funds.
The Debentures and the Warrants to be purchased by the
Purchaser hereunder, in definitive form, and in such denominations and
registered in such names as the Purchaser or its representative, if any, may
request upon notice to the Company, shall be delivered by or on behalf of the
Company for the account of the Purchaser, against payment by the Purchaser, or
on its behalf, of the purchase price therefor by wire transfer to an account of
the Company, all at the offices of Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, New York 10104, at 3:30 p.m., New York time on August 24,
1999, or at such other time and date as the Purchaser or its representative, if
any, and the Company may agree upon in writing, such date being referred to
herein as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Purchaser represents and warrants to the Company, and
covenants and agrees as follows:
a. The Purchaser and each of its equity owners (i) has such knowledge
and experience in financial and business matters that each is capable of
evaluating the merits and risks of this investment, and (ii) is able to afford
the entire loss of its investment in the Units.
21
<PAGE>
b. All subsequent offers and sales of the Debentures, the Warrants,
and the Common Stock issuable upon conversion or exercise of, or in lieu of
interest payments on, the Debentures or the Warrants, shall be made pursuant to
an effective registration statement under the Securities Act or pursuant to an
applicable exemption from such registration.
c. The Purchaser understands that the Units are being offered and sold
to it in reliance upon exemptions from the registration requirements of the
United States Federal securities laws, and that the Company is relying upon the
truth and accuracy of the Purchaser's representations and warranties, and the
Purchaser's compliance with its agreements, each as set forth herein, in order
to determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Units.
d. The Purchaser: (i) has been provided with sufficient information
with respect to the business of the Company and such documents relating to the
Company and its business and financial condition as the Purchaser, or the
Purchaser's agent or attorney, has requested and the Purchaser has carefully
reviewed the same including, without limitation, the Company's Form 10KSB for
the fiscal year ended December 31, 1998 filed with the Securities and Exchange
Commission ("the Commission"); and (ii) has had access to management of the
Company and the opportunity to discuss the information provided by the Company,
and any questions that the Purchaser had with respect thereto have been answered
to the full satisfaction of the Purchaser.
e. The Purchaser has the requisite power and authority to enter into
this Agreement and the Registration Rights Agreement, dated the date hereof,
between the Company and the Purchaser (the "Registration Rights Agreement"), and
each of this Agreement and the Registration Rights Agreement, and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Purchaser; and each such agreement is, or when executed and
delivered by each of the Purchaser and the Company will be, a valid and binding
agreement of the Purchaser, enforceable in accordance with its respective terms,
except to the extent that enforcement of each such agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. The Company
is duly qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the Company and
its subsidiaries taken as a whole.
b. Capitalization. On the date hereof, the authorized capital of the
Company consists of 7,500,000 shares of Common Stock, par value $.0001 per
share, of which 5,995,885 are issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.0001 per share (the "Preferred Stock"), of which no
shares are issued or outstanding. Schedule 3b sets forth all of the options,
warrants and convertible securities of the Company, and any other rights to
acquire securities of the Company (collectively, the "Derivative Securities")
which are outstanding on the date hereof, including in each case (i) the name
and class of such Derivative Securities, (ii) the issue date of such Derivative
Securities, (iii) the number of shares of Common Stock of the Company into which
such Derivative Securities are convertible as of the date hereof, (iv) the
conversion or exercise price or prices of such Derivative Securities as of the
date hereof, (v) the expiration date of any conversion or exercise rights held
by the owners of such Derivative Securities and (vi) any registration rights
associated with such Derivative Securities.
c. Concerning the Common Stock and the Warrants. The Common Stock
issuable upon conversion of, or in lieu of interest payments on, the Debentures,
and upon exercise of the Warrants, when issued, shall be duly and validly
issued, fully paid and non-assessable, and will not subject the holder thereof
to personal liability by reason of being such a holder. There are no preemptive
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or anti-dilution rights of any stockholder of the Company, as such, to acquire
all or any portion of the Units or all or any portion of the Common Stock
issuable to the Purchaser pursuant to the terms of the Debentures and the
Warrants. The provisions of the Warrants contained in Exhibit B are
substantially the same as all other Warrants of the Company.
d. Reporting Company Status. The Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company has duly filed all materials and documents required to be
filed pursuant to all reporting obligations under either Section 13(a) or 15(d)
of the Exchange Act, if any, for a period of twelve months preceding the offer
and sale of the Units hereunder. The Common Stock is listed and traded on the
OTC Bulletin Board Market (the "OTC"), and the Company is not aware of any
pending or contemplated action or proceeding of any kind to suspend the trading
of the Common Stock. The Company has not, in the two years preceding the date
hereof, received notice (written or oral) from the OTC or any other stock
exchange, market or trading facility on which the Common Stock has been listed
(or on which it has been quoted) to the effect that the Company is not, or was
not, in compliance with the listing or maintenance requirements of such exchange
or market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such maintenance
requirements.
e. Authorized Shares. The Company has reserved and will maintain at
all times a sufficient number of authorized and unissued shares of Common Stock
to effect the conversion of the Debentures and the exercise of the Warrants. The
Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of shares of Common Stock upon conversion of the
Debentures and the exercise of the Warrants. The Company further acknowledges
that its obligation to issue shares of Common Stock upon conversion of the
Debentures and upon exercise of the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and notwithstanding the
commencement of any case under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy
Code"). In the event the Company becomes a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the conversion of the Debentures
and the exercise of the Warrants. The Company agrees, without cost or expense to
the Purchaser, to take or consent to any and all action necessary to effectuate
relief under 11 U.S.C. ss. 362.
f. Legality. The Company has the requisite corporate power and
authority to enter into this Agreement and the Registration Rights Agreement and
to issue and deliver the Debentures, the Warrants, and the Common Stock issuable
upon conversion of, or in lieu of interest payments on, the Debentures and upon
the exercise of the Warrants.
g. Transaction Agreements. This Agreement, the Registration Rights
Agreement, the Debentures and the Warrants (collectively, the "Primary
Documents"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company; this Agreement has been duly
executed and delivered by the Company and this Agreement is, and each of the
Primary Documents, when executed and delivered by the Company, will be, a valid
and binding agreement of the Company, enforceable in accordance with its terms,
except to the extent that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity.
h. Non-contravention. The execution and delivery of this Agreement and
each of the other Primary Documents, and the consummation by the Company of the
transactions contemplated by this Agreement and each of the other Primary
Documents, does not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
Articles of Incorporation or By-laws of the Company, or any material indenture,
mortgage, deed of trust or other agreement or instrument to which the Company is
a party or by which it or any of its properties or assets are bound, or any
existing applicable law, rule, or regulation or any applicable decree, judgment
or order of any court or United States federal or state regulatory body,
administrative agency, or any other governmental body having jurisdiction over
the Company or any of its respective properties or assets. Except as set forth
on Schedule 3h, neither the filing of the registration statement required to be
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filed by the Company pursuant to the Registration Rights Agreement nor the
offering or sale of the Units, the Debentures, or the Warrants as contemplated
by this Agreement gives rise to any rights, other than those which have been
waived or satisfied on or prior to the Closing Date, for or relating to the
registration of any shares of the Common Stock.
i. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the execution and delivery of, or the performance by the
Company of, this Agreement and the other Primary Documents.
j. SEC Filings. None of the reports or documents filed by the Company
with the Commission contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein, or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
k. Financial Reports. The financial statements of the Company provided
to the Purchaser (the "Financial Statements") were prepared from and in
accordance with the books and records of the Company in accordance with GAAP,
consistently applied and maintained throughout the periods indicated. The
Financial Statements fairly present the assets, liabilities and financial
condition of the Company as of the date thereof and the results of operations.
l. Stabilization. Neither the Company, nor any of its subsidiaries or
affiliates, has taken or will take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock.
m. Absence of Certain Changes. Except as disclosed in the Company's
public filings with the Commission, since December 31, 1998, there has been no
change nor any development which has had or could reasonably be expected to have
a Material Adverse Effect (as defined below).
n. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser (i) that could reasonably be expected to
have a material adverse effect upon the business, properties, condition
(financial or otherwise), prospects, outstanding securities, operations or
results of operations of the Company or any of its subsidiaries (a "Material
Adverse Effect") or (ii) that could reasonably be expected to materially and
adversely affect the ability of the Company to perform the obligations set forth
in the Primary Documents.
o. Title to Properties; Liens and Encumbrances. The Company has good
and marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges created in the ordinary course of business.
p. Patents and Other Proprietary Rights. The Company has sufficient
title and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of its business as now conducted and as proposed to be
conducted, and the conduct of such business does not and would not conflict with
or constitute an infringement on the rights of others. No claim has been made
against the Company alleging the infringement by the Company of any patent,
trademark, service mark, trade name, copyright, trade secret, license, or other
intellectual property right or franchise right of any person, except for any
such claim which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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q. Permits. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now conducted,
the lack of which could reasonably be expected to have a Material Adverse
Effect. The Company is not in default in any respect under any of such
franchises, permits, licenses or similar authority.
r. Absence of Litigation. Except as disclosed in the Company's public
filings with the Commission, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company, in which an unfavorable decision, ruling or finding could
reasonably be expected to have a Material Adverse Effect, or to adversely affect
the transactions contemplated by the Primary Documents, or to adversely affect
the validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, the Primary Documents.
s. No Default. The Company is not in default in the performance or
observance of any obligation, covenant or condition contained in any indenture,
mortgage, deed of trust or other instrument or agreement to which it is a party
or by which it or its property may be bound.
t. Transactions with Affiliates. Except as disclosed in the Company's
public filings with the Commission, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors or
affiliates that, had they existed on December 31, 1998, would have been required
to be disclosed in the Company's 1998 Annual Report to stockholders.
u. Employment Matters. The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
v. Insurance. The Company maintains property and casualty, general
liability, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer that
has issued any insurance policy to the Company that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
w. Taxes. All tax returns required to be filed by the Company have
been prepared and filed in compliance with all applicable laws, or if not yet
filed have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges upon
the Company or upon any of its respective properties, income or franchises,
shown in such returns and on assessments received by the Company to be due and
payable have been paid, or adequate reserves therefor have been set up, if any
of such taxes are being contested in good faith.
x. Foreign Corrupt Practices Act. Neither the Company nor any of its
directors, officers or other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
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assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
y. Investment Company Act. The Company is not, and does not intend to
conduct its business in a manner which would cause it to become, an "investment
company" as defined in Section 3(a) of the Investment Company Act of 1940, as
amended.
z. Agent Fees. The Company has not incurred any liability for any
finder's or brokerage fees or agent's commissions in connection with the
transactions contemplated by this Agreement, other than a fee of 8% of gross
proceeds to be paid to EBI Securities Corporation.
aa. Private Offering. Assuming for the purposes of this representation
the accuracy of the Purchaser's representations and warranties set forth in
Section 2(a) through (d) hereof, the offer, sale and issuance of the Units and
the other securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act. The Company agrees that neither
the Company nor anyone acting on its behalf will offer any of the Units, the
Debentures, the Warrants, or any similar securities for issuance or sale, or
solicit any offer to acquire any of the same from anyone so as to render the
issuance and sale of such securities subject to the registration requirements of
the Securities Act. The Company has not offered or sold the Units by any form of
general solicitation or general advertising, as such terms are used in Rule
502(c) under the Securities Act.
bb. Full Disclosure. The representations and warranties of the Company
set forth in this Agreement do not contain any untrue statement of a material
fact or omit any material fact necessary to make the statements contained
herein, in light of the circumstances under which they were made, not
misleading.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, (i) neither the Units, the
Debentures, the Warrants, nor the Common Stock issuable upon conversion of, or
in lieu of interest payments on, the Debentures or upon exercise of the
Warrants, have been, or are being, registered under the Securities Act, and may
not be transferred unless (a) subsequently registered thereunder or (b)
transferred pursuant to an exemption from such registration; and (ii) any sale
of the Securities made in reliance upon Rule 144 under the Securities Act may be
made only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of the Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the Securities Act, may require compliance
with another exemption under the Securities Act and the rules and regulations of
the Commission thereunder. The provisions of Section 4(a) and 4(b) hereof,
together with the rights of the Purchaser under this Agreement and the other
Primary Documents, shall be binding upon any subsequent transferee of the
Debentures and the Warrants.
b. Restrictive Legend. The Purchaser acknowledges and agrees that,
until such time as the Securities shall have been registered under the
Securities Act or the Purchaser demonstrates to the reasonable satisfaction of
the Company and its counsel that such registration is no longer required, such
Securities may be subject to a stop-transfer order placed against the transfer
of such Securities, and such Securities shall bear a restrictive legend in
substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NO LONGER REQUIRED.
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c. Filings. The Company covenants and agrees that it will make all
required filings in connection with the sale of the Securities to the Purchaser
as required by United States laws and regulations, or by any domestic securities
exchange or trading market, including, if applicable, the filing of a notice on
Form D (at such time and in such manner as required by the Rules and Regulations
of the Commission), and to provide copies thereof to the Purchaser promptly
after such filing or filings.
d. Listing of Underlying Shares. If, after the date hereof, the
Company shall list the Common Stock on any of the New York Stock Exchange,
American Stock Exchange, Nasdaq National Market or Nasdaq SmallCap Market (each,
a "Subsequent Market"), then the Company shall include in such listing for the
benefit of the Purchaser such number of shares (the "Underlying Shares") as
shall equal the sum of: (x) the number of shares underlying Debentures or
Warrants already converted or exercised, respectively, by the Purchaser, which
are still registered to the Purchaser on the books of the Company; (y) a
sufficient number of shares to effect the conversion and exercise, respectively,
of all remaining Debentures and Warrants; and (z) such number of shares as shall
have been distributed to the Purchaser by the Company as payment of dividend or
interest on the Common Stock or the Debentures held by the Purchaser (such sum
herein to be referred to as the "Required Minimum"). At any time at which the
Required Minimum shall exceed the number of Underlying Shares previously listed
on account thereof with a Subsequent Market, the Company shall take the
necessary actions to immediately list a number of Underlying Shares as equals no
less than the then Required Minimum.
e. Reporting Status. So long as the Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act and
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
f. State Securities Filings. The Company shall from time to time
promptly take such action as the Purchaser or any of its representatives, if
applicable, may reasonably request to qualify the Securities for offering and
sale under the securities laws (other than United States federal securities
laws) of the jurisdictions in the United States as shall be so identified to the
Company, and to comply with such laws so as to permit the continuance of sales
therein, provided that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction.
g. Use of Proceeds. The Company will use all of the net proceeds from
the issuance of the Units for working capital.
h. Authorization of Additional Shares. The Company covenants and agrees
that, on or before September 10, 1999 it will authorize for issuance a
sufficient number of shares of Common Stock such that the Company's total number
of authorized shares of Common Stock shall be 25,000,000, and that it shall
complete and file all necessary filings, including such amendments to the
Company's charter or other organizational documents, and obtain such approvals
and resolutions from the Company's shareholders and Board of Directors as may be
necessary to effect such authorization.
i. Reservation of Common Stock. The Company will at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Debentures and the
exercise of the Warrants. The Company will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance that is not
less than two (2) times the number that is then actually issuable upon the
conversion of the Debentures and the exercise in full of the Warrants.
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j. Sales of Additional Shares. The Company shall not, directly or
indirectly, offer, sell, offer to sell, contract to sell or otherwise dispose of
any of its securities or any security or other instrument convertible into
exchangeable for shares of its capital stock, in each case, for a period ending
on the later of (x) 180 days after the date of this Agreement or (y) 180 days
after the Registration Statement has been declared effective by the Commission
(the "Lock-Up Period"), except that the Company may (i) issue securities for the
aggregate consideration of at least $8 million in connection with a bona fide,
firm commitment, underwritten public offering under the Securities Act; (ii)
issue securities for the aggregate consideration of at least $8 million in
connection with a private placement involving a bona fide placement agent;
provided, however, that such securities may not be exercisable or convertible at
a floating rate or at a discount to the market price; (iii) issue shares of
Common Stock which are issued in connection with a bona fide transaction
involving the acquisition of another business entity or segment of any such
entity by the Company by merger, asset purchase, stock purchase or otherwise;
(iv) issue shares of Common Stock in exchange for $1.1 million in debt
outstanding to ____________, provided, however, that such debt may only be
exchanged for or converted to Common Stock at no less than market price at the
time of such exchange or conversion; (v) issue shares of Common Stock to
directors, officers, employees or consultants of the Company for the primary
purpose of soliciting or retaining their services in an aggregate amount,
together with any New Options (as defined below) vesting or becoming exercisable
during the Lock-Up Period, not to exceed 500,000 shares; (vi) issue shares of
Common Stock upon the exercise or conversion of currently outstanding options,
warrants and other convertible securities and up to 500,000 shares of Common
Stock underlying New Options as provided in clause (vii) below; (vii) issue
options to purchase shares of its Common Stock to its directors, officers,
employees and consultants in connection with its existing stock option plans;
provided, that, during the Lock-Up Period, only New Options to purchase not more
than 500,000 shares of Common Stock may vest or become exercisable; (viii) issue
Common Stock in connection with a stock split, stock dividend or similar
recapitalization of the Company which affects all holders of the Company's
Common Stock on an equivalent basis, in each case, without the prior written
consent of the Purchaser. In addition, the Company agrees that it will not cause
any shares of its capital stock that are issued in connection with a transaction
of the type contemplated above (or upon the conversion or exercise of other
securities that are issued in connection with such transaction) or that were
issued in connection with any financing, acquisition or other transaction to be
covered by a registration statement that is filed with the Commission or
declared effective by the Commission until a registration statement covering the
Warrants and the Common Stock underlying the Debentures and the Warrants that
was filed by the Company pursuant to its obligations under the Registration
Rights Agreement has been effective for at least 180 days; except for any
registration statement as may be filed in connection with a bona fide, firm
commitment underwritten public offering under the Securities Act.
k. Stockholder Approval. The Company agrees to use its best efforts
(including obtaining any vote of its stockholders required by applicable law) to
authorize and approve the issuance of the Common Stock issuable upon conversion
of the Debentures and Warrants, to the extent that such conversion or issuance
results in the issuance of 20% or more of the Company's outstanding Common
Stock.
l. Ownership. At no time shall the Purchaser (including its officers,
directors and affiliates) maintain, in the aggregate, beneficial ownership (as
defined for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended) of shares of Common Stock in excess of 9.9% of the Company's
outstanding Common Stock unless the Purchaser gives the Company at least
sixty-one days notice that it intends to exceed such an amount.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Sections 4(a) and 4(b) hereof prior to the registration and sale
of the Securities in the manner contemplated by the Registration Rights
Agreement, will be given by the Company to the transfer agent, and that the
shares of Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures or upon exercise of the Warrants shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing in this Section shall affect in any way the Purchaser's obligations
and agreement to comply with all applicable securities laws upon resale of the
Securities. If the Purchaser provides the Company with an opinion of counsel
reasonably satisfactory (as to both the identity of such counsel and the content
of such opinion) to the Company and its counsel that registration of a resale by
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the Purchaser of any of the Securities in accordance with clause (i)(b) of
Section 4(a) of this Agreement is not required under the Securities Act, the
Company shall permit the transfer of the Securities and, in the case of the
Common Stock, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legends in such names and in such
denominations as specified by the Purchaser.
b. The Company will permit the Purchaser to exercise its right to
convert the Debentures or to exercise the Warrants by faxing an executed and
completed Notice of Conversion or Form of Election to Purchase, as applicable,
to the Company, and delivering within three (3) business days thereafter, the
original Notice of Conversion (and the related original Debentures) or Form of
Election to Purchase (and the related original Warrants) to the Company by hand
delivery or by express courier, duly endorsed. Each date on which a Notice of
Conversion or Form of Election to Purchase is faxed in accordance with the
provisions hereof shall be deemed a "Conversion Date." The Company will transmit
the certificates representing the Common Stock issuable upon conversion of any
Debenture or upon exercise of any Warrants (together with the Debentures not so
converted, or the Warrants not so exercised) to the Purchaser via express
courier as soon as practicable, but in all events no later than three (3)
business days in the case of conversion of the Debentures or five (5) business
days in the case of the exercise of any Warrant after the Conversion Date (the
"Delivery Date"). For purposes of this Agreement, such conversion of the
Debentures or the exercise of the Warrants shall be deemed to have been made
immediately prior to the close of business on the Conversion Date.
c. In lieu of delivering physical certificates representing the Common
Stock issuable upon the conversion of the Debentures or the exercise of the
Warrants, provided the Company's transfer agent is a participant in the
Depositary Trust Company ("DTC") Fast Automated Securities Transfer program, on
the written request of the Purchaser, who shall have previously instructed the
Purchaser's prime broker to confirm such request to the Company's transfer
agent, the Company shall cause its transfer agent to electronically transmit
such Common Stock to the Purchaser by crediting the account of the Purchaser's
prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system no later than the applicable Delivery Date.
d. The Company understands that a delay in the issuance of Common
Stock beyond the applicable Delivery Date could result in an economic loss to
the Purchaser. As compensation to the Purchaser for such loss, the Company
agrees to pay to the Purchaser for late issuance of Common Stock upon conversion
of the Debentures or upon exercise of the Warrants the sum of $2,000 per day for
each $100,000 in aggregate principal amount of Debentures that are being
converted or for any or all shares of Common Stock purchased upon the exercise
of the Warrants. The Company shall pay any payments that are payable to the
Purchaser pursuant to this Section 5 in immediately available funds upon demand.
Nothing herein shall limit the Purchaser's right to pursue actual damages for
the Company's failure to so issue and deliver Common Stock to the Purchaser.
Furthermore, in addition to any other remedies which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of such Common Stock within five (5) business days after the relevant Delivery
Date, the Purchaser will be entitled to revoke the relevant Notice of Conversion
or Form of Election to Purchase by delivering a notice to such effect to the
Company, whereupon the Company and the Purchaser shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion
or Form of Election to Purchase. For purposes of this Section 5, "business day"
shall mean any day in which the financial markets of New York are officially
open for the conduct of business therein.
6. EXPENSES.
The Company covenants and agrees with the Purchaser that the
Company will pay or cause to be paid the following: (a) the fees, disbursements
and expenses of the Purchaser's counsel in connection with drafting,
negotiation, execution and delivery of the Primary Documents and the
consummation of the transactions contemplated thereby, including without
limitation the issuance of the Securities payable on the Closing Date, (b) all
expenses in connection with registration or qualification of the Securities for
offering and sale under state securities laws as provided in Section 4(f)
hereof, and (c) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
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Section, including the fees and disbursements of the Company's accountants and
other professional advisors, if any. If the Company fails to satisfy its
obligations or to satisfy any condition set forth in this Agreement, as a result
of which the Securities are not delivered to the Purchaser on the terms and
conditions set forth herein, the Company shall reimburse the Purchaser for any
out-of-pocket expenses reasonably incurred in making preparations for the
purchase, sale and delivery of the Securities not so delivered.
7. RIGHT OF FIRST OFFER; PREEMPTIVE RIGHT
a. The Company hereby grants to the Purchaser, for the term of 18
months from the date of this agreement, a right of first offer with respect to
future rounds of financing by the Company. Each time that the Company proposes
to offer any shares of, or securities convertible into or exercisable for any
shares of, any class or its capital stock, or debt instruments including without
limitation bonds or debentures (a "Financing"), other than in connection with a
bona fide, firm commitment public offering under the Securities Act, the Company
shall first make an offering of such Financing to the Purchaser in accordance
with the following provisions:
b. The Company shall deliver notice in writing ("Notice of Financing")
to the Purchaser setting forth (i) its bona fide intention to offer the
Financing, (ii) the number of securities or units to be offered, and (iii) in
reasonable detail the terms and conditions upon which it proposes to offer such
a Financing.
c. Within 5 business days after receipt of the Notice of Financing,
the Purchaser may elect to purchase or obtain, at the price and on the terms
specified in the Notice, all or any portion of such Financing. If the Purchaser
does not elect to purchase all of the Financing as provided in this subsection
(c), the Company may, during the 30-day period following the expiration of the
period provided in this subsection (c), offer the remaining unsubscribed portion
of the Financing to any person or persons on terms not materially different than
those specified in the Notice. Upon any material change in the terms of the
Financing, the right provided hereunder shall be deemed to be revived and the
Financing shall not be offered unless first reoffered to the Purchaser in
accordance herewith.
d. The right of first offer in this Article shall not be applicable to
the issuance or sale of not to exceed 500,000 shares of Common Stock (or options
therefor) to employees for the primary purpose of soliciting or retaining their
employment, and to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities outstanding on the date
hereof.
8. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to principles
of conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement. This Agreement and each of the Primary Documents have been entered
into freely by each of the parties, following consultation with its respective
counsel, and shall be interpreted fairly in accordance with its respective
terms, without any construction in favor of or against either party. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
unenforceability of this Agreement in any other jurisdiction. This Agreement
shall inure to the benefit of, and be binding upon, the successors and assigns
of each of the parties hereto, including any transferees of the Securities,
except that neither this Agreement, any of the other Primary Documents, nor any
of the rights or obligations hereunder or thereunder may be assigned or
transferred by the Company without the prior written consent of the Purchaser.
This Agreement may be amended only by an instrument in writing signed by the
party to be charged with enforcement. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
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9. NOTICES.
Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
COMPANY: MEDIAX CORPORATION
Attention: Rainer Poertner
8522 National Boulevard, Suite 110
Culver City, CA 90232
Telephone (310) 815-8002
Facsimile (310) 815-8096
With a copy to:
Richard O. Weed
Weed & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
PURCHASER: APPLE INVESTORS, LLC
c/o West Asset Management LLC
One World Trade Center
Suite 4563
New York, New York 10048
Att: Daniel J. Saks
Telephone (212) 775-9299
Facsimile (212) 775-9311
With a copy to:
MORRISON & FOERSTER, LLP
1290 Avenue of the Americas
New York, New York 10104
Att: Ira A. Greenstein, Esq.
Telephone (212) 468-8000
Facsimile (212) 468-7900
10. SURVIVAL.
The agreements, covenants representations and warranties of
the Company and the Purchaser shall survive the execution and delivery of this
Agreement and the delivery of the Securities hereunder.
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IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
MEDIAX CORPORATION
By:
Name:
Title:
APPLE INVESTORS, LLC
By: WEC Asset Management LLC, Manager
By:
Name: Daniel J. Saks
Title: Managing Director
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EXHIBIT INDEX
EXHIBIT A FORM OF DEBENTURE
EXHIBIT B FORM OF WARRANT
EXHIBIT C FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D OPINION OF COUNSEL
EXHIBIT A TO SECURITIES PURCHASE AGREEMENT
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
Issue Date: August 24, 1999 Principal Amount: $2,200,000.00
MEDIAX CORPORATION
5% Convertible Debenture
No.: A-1
1. Consideration. FOR VALUE RECEIVED, MEDIAX CORPORATION (the "Company"),
a Nevada corporation, hereby promises to pay to the order of APPLE
INVESTORS, LLC, or its registered assigns (hereinafter, the "Registered
Holder"), $2,200,000.00 in lawful money of the United States on August
24, 2002 (the "Maturity Date"), with interest thereon from the date of
this Debenture in like money at the rate of five percent (5%) per annum
on the unpaid balance of this Debenture until paid. Principal payments
shall be reduced by that portion of the principal amount of the
Debenture that has been converted into the Company's common stock, par
value $.0001 per share (the "Common Stock"), pursuant to Section 4, or
redeemed pursuant to Section 6.
2. Payment; No Payment. Principal and interest shall be payable at the
most recent address as the Registered Holder shall have designated to
the Company in writing. No payment of the principal of the Debenture
may be made prior to the Maturity Date by the Company without the
consent of the Registered Holder, except as otherwise provided herein.
At the Company's option, any interest payment required to be paid on
this Debenture may be made in the form of Common Stock, with the number
of shares of such Common Stock to be payable in lieu of such interest
payments to be determined in accordance with the provisions of Section
4, as if such interest payment were a portion of the principal amount
of the Debenture to be converted into Common Stock.
3. Issuance of Debentures. This Debenture has been issued by the Company
pursuant to the authorization of the Board of Directors of the Company
(the "Board") and issued pursuant to a Securities Purchase Agreement,
dated as of August 24, 1999, by and between the Company and the
Purchaser identified therein (the "Securities Purchase Agreement").
Pursuant to the Securities Purchase Agreement, the Company issued units
(the "Units"), each Unit consisting of $100,000 principal amount of the
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Debentures and 10,000 five-year non-redeemable warrants (the
"Warrants") to purchase Common Stock. Pursuant to the Securities
Purchase Agreement, up to $2,200,000 aggregate principal amount of
Debentures may be issued. The Securities Purchase Agreement contains
certain additional terms that are binding upon the Company and each
Registered Holder of the Debentures. A copy of the Securities Purchase
Agreement may be obtained by any Registered Holder of the Debentures
from the Company upon written request. Capitalized terms used but not
defined herein shall have the meanings set forth in the Securities
Purchase Agreement. The Debentures, together with any debentures from
time to time issued in replacement thereof, whether pursuant to
transfer and assignment, partial conversion thereof or otherwise, are
collectively referred to herein as the "Debentures."
4. Conversion Price.
(a) At the option of the Registered Holder hereof,
all or any part of the unpaid principal amount of this
Debenture may, upon execution of the Notice of Conversion
attached hereto and the surrender of this Debenture to the
Company for conversion in accordance with Section 5(b) of the
Securities Purchase Agreement, be convertible into fully-paid,
nonassessable shares of Common Stock, at a conversion price
(the "Conversion Price") equal to the lesser of (i) 110% of
the average Closing Bid Price for the five trading days prior
to the Closing Date ($3.40) or (ii) 87.5% of the average of
the three (3) lowest Closing Bid Prices of the Common Stock
for the thirty (30) trading days prior to the date of the
delivery of the Notice of Conversion (the "Applicable
Conversion Price"). During any thirty trading day period in
which the closing market price of the Common Stock on each
trading day is less than two dollars per share, the Registered
Holder may convert no more than 15% of the initial face amount
of the debenture within any such thirty-day period. If, during
any period following the issuance of this Debenture, as a
result of (x) the Registration Statement not being effective
by the Required Effective Date, as such terms are defined in
the Registration Rights Agreement, or (y) the occurrence of
any of the events set forth in Section 3(e) or 3(f) of the
Registration Rights Agreement, dated as of the above date, by
and between the Company and the Registered Holder (the
"Registration Rights Agreement"), the Registered Holder is not
able to sell shares of Common Stock issuable upon conversion
of, or in lieu of interest payments on, this Debenture
pursuant to a registration statement filed pursuant to such
agreement, the Registered Holder shall have the right, for any
purpose under this Debenture during such period and
thereafter, to cancel any Notice of Conversion issued during
the time period that the Registered Holder has not been able
to sell shares of Common Stock because such registration
statement is not effective. "Conversion Date" shall have the
meaning given such term in Section 5(b) of the Securities
Purchase Agreement.
(c) For purposes of this Debenture, the term "Closing
Bid Price" means for the Common Stock, as of any date, (i) the
closing bid price on the principal securities exchange or
trading market where the Company's Common Stock is listed or
traded, as reported by Bloomberg, L.P. ("Bloomberg") or The
Wall Street Journal (the "Journal") (or, if not so reported,
as otherwise reported by The Nasdaq Smallcap Market) or, (ii)
if applicable, the closing bid price of the Common Stock in
the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg or the Journal, or,
if no closing bid price is reported for the Common Stock by
Bloomberg or the Journal, then the average of the bid prices
of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price of the Common Stock cannot be calculated on
such date on any of the foregoing bases, the Closing Bid Price
of the Common Stock on such date shall be the fair market
value as mutually determined by the Company and the Registered
Holder. "Trading day" shall mean any day on which the
Company's Common Stock is traded for any period on the
principal securities exchange or other securities market on
which the Common Stock is then being traded.
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(d) If the Registered Holder does not exercise its
right to convert the Debenture into shares of Common Stock of
the Company during the conversion period, the Debenture will
continue to accrue interest at the rate of five percent (5%)
per annum on the unpaid balance of the Debenture until the
Maturity Date, subject to the provisions of Section 2 above
and Section 6 below. All accrued interest payable on this
Debenture for which conversion has been requested shall be
payable on the Conversion Date in shares of Common Stock at
the Conversion Price.
5. Conversion and Delivery. Subject to the limitations set forth below
and in Section 6, Notice of Conversion may be given at any time after
the date hereof. The Company shall convert this Debenture pursuant to
such Notice of Conversion into shares of Common Stock in accordance
herewith and Section 5 of the Securities Purchase Agreement.
No fractional shares of Common Stock shall be issued upon conversion
of this Debenture. The Registered Holder expressly waives his rights
to receive a certificate for any fractional shares. If less than all
of the unpaid principal amount evidenced by this Debenture shall be
converted, the Company will, upon such exercise of the conversion
privilege, execute and deliver to the Registered Holder hereof a new
Debenture (dated the date hereof) evidencing the remaining amount of
principal then outstanding.
6. Redemption by Company.
(a) If while this Debenture is outstanding there
shall occur a Change in Control of the Company (as defined
below), then, at the option of the Registered Holder, the
Company shall, on the effective date of and subject to the
consummation of such Change in Control, redeem this Debenture
for cash from the Registered Holder at a redemption price
equal to 125% of the aggregate principal and accrued interest
outstanding under this Debenture. Nothing in this subsection
shall limit the Registered Holder's right to convert this
Debenture on or prior to such Change in Control. For purposes
hereof, a "Change in Control" shall be deemed to have occurred
if (A) any person or group (as defined for purposes of
Regulation 13D of the Securities Exchange Act of 1934, as
amended) (excluding persons who on the date hereof are
beneficial owners of shares of the Company's voting stock and
affiliates of such persons) shall have become the beneficial
owner or owners of more than 50% of the outstanding voting
stock of the Company; provided, that beneficial ownership of
preferred stock or any convertible security shall not be given
effect toward counting a person's or group's beneficial
ownership; (B) there shall have occurred a merger or
consolidation in which the Company or an affiliate of the
Company is not the survivor or in which holders of the Common
Stock of the Company shall have become entitled to receive
cash, securities of the Company other than voting common stock
or securities of any other person; (C) at any time persons
constituting the Existing Board of Directors cease for any
reason whatsoever to constitute at least a majority of the
members of the Board of Directors of the Company; or (D) there
shall have occurred a sale of all or substantially all the
assets of the Company. For purposes hereof, the term "Existing
Board of Directors" shall mean the persons constituting the
Board of Directors of the Company on the date hereof, together
with each new director whose election, or nomination for
election by the Company's stockholders is approved by a vote
of the majority of the members of the Existing Board of
Directors who are in office immediately prior to the election
or nomination of such director.
(b) If the price of the Company's Common Stock is
less than $1.50 per share, the Company shall have the option
to (A) redeem the outstanding principal amount of this
Debenture at the redemption price of one hundred twenty-five
percent (125%) of the principal amount hereof plus accrued
interest on this Debenture, if any, upon fifteen days' written
notice to the Purchaser, provided, however, that the
redemption price shall be placed in escrow prior to the
Company's issuance of the notice of redemption, and shall
remain in escrow until the earlier of (x) the date of the
redemption or (y) the conversion of the Debenture. Nothing in
this subsection shall limit the Registered Holder's right to
convert this Debenture prior to such redemption by the
Company.
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(c) If the Company fails to have a registration
statement effective within 150 days of the date of the Stock
Purchase Agreement, at the option of the Purchaser, the
Company shall redeem these Debentures at a redemption price of
one hundred twenty-five percent (125%) of the principal amount
hereof plus accrued and unpaid interest thereon.
(d) If the Company elects to redeem the Debentures
pursuant to any of the terms or conditions set forth in this
Section 6, the Company shall remit the redemption price to the
Registered Holder thereof immediately upon such redemption.
7. Covenants.
(a) The Company will pay all taxes, assessments and
governmental charges lawfully levied or assessed upon it, its
property and any part thereof, and upon its income for
profits, and any part thereof, before the same shall become
delinquent; and will duly observe, and conform to, all lawful
requirements of any governmental authority relative to any of
its property, and all covenants, terms and conditions upon or
under which any of its property is held; provided that nothing
in this Section shall require the Company to observe or
conform to any requirement of governmental authority or to pay
any such tax, assessment or governmental charges so long as
the validity thereof shall be contested in good faith.
(b) Subject to the other provisions of this
Debenture, the Company at all times will maintain its
corporate existence and right to carry on its business and
will duly procure all necessary renewals and extensions
thereof and use its best efforts to maintain, preserve and
renew all of its rights, powers, privileges and franchises;
provided, however, that nothing herein contained shall be
construed to prevent the Company from ceasing or omitting to
exercise any rights, powers, privileges or franchises which,
in the judgment of the Board, can no longer be profitably
exercised, nor to prevent the consolidation, merger or
liquidation of any subsidiary or subsidiaries of the Company
with or into the Company.
(c) The Company will at no time close its stock
transfer books against the transfer of any shares of Common
Stock issued or issuable upon the conversion of, or in lieu of
payments on, the Debentures, in any manner which interferes
with the timely conversion of such Debentures.
(d) The Company shall not, without the prior written
consent of the Registered Holder of this Debenture, issue any
shares of its capital stock, other than as permitted by
Section 4(j) of the Securities Purchase Agreement. The Company
shall not, without the prior written consent of the Registered
Holder, issue any shares of Preferred Stock in exchange for
the Debentures as provided hereunder. The term "capital stock"
includes all stock of any class or classes (however
designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after
the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall
ordinarily be entitled to vote for the election of the
directors of the Company.
(e) The Company will not, by amendment of its
Certificate of Incorporation or Bylaws or through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be
observed or performed hereunder or pursuant to the Securities
Purchase Agreement by the Company, and will at all times
assist in good faith in the carrying out of all the provisions
of this Debenture and the Securities Purchase Agreement and in
the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the
Registered Holders of the Debentures against impairment.
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<PAGE>
(f) In the event of any taking by the Company of a
record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right,
the Company shall mail to each Registered Holder of the
Debentures, at least ten (10) days prior to the date specified
therein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend, distribution
or right, and the amount and character of such dividend,
distribution or right.
8. Taxes. The issuance of certificates representing shares of Common
Stock upon the conversion of this Debenture shall be made without
charge to the converting Registered Holder of the Debenture for any
tax with respect to such issue.
9. No Rights as Shareholder. The Registered Holder of this Debenture
shall not, by reason of the ownership of this Debenture, have any
rights whatsoever as a shareholder of the Company, or any other
rights, whatsoever, except as stated in this Debenture and in the
Securities Purchase Agreement.
10. Limitation on Certain Corporate Acts. The Company hereby covenants and
agrees that upon any consolidation or merger or upon the transfer of
all or substantially all of the property or assets of the Company, the
due and punctual payment of the principal and interest on all the
Debentures according to their tenor and the due and punctual
performance and observance of all the terms, covenants and conditions
of the Debentures and the Securities Purchase Agreement to be kept and
performed by the Company shall be expressly assumed by the corporation
formed by such consolidation or into which the Company shall have
merged, or by the purchaser of such property or assets; and such
assumption shall be an express condition of such merger or
consolidation agreement or agreement for the transfer of property or
assets.
11. Events of Default. In case one or more of the following events of
default shall have occurred:
(a) default in the due and punctual payment of
interest upon or principal of any of the Debentures as and
when the same becomes due and payable either at maturity or
otherwise; or
(b) failure to deliver the shares of Common Stock
required to be delivered upon conversion of Debentures in
the manner and at the time required by Section 5 of the
Securities Purchase Agreement; or
(c) failure of the Company to have authorized the
number of shares of Common Stock issuable upon conversion of
the Debentures or exercise of the Warrants.
(d) failure on the part of the Company to duly
observe or perform any of its other covenants or agreements
contained in the Debentures or in Section 4(j) of the
Securities Purchase Agreement, or to cure any material
breach in a material representation or covenant contained in
the Securities Purchase Agreement or the Registration Rights
Agreement for a period of thirty (30) days after the date on
which written notice of such failure or breach requiring the
same to be remedied has been given by a Registered Holder to
the Company; or
(e) a decree or order by a court having
jurisdiction has been entered adjudging the Company a
bankrupt or insolvent, or approving a petition seeking
reorganization of the Company under any applicable
bankruptcy law and such decree or order has continued
undischarged or unstayed for a period of sixty (60) days; or
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<PAGE>
a decree or order of a court having jurisdiction for the
appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of the Company or of
all or substantially all of its property, or for the
winding-up or liquidation of its affairs, has been entered,
and has remained in force undischarged or unstayed for a
period of sixty (60) days;
(f) the Company institutes proceedings to be
adjudicated a voluntary bankrupt, or consents to the filing
of a bankruptcy proceeding against it, or files a petition
or answer or consent seeking reorganization under applicable
law, or consents to the filing of any such petition or to
the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of all or
substantially all of its property, or makes an assignment
for the benefit of creditors, or admits in writing its
inability to pay its debts generally as they become due;
then, and in each and every such case, so long as such event of
default has not been remedied and unless the principal of all the
Debentures has already become due and payable, the holders of not less
than fifty-one percent (51%) in principal amount of the Debentures
then outstanding, by notice in writing to the Company, may declare the
principal of all the Debentures then outstanding and the interest
accrued thereof, if not already due and payable, to be due and payable
immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything herein contained to the
contrary notwithstanding.
12. Transferability. This Debenture is transferable, in whole or in part,
only in accordance with the terms of Section 5 of the Securities
Purchase Agreement. The Registered Holder may submit a written
request, in person or by his duly authorized attorney, for a transfer
of the Debenture on the register of the Company maintained at its
principal offices (a "Request for Transfer"). In the event that the
Registered Holder should seek to transfer this Debenture, the Company
shall hereby have a right of first refusal to purchase this Debenture
upon the same terms and conditions as have been offered to any other
third party ("the Potential Purchaser"). If the Company does not elect
to purchase this Debenture within 5 business days of the Request for
Transfer, the Registered Holder may transfer this Debenture to a
Potential Purchaser. The Company may deem and treat the person in
whose name this Debenture is registered as the absolute owner hereof,
for the purpose of receiving payment of the principal thereof and
interest hereon, whether or not the same shall be overdue, and for all
other purposes whatsoever, including but without limitation, the
giving of any written notices required hereunder, and the Company
shall not be affected by any notice to the contrary.
13. Acceptance of Holder. This Debenture is subject to all of the
covenants, obligations, conditions, rights, limitations and other
provisions stated herein, to all of which the holder and each
successive holder hereof by acceptance of any Debenture assents.
14. Amendments and Modification. Changes in or additions to this Debenture
may be made, and compliance with any covenant or condition herein set
forth may be omitted only if the Company shall obtain the written
consent from the Registered Holder of this Debenture.
15. Non-Waiver. Neither any failure nor any delay on the part of the
Registered Holder of this Debenture in exercising any right, power, or
privilege hereunder shall operate as a waiver of any rights of any
holder hereof, nor shall a single or partial exercise of any right
preclude any other or further exercise of any other right, power or
privilege accorded to any Registered Holder hereof.
16. Attorney's Fees. If this Debenture shall not be paid when due and
shall be placed by the Registered Holder hereof in the hands of an
attorney for collection, through legal proceedings or otherwise, or if
this Debenture shall not be converted into shares of Common Stock on
the Conversion Date, subject to the provisions of Section 5 hereof,
and an action is brought by the Registered Holder with respect
thereto, the Company shall pay attorney's fees to the Registered
Holder hereof, together with reasonable costs and expenses of
collection or enforcement incurred in connection with any such action.
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17. Specific Performance. The Company expressly agrees that each
Registered Holder may not have adequate remedies at law if the Company
does not perform its obligations under this Debenture. Upon a breach
of the terms or covenants of this Debenture by the Company, the
Registered Holder shall, each in addition to all other remedies, be
entitled to obtain injunctive relief, and an order for specific
performance of the Company's obligations hereunder.
18. Governing Law. This Debenture shall be construed and enforced in
accordance with and governed by the laws of the State of New York,
without giving effect to principles of conflicts of law. The Company
agrees that any final judgment after exhaustion of all appeals or the
expiration of time to appeal in any such action or proceeding shall be
conclusive and binding, and may be enforced in any federal or state
court in the United States by suit on the judgment or in any other
manner provided by law. Nothing contained in this Debenture shall
affect or limit the right of the Registered Holder to serve any
process or notice or motion or other application in any other manner
permitted by law, or limit or affect the right of the Registered
Holder to bring any action or proceeding against the Company or any of
its property in the courts of any other jurisdiction. The Company
hereby consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Debenture, and hereby
waives, to the maximum extent permitted by law, any objection,
including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
19. Headings. The headings contained in this Debenture are for reference
purposes only and shall not affect the meaning of interpretation of
this Debenture.
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IN WITNESS WHEREOF, the Company has caused this Debenture to be
executed as of August 24, 1999.
MEDIAX CORPORATION
Attest: Name:
Title:
By:
Name:
Title:
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NOTICE OF CONVERSION
The conversion form appearing below should only be executed by the Registered
Holder desiring to convert all or part of the principal amount of the Debenture
attached hereto.
CONVERSION FORM
Date:
TO:
The undersigned hereby exercises the conversion privilege upon the
terms and conditions set forth in the attached Debenture, to the extent of the
maximum number of shares of Common Stock issuable pursuant to the terms of
Sections 4 and 5 of the Debenture, and accordingly, authorizes the Company to
apply $__________ principal amount of the attached Debenture to payment in full
for such shares of Common Stock. Please register such shares and make delivery
thereof as follows:
Registered in the Name of (Giving First or Middle Name in Full)
Name
(Please Print)
Address
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to persons other
than the Registered Holder.
Name
(Please Print)
Address
Signature
ny-221336
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
___________________ ____________________________________ the within Debenture
and all rights thereunder, hereby irrevocably authorizing the Company to
transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated:
Signature:
Print Name:
EXHIBIT B TO SECURITIES PURCHASE AGREEMENT
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF
THIS WARRANT.
No. of Shares of Common Stock:220,000
WARRANT
To Purchase Common Stock of
MediaX Corporation
THIS IS TO CERTIFY THAT Apple Investors, LLC, a Delaware
limited liability company, or registered assigns, is entitled, at any time from
the Warrant Issuance Date (as hereinafter defined) to the Expiration Date (as
hereinafter defined), to purchase from MediaX, Inc., a Nevada corporation (the
"Company"), 220,000 shares of Common Stock (as hereinafter defined and subject
to adjustment as provided herein), in whole or in part, including fractional
parts, at a purchase price per share equal to $3.40 (subject to any adjustments
made to such amount pursuant to Section 4 hereto) on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Book Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
as of the last day of any month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by a firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
ny-221302
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"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.0001 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock, either immediately or upon the occurrence
of a specified date or a specified event.
"Current Warrant Price" shall mean, $3.40 subject to any
adjustments to such amount made in accordance with Section 4 hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean August 23, 2004.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on such
date, and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Market Price" per Common Share means the average of the
closing bid prices of the Common Shares as reported on the National Association
of Securities Dealers Automated Quotation System for the National Market,
("NASDAQ") or, if such security is not listed or admitted to trading on the
NASDAQ, on the principal national security exchange or quotation system on which
such security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the closing bid price of such security on the over-the-counter market on
the day in question as reported by the National Association of Security Dealers,
Inc., or a similar generally accepted reporting service, as the case may be, for
the five (5) trading days immediately preceding the date of determination.
"Other Property" shall have the meaning set forth in Section
4.4.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
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"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated a date even herewith by and between the Company and Apple
Investors, LLC, as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of a date even herewith by and between the Company
and Apple Investors, LLC, as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrant Issuance Date" shall mean any date on which Warrants
are issued pursuant to the Securities Purchase Agreement.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Warrant Issuance Date and
until 5:00 P.M., New York City time, on the Expiration Date, Holder may exercise
this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment by cash, check or bank draft payable to the
Company of the Warrant Price in cash or by wire transfer or cashier's check
drawn on a United States bank equal to the Warrant Price for all shares then
being purchased and (iii) this Warrant. Such notice shall be substantially in
the form of the subscription form appearing at the end of this Warrant as
Exhibit A, duly executed by Holder or its agent or attorney. Upon receipt of the
items referred to in clauses (i), (ii) and (iii) above, the Company shall, as
promptly as practicable, and in any event within five (5) Business Days
thereafter, execute or cause to be executed and deliver or cause to be delivered
to Holder a certificate or certificates representing the aggregate number of
full shares of Common Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share, as hereinafter provided. The stock certificate
or certificates so delivered shall be, to the extent possible, in such
denomination or denominations as Holder shall request in the notice and shall be
registered in the name of Holder or, subject to Section 9, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
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issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised by payment to the Company of the
Warrant Price. If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock, deliver to Holder a new Warrant evidencing the rights of Holder
to purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant.
The Holder shall be entitled to exercise the Warrant
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et seq.
(the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. ss. 362 in respect of the Holder's
exercise right. The Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. ss. 362 in respect of the exercise
of the Warrant. The Company agrees, without cost or expense to the Holder, to
take or consent to any and all action necessary to effectuate relief under 11
U.S.C. ss. 362.
2.2. Payment of Taxes and Charges. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock on the relevant exercise date.
2.4. Continued Validity. A holder of shares of Common Stock issued
upon the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10 and
14 of this Warrant. The Company will, at the time of exercise of this Warrant,
in whole or in part, upon the request of Holder, acknowledge in writing, in form
reasonably satisfactory to Holder, its continuing obligation to afford Holder
all such rights; provided, however, that if Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Sections 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder or its agent or attorney. Upon such
surrender, the Company shall, subject to Section 9, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this Warrant may
be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under this Section 3.
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3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant
is exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions.
(a) If at any time prior to the Expiration Date the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
cash,
any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock), or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
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(b) In case the Company shall issue any Common Stock or any
rights, options or warrants to all holders of record of its Common Stock
entitling all holders to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price per share of the Common Stock on the
date fixed for such issue, the Current Warrant Price in effect immediately prior
to the close of business on the date fixed for such determination shall be
reduced to the amount determined by multiplying such Current Warrant Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the close of business on the date fixed for
such determination plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such Market Price and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduced amount to become effective immediately
after the close of business on the date fixed for such determination. For the
purposes of this clause (b), (i) the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
and (ii) in the case of any rights, options or warrants which expire by their
terms not more than 60 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Current Warrant Price shall be made until the
expiration or exercise of all rights, options or warrants, whereupon such
adjustment shall be made in the manner provided in this clause (b), but only
with respect to the shares of Common Stock actually issued pursuant thereto.
Such adjustment shall be made successively whenever any event specified above
shall occur. In the event that any or all rights, options or warrants covered by
this clause (b) are not so issued or expire or terminate before being exercised,
the Current Warrant Price then in effect shall be appropriately readjusted.
4.3. Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event requiring
an adjustment shall occur. For the purpose of any adjustment, any specified
event shall be deemed to have occurred at the close of business on the date of
its occurrence.
(b) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Holder
and reasonably acceptable to the Company.
4.4. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or
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any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring corporation
("Other Property"), are to be received by or distributed to the holders of
Common Stock of the Company, then Holder shall have the right thereafter to
receive, upon exercise of the Warrant, the number of shares of common stock of
the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.4, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
4.5. Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock,
other than any action taken in the ordinary course of the Company's business or
any action described in this Section 4, which would, in the opinion of an
unaffiliated investment bank selected by Holder, have a materially adverse
effect upon the rights of the Holder, the number of shares of Common Stock
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances, as determined in good faith by an unaffiliated
investment bank selected by Holder.
4.6. Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
4.7. No Voting Rights. This Warrant shall not entitle its Holder to
any voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
5.1. Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of the Warrants, shall
be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by an executive officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of Common Stock
for which this Warrant is exercisable and (if such adjustment was made pursuant
to Section 4.4 or 4.5) describing the number and kind of any other shares of
stock or Other Property for which this Warrant is exercisable, and any change in
the purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate to be
delivered to the Holder in accordance with Section 14.2. The Company shall keep
at its office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of a
Warrant designated by the Holder.
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5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other distribution,
or any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 Business Days' prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for determining
rights to vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 20 Business Days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause also shall
specify (i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, the date on which the holders of Common
Stock shall be entitled to any such dividend, distribution or right, and the
amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
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sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1. Restrictive Legend. The Holder by accepting this Warrant and any
Warrant Stock agrees that this Warrant and the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the
Securities Act or (ii) a registration statement relating to such securities has
been filed by the Company and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend substantially worded as follows unless such securities have been
sold pursuant to an effective registration statement under the Securities Act:
"The securities represented by this
certificate have not been registered under the
Securities Act of 1933, as amended (the "Act") or
any state securities laws. The securities may not be
offered for sale, sold, assigned, offered,
transferred or otherwise distributed for value
except (i) pursuant to an effective registration
statement under the Act or any state securities laws
or (ii) pursuant to an exemption from registration
or prospectus delivery requirements under the Act or
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any state securities laws in respect of which the
Company has received an opinion of counsel
satisfactory to the Company to such effect. Copies
of the agreement covering both the purchase of the
securities and restricting their transfer may be
obtained at no cost by written request made by the
holder of record of this certificate to the
Secretary of the Company at the principal executive
offices of the Company."
a) Except as otherwise provided in this Section 9,
the Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities
represented hereby have not been registered under
the Securities Act of 1933, as amended, or any state
securities laws and may not be transferred in
violation of such Act, the rules and regulations
thereunder or any state securities laws or the
provisions of this Warrant."
9.2. Notice of Proposed Transfers. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Restricted Common Stock, the Holder
shall give five days' prior written notice (a "Transfer Notice") to the Company
of Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to Holder an
opinion that the proposed Transfer of such Warrants or such Restricted Common
Stock may be effected without registration under the Securities Act or state
securities laws. After the Company's receipt of the Transfer Notice and opinion,
such Holder shall thereupon be entitled to Transfer such Warrants or such
Restricted Common Stock, in accordance with the terms of the Transfer Notice.
Each certificate, if any, evidencing such shares of Restricted Common Stock
issued upon such Transfer and the Warrant issued upon such Transfer shall bear
the restrictive legends set forth in Section 9.1, unless in the opinion of such
counsel such legend is not required in order to ensure compliance with the
Securities Act.
9.3. Required Registration. Pursuant to the terms and conditions set
forth in the Registration Rights Agreement, the Company shall prepare and file
with the Commission not later than the 30th day after the Closing Date, a
Registration Statement relating to the offer and sale of the Common Stock
issuable upon exercise of the Warrants and shall cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly as
practicable but no later than 90 days after the Closing Date.
9.4. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and applicable state
securities laws and disposed of pursuant thereto or (ii) when the Company shall
have received an opinion of counsel that such shares may be transferred without
registration thereof under the Securities Act and applicable state securities
laws.
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legends set forth in Section 9.1.
9.5. Listing on Securities Exchange. If the Company shall list any
shares of Common Stock on any securities exchange, it will, at its expense, list
thereon, maintain and, when necessary, increase such listing of, all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during any such Exercise Period.
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10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written agreement of the Holder shall be
sufficient indemnity), and in case of mutilation upon surrender and cancellation
hereof, the Company will execute and deliver in lieu hereof a new Warrant of
like tenor to Holder; provided, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this Warrant,
such office to be initially located at the address listed in Section 14 below,
provided, however, that the Company shall provide prior written notice to Holder
of a change in address no less than 30 days prior to such change.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Expiration Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any direct and indirect
losses, damages, costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
14.2. Notice Generally. Except as may be otherwise provided herein,
any notice or other communication or delivery required or permitted hereunder
shall be in writing and shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit in the United
States mails, as follows:
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(1) if to the Company, to:
MediaX, Inc.
Attention: Rainer Poertner
8522 National Boulevard, Suite 110
Culver City, CA 90232
Telephone (310) 815-8002
Facsimile (310) 815-8096
With a copy to:
Richard O. Weed
Weed & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
(2) if to the Holder, to:
Apple Investors, LLC
c/o WEC Asset Management LLC.
One World Trade Center, Suite 4563
New York, New York 10048
Attention: Daniel J. Saks
With a copy to:
Morrison & Foerster, LLP
1290 Avenue of the Americas
New York, New York 10104
Att: Ira A. Greenstein, Esq.
Telephone (212) 468-8000
Facsimile (212) 468-7900
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3. Indemnification. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant.
14.4. Remedies. Holder in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
14.5. Successors and Assigns. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and, with respect to
Section 9 hereof, holders of Warrant Stock, and shall be enforceable by any such
Holder or holder of Warrant Stock.
14.6. Amendment. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived only with the prior written consent
of the Company and the Holder.
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14.7. Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.8. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.9. Governing Law. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
54
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: August 24, 1999
MEDIAX CORPORATION
By:
------------------------------------
Name:
Title:
Attest:
By:
------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Shares of Common Stock of
MediaX Corporation and herewith makes payment therefor in cash or by check or
bank draft made payable to the Company, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is _________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State)(Zip Code)
NOTICE: The signature on this subscription must correspond with
the name as written upon the face of the within Warrant
in every particular, without alteration or enlargement or
any change whatsoever.
NYFS03...:\15\73615\0006\1324\WAR7208L.48A
11038473.04
ny-221302
ny-221302
56
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EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of Mediax, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:__________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Warrant in
every particular, without alteration or enlargement or
any change whatsoever.
EXHIBIT C TO SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 24, 1999 (the
"Closing Date") (this "Agreement"), is made by and between MEDIAX CORPORATION, a
Nevada corporation (the "Company"), and APPLE INVESTORS, LLC, a Delaware limited
liability company (the "Purchaser").
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W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement dated as of the
date hereof between the Purchaser and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Purchaser 22 Units
(the "Units"), each Unit consisting of $100,000 principal amount of the
Company's 5% Convertible Debentures (the "Debentures") and warrants to purchase
10,000 shares of Common Stock of the Company (the "Warrants");
WHEREAS, pursuant to the terms of the Debentures and the Warrants, (i)
upon the conversion of the Debentures and (ii) upon exercise of the Warrants,
the Company will issue to the Purchaser shares of the Company's common stock,
par value $.0001 per share (such shares are referred to herein as the "Shares");
and
WHEREAS, to induce the Purchaser to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws,
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Purchaser hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "Register," "Registered,"
and "Registration" refer to a registration effected by preparing and filing one
or more Registration Statements in compliance with the Securities Act and
pursuant to Rule 415 under the Securities Act or any successor rule providing
for offering securities on a continuous basis ("Rule 415"), and the declaration
or ordering of effectiveness of such Registration Statement by the Securities
and Exchange Commission (the "Commission").
(ii) "Registrable Securities"
shall mean all of the following to the extent the same have not been sold to the
public: (i) any and all shares of the Company's common stock issued or issuable
upon conversion of the Debentures and the exercise of the Warrants; or (ii)
stock issued in respect of stock referred to in (i) above in any reorganization;
or (iii) stock issued in respect of the stock referred to in (i) or (ii) as a
result of a stock split, stock dividend, recapitalization or combination.
(iii) "Registration Statement"
means a registration statement of the Company under the Securities Act.
Capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in the
Securities Purchase Agreement.
2. Registration.
(a) Mandatory Registration. Within thirty (30) days of
the Closing Date (the "Required Filing Date"), the Company shall file with the
Commission a Registration Statement on Form S-3, or if Form S-3 is not
available, such other Form as shall be appropriate, covering (a) resales of the
Warrants and (b) at least two (2) times the sum of: (i) the number of shares of
Common Stock that are issuable upon conversion of the Debentures on the date of
filing, without regard to any limitation on any holder's ability to convert the
Debentures, and (ii) the maximum number of Shares issuable upon exercise of the
Warrants. Such Registration Statement or amended Registration Statement, as the
case may be, shall state that, in accordance with Rule 416 under the Securities
Act, it also covers such indeterminate number of additional Shares as may become
issuable upon conversion of such Debentures or exercise of such Warrants (i)
resulting from any adjustment in the applicable Conversion Price of such
Debentures or the Exercise Price of such Warrants or (ii) to prevent dilution
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resulting from stock splits, stock dividends or similar transactions. If at any
time two (2) times the sum of (i) the number of Shares into which such
Debentures may be converted, and (ii) the maximum number of shares issuable upon
exercise of the Warrants exceeds the total number of Shares so registered, the
Company shall, within ten (10) business days after receipt of a written notice
from the Purchaser, either (i) amend the Registration Statement or Registration
Statements filed by the Company pursuant to the preceding sentence, if such
Registration Statement has not been declared effective by the Commission at that
time, to register all of such Shares, or (ii) if such Registration Statement has
been declared effective by the Commission at that time, file with the Commission
an additional Registration Statement on Form S-3 to register all of such Shares
that have not already been so registered. The Company shall use its best efforts
to cause any such Registration Statement or amended Registration Statement, as
the case may be, to become effective within the earliest to occur of (i) ninety
(90) days following the Closing Date; (ii) if the Commission elects not to
conduct a review of the Registration Statement, the date which is three business
days after the date upon which either the Company or its counsel is so notified,
whether orally or in writing; or (iii) if the Registration Statement is reviewed
by the Commission, the date which is three business days after the date upon
which the Company or its counsel is notified by the Commission, whether orally
or in writing, that the Commission has no further comments with respect to the
Registration Statement, or that the Registration Statement may be declared
effective. The earliest of such dates is referred to herein as the "Required
Effective Date." The failure of the Company to cause such Registration Statement
to become effective during such respective time periods shall have the effect
set forth in Section 2(b) below. Notwithstanding the use of the terms "Required
Filing Date" and "Required Effective Date" that are used herein, the Company
shall use its best efforts to file each required Registration Statement as soon
as possible after the Closing Date and to cause each such Registration Statement
to become effective as soon as possible thereafter. Subject to Schedule 2(a), no
securities of the Company other than the Registrable Securities shall be
included in the Registration Statement. The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until such date as is the
earlier of (i) the date on which all of the Registrable Securities have been
sold and (ii) the date on which the Registrable Securities (in the opinion of
counsel to the Purchaser) may be immediately sold without restriction (including
without limitation as to volume by each holder thereof) without registration
under the Securities Act (the "Registration Period").
(b) Payments by the Company.
(i) If the Registration
Statement covering the Registrable Securities is not filed in proper form with
the Commission on or prior to the Required Filing Date, if the Registration
Statement covering the Registrable Securities is not effective on or prior to
the Required Effective Date, or under the circumstances described in Section
3(f) below, the Company will make payments to the Purchaser in such amounts and
at such times as shall be determined pursuant to this Section 2(b).
(ii) The amount (the "Periodic
Amount") to be paid by the Company to the Purchaser shall be determined as of
each Computation Date (as defined below) and such amount, calculated on a
monthly basis, shall be equal to (A) two percent (2%) of the purchase price paid
by the Purchaser (the "Purchase Price") for all of the Units multiplied by the
fraction the numerator of which shall be the number of days from the date
following the Required Filing Date, the Required Effective Date, or the date
that the provisions of Section 3(e) or 3(f) become applicable, as the case may
be, to the first relevant Computation Date and the denominator of which shall be
thirty (30), and (B) two percent (2%) of the Purchase Price multiplied by the
fraction the numerator of which shall be the number of days from the first (or
most recent, as applicable) Computation Date to the next succeeding Computation
Date and the denominator of which shall be thirty (30).
(iii) Each Periodic Amount
shall be payable by the Company in cash or other immediately available funds to
the Purchaser monthly, with demand therefor by the Purchaser.
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(iv) The parties acknowledge
that the damages which may be incurred by the Purchaser if the Registration
Statement is not filed by the Required Filing Date, if the Registration
Statement has not been declared effective by the Required Effective Date, or if
the provisions of Section 3(e) or 3(f) become applicable, may be difficult to
ascertain. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of such damages.
(v) "Computation Date" means
(i) the date which is the earlier of (A) thirty (30) days after the Required
Filing Date, the Required Effective Date or the date that the provisions of
Section 3(e) or 3(f) become applicable, as the case may be, or (B) the date
after the Required Filing Date or the Required Effective Date on which the
Registration Statement is filed, the Registration Statement is declared
effective, or the Company's obligations in Section 3(e) or 3(f) shall have been
satisfied, as the case may be, and (ii) each date which is the earlier of (A)
thirty (30) days after the previous Computation Date or (B) the date after the
previous Computation Date on which the Registration Statement is filed, the
Registration Statement is declared effective, or the Company's obligations in
Section 3(e) or 3(f) shall have been satisfied, as the case may be.
(c) Piggyback Registration. (i) If at any time or from
time to time, the Company shall determine to register any of its securities, for
its own account or the account of any of its shareholders, other than a
Registration relating solely to employee share option plans or pursuant to an
acquisition transaction on Form S-4, the Company will:
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(A) provide to the Purchaser written notice thereof
as soon as practicable prior to filing the Registration Statement; and
(B) include in such Registration Statement and in
any underwriting involved therein, all of the Registrable Securities
specified in a written request by the Purchaser made within fifteen
(1) days after receipt of such written notice from the Company.
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(ii) If the Registration is for a registered public offering
involving an underwriting, the Company shall so advise the Purchaser as a part
of the written notice given pursuant to this Section. In such event, the rights
of the Purchaser hereunder shall include participation in such underwriting and
the inclusion of the Registrable Securities in the underwriting to the extent
provided herein. To the extent that the Purchaser proposes to distribute its
securities through such underwriting, the Purchaser shall (together with the
Company and any other securityholders of the Company distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section, if the managing underwriter of such underwriting determines that
marketing factors require a limitation of the number of shares to be offered in
connection with such underwriting, the managing underwriter may limit the number
of Registrable Securities to be included in the Registration and underwriting
(provided, however, that (a) the Registrable Securities shall not be excluded
from such underwritten offering prior to any securities held by officers and
directors of the Company or their affiliates, (b) the Registrable Securities
shall be entitled to at least the same priority in an underwritten offering as
any of the Company's existing securityholders, and (c) the Company shall not
enter into any agreement that would provide any securityholder with priority in
connection with an underwritten offering greater than the priority granted to
the Purchaser hereunder). The Company shall so advise any of its other
securityholders who are distributing their securities through such underwriting
pursuant to their respective piggyback registration rights, and the number of
shares of Registrable Securities and other securities that may be included in
the registration and underwriting shall be allocated among the Purchaser and all
other securityholders of the Company in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by the Purchaser and such
other securityholders at the time of the filing of the registration statement.
If the Purchaser disapproves of the terms of any such underwriting, it may elect
to withdraw therefrom by written notice to the Company. Any Registrable
Securities so excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.
(d) Eligibility for Form S-3. The Company represents
and warrants that it meets all of the requirements for the use of Form S-3 for
the Registration of the sale by the Purchaser and any transferee who purchases
the Registrable Securities, and the Company shall file all reports required to
be filed by the Company with the Commission in a timely manner, and shall take
such other actions as may be necessary to maintain such eligibility for the use
of Form S-3.
(e) Priority in filing. The Company covenants that
beginning on the Closing Date and until 180 days after such time as the
Registration Statement pursuant to Section 2(a) of this Agreement has been
continuously effective, the Company will not file any other registration
statement, except as permitted by Section 4(j) of the Securities Purchase
Agreement.
3. Obligations of the Company.
In connection with the registration of the Registrable Securities, the
Company shall do each of the following:
(a) Prepare and file with the Commission the
registration statements required by Section 2 of this Agreement and such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectuses used in connection with the
Registration Statement, each in such form as to which the Purchaser and its
counsel shall not have objected, as may be necessary to keep the Registration
effective at all times during the Registration Period, and, during the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement;
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(b) Furnish to the Purchaser and its legal counsel
identified to the Company, if the Registrable Securities of the Purchaser are
included in the Registration Statement, promptly after the same is prepared and
publicly distributed, filed with the Commission, or received by the Company, a
copy of the Registration Statement, each preliminary prospectus, each final
prospectus, and all amendments and supplements thereto and such other documents
as the Purchaser may reasonably request in order to facilitate the disposition
of its Registrable Securities;
(c) Furnish to the Purchaser and its counsel copies of
any correspondence between the Company and the Commission with respect to any
registration statement or amendment or supplement thereto filed pursuant to this
Agreement;
(d) Use all reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of such jurisdictions as the Purchaser
may reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions, provided that in
connection therewith, the Company shall not be required to qualify as a foreign
corporation or to file a general consent to the service of process in any
jurisdiction;
(e) As promptly as practicable after becoming aware of
such event, notify the Purchaser of the occurrence of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and to use its best efforts to promptly prepare
a supplement or amendment to the Registration Statement or other appropriate
filing with the Commission to correct such untrue statement of omission, and to
deliver such number of copies of such supplement or amendment to the Purchaser
as the Purchaser may reasonably request;
(f) At the earliest possible time after becoming aware of
such event, notify the Purchaser who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement, and to use its best efforts to
promptly obtain the withdrawal of such stop order or other suspension of
effectiveness;
(g) During the period commencing upon (i) the third day
following the Purchaser's receipt of a notification pursuant to Section 3(e)
above or (ii) the third day following the entry of a stop order or other
suspension of the effectiveness of the Registration Statement described in
Section 3(f) above, and ending at such time as (x) the Company shall have
completed the applicable filings (and if applicable, such filings shall have
been declared effective) and shall have delivered to the Purchaser the documents
required pursuant to Section 3(e) above or (y) such stop order or other
suspension of the effectiveness of the Registration Statement shall have been
removed, the Company shall be liable to remit the payments required to be paid
to the Purchaser pursuant to Section 2(b) above;
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(h) If the offering is underwritten, to furnish at the
request of the Purchaser on the date that Registrable Securities are delivered
to the underwriters for sale pursuant to such registration: (i) a certificate of
the President or Chief Financial Officer of the Company dated such date,
addressed to the underwriters and to the Purchaser, certifying that such
registration statement has become effective under the Securities Act and that,
to his knowledge after due inquiry, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been instituted
or are pending or contemplated under the Securities Act, (ii) an opinion of
counsel representing the Company dated such date, addressed to the underwriters
and to the Purchaser, for purposes of such registration stating that the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (iii) a
letter dated such date from the Company's independent public accountants,
addressed to the underwriters and to the Purchaser, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five (5) business days prior to the date of
such letter) with respect to such registration as such underwriters may
reasonably request; and
(i) Cooperate with the Purchaser to facilitate the
timely preparation and delivery of certificates for the Registrable Securities
to be offered pursuant to the Registration Statement and to enable such
certificates for the Registrable Securities to be in such denominations or
amounts, as the case may be, as the Purchaser may reasonably request, and
registered in such names as the Purchaser may request; and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the Commission, the Company shall deliver,
and shall cause legal counsel selected by the Company to deliver, to the
transfer agent for the Registrable Securities (with copies to the Purchaser) an
appropriate instruction and opinion of such counsel.
4. Obligations of the Purchaser.
In connection with the registration of the Registrable Securities, the
Purchaser shall have the following obligations:
(a) Take all other reasonable actions necessary to
expedite and facilitate the disposition by the Purchaser of the Registrable
Securities pursuant to the Registration Statement.
(b) It shall be a condition precedent to the obligations
of the Company to complete the registration of the Registrable Securities of the
Purchaser pursuant to this Agreement that the Purchaser shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of the Registrable Securities held by
it, as shall be reasonably required to effect the registration of such
Registrable Securities, and the Purchaser shall execute such documents in
connection with such registration as the Company may reasonably request. At
least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify the Purchaser of the
information the Company requires from the Purchaser if the Purchaser elects to
have any of its Registrable Securities included in the Registration Statement.
In order to participate in an underwritten offering under Section 2, the
Purchaser shall be required to provide such documents as the underwriter may
reasonably require (which may include an opinion of counsel).
(c) The Purchaser, by its acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless the Purchaser has notified the Company in writing of
its election to exclude all of the Purchaser's Registrable Securities from such
Registration Statement.
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(d) The Purchaser agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the kind described in
Section 3(e) or 3(f) above, it will immediately discontinue disposition of its
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) shall be furnished to the
Purchaser.
5. Expenses of Registration.
All expenses, other than underwriting discounts and commissions and
other fees and expenses of investment bankers, and other than brokerage
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualification fees, printing and accounting fees, and
the fees and disbursements of counsel for the Company, and the fees of counsel
to the Purchaser with respect to each Registration Statement filed pursuant
hereto shall be borne by the Company.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Purchaser, its directors, officers, members,
partners, employees and agents, and each person who controls the Purchaser
within the meaning of the Securities Act or the Exchange Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, (ii) any untrue or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the Commission) or the omission or alleged
omission to state therein any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state or foreign securities law or
any rule or regulation under the Securities Act, the Exchange Act or any state
or foreign securities law (the matters in foregoing clauses (i) through (iii)
being, collectively, "Violations"). The Company shall, subject to the provisions
of Section 6(b) below, reimburse the Purchaser promptly as such expenses are
incurred and are due and payable, for any legal and other costs, expenses and
disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise, including without limitation, the costs, expenses and
disbursements, as and when incurred, of investigating, preparing or defending
any such action, suit, proceeding or investigation (whether or not in connection
with litigation in which the Purchaser is a party), incurred by it in connection
with the investigation or defense of any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (i) apply to any Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) with respect
to any preliminary prospectus, inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the final prospectus, as then amended or
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supplemented, if such final prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (iii) be available to the extent that such
Claim is based upon a failure of the Purchaser to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company pursuant to Section 3(b) hereof; or (iv)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Purchaser
pursuant to Section 9. The Purchaser will indemnify the Company and its officers
and directors against any Claims arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company, by or on behalf of the Purchaser, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company in this Section 6.
(b) Promptly after receipt by an Indemnified Person
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and to the
extent that the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person, provided, however, that an Indemnified Person shall have the right to
retain its own counsel with the reasonable fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person and any other party
represented by such counsel in such proceeding. In such event, the Company shall
pay for only one separate legal counsel for the Purchaser, and such legal
counsel shall be selected by the Purchaser. The failure to deliver written
notice to an indemnifying party within a reasonable time after the commencement
of any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person under this Section 6, except to the extent that the
indemnifying party is materially prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(c) No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Person of an unconditional and irrevocable release from all
liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that
any provisions relating to indemnification or contribution contained in the
underwriting agreements entered into among the Company, the underwriters and the
Purchaser in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in such underwriting agreements
shall be controlling as to the Registrable Securities included in the public
offering; provided, however, that if, as a result of this Section 6(d), the
Purchaser, its officers, directors, members, partners, employees or agents, or
any person controlling the Purchaser is or are held liable with respect to any
Claim for which they would be entitled to indemnification hereunder but for this
Section 6(d) in an amount which exceeds the aggregate proceeds received by the
Purchaser from the sale of Registrable Securities included in a registration
pursuant to such underwriting agreement (the "Excess Liability"), the Company
shall reimburse the Purchaser for such Excess Liability.
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7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited under applicable law, the indemnifying party agrees to
contribute to the amount paid or payable by an Indemnified Person as a result of
such loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and the Indemnified Person shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on which such Claim is based relates to information supplied by
the indemnifying party or by the Indemnified Person, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the forgoing, (a) no contribution
shall be made under circumstances where the payor would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net proceeds received
by such seller from the sale of such Registrable Securities. The Company and the
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation (even if the Purchaser
and any other party were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section.
8. Reports Under Exchange Act.
(a) With a view to making available to the Purchaser the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the Commission that may at any time permit the Purchaser
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(i) make and keep public
information available, as those terms are understood and defined in Rule 144;
(ii) file with the Commission
in a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(iii) furnish to the Purchaser
promptly upon request, so long as the Purchaser owns Registrable Securities, (i)
a written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or periodic report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Purchaser to sell such securities pursuant to
Rule 144 without registration.
(b) Notwithstanding the forgoing, the Company will not
be deemed to have breached this Agreement pursuant to paragraph (a) above at any
time at which the Purchaser may effect resales of all of the Registrable
Securities pursuant to one or more Registration Statements filed pursuant to
this Agreement.
9. Assignment of the Registration Rights.
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Purchaser to
any transferee of all or any portion of the Debentures or the Warrants held by
the Purchaser if: (a) the Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
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written notice of (i) the name and address of such transferee or assignee and
(ii) the Securities with respect to which such registration rights are being
transferred or assigned; (c) at or before the time the Company receives the
written notice contemplated by clause (b) of this sentence, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (d) the transfer of the relevant Securities complies with
the restrictions set forth in Section 4 of the Securities Purchase Agreement.
10. Amendment of Registration Rights.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Purchaser. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon the Purchaser and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be effective upon
personal delivery, via facsimile (upon receipt of confirmation of error- free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
COMPANY: MEDIAX CORPORATION
Attention: Rainer Poertner
8522 National Boulevard, Suite 110
Culver City, CA 90232
Telephone (310) 815-8002
Facsimile (310) 815-8096
With a copy to:
Richard O. Weed
Weed & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
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PURCHASER: Apple Investors LLC
c/o WEC Asset Management LLC
One World Trade Center
Suite 4563
New York, New York 10048
Att: Daniel J. Saks
Telephone (212) 775-9299
Facsimile (212) 775-9311
with a copy to:
MORRISON & FOERSTER, LLP
1290 Avenue of the Americas
New York, New York 10104
Att: Ira A. Greenstein, Esq.
Telephone (212) 468-8000
Facsimile (212) 468-7900
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York, without regard to conflict
of law principles, except for provisions with respect to internal corporate
matters of the Company, which shall be governed by the corporate laws of the
State of Nevada. Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions.
This Agreement may be signed in one or more counterparts, each of which shall be
deemed an original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. This Agreement has been entered into freely by each of the parties,
following consultation with their respective counsel, and shall be interpreted
fairly in accordance with its terms, without any construction in favor of or
against either party. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction. Subject
to the provisions of Section 10 hereof, this Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement. This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
(e) This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth,
or referred to herein and in the other Primary Documents. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
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(h) The Company acknowledges that any failure by the
Company to perform its obligations under Section 2(a), or any delay in such
performance could result in direct damages to the Purchaser, and the Company
agrees that, in addition to any other liability the Company may have by reason
of any such failure or delay, the Company shall be liable for all direct damages
caused by any such failure or delay.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed.
MEDIAX CORPORATION
By:
Name:
Title:
APPLE INVESTORS, LLC
By: WEC ASSET MANAGEMENT LLC,
Manager
By:
Name: Daniel J. Saks
Title: Managing Director
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Form S-3 and related Prospectus of MediaX Corporation for
the registration of 2,514,000 shares of its common stock and to the
incorporation by reference therein of our report dated March 26, 1999, with
respect to the financial statements of MediaX Corporation included in its Annual
Report Form 10-KSB for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Davis & Co., CPA's, P.C.
---------------------------------------
Davis & Co., CPA's, P.C.
Englewood, Colorado
September 23, 1999
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EXHIBIT 24.1
WEED & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
September 23, 1999
MediaX Corporation
8522 National Boulevard
Culver City, CA 90232
I hereby consent to the use of my opinion, dated September 23, 1999,
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of an aggregate of 2,514,000 shares (the "Shares") of the Company's
common stock, par value $.0001 per share (the "Common Stock"), to be sold by the
Selling Stockholders upon the terms and subject to the conditions set forth in
the Company's registration statement on Form S-3, (the "Registration
Statement"), as an exhibit to the Registration Statement and to the use of my
name under the caption "Experts" in the Prospectus included as part of the
Registration Statement.
Very truly yours,
/s/ Richard O. Weed
- ------------------------
Richard O. Weed
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