PREFERRED STOCK AND PRIVATE EQUITY
LINE OF CREDIT AGREEMENT
PREFERRED STOCK AND PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of
December, 1998 (the "AGREEMENT"), between the entities listed on Schedule A
attached hereto (collectively referred to as the "Investors"), and IJNT
International, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investors shall purchase up to (a)
$2,000,000 aggregate principal amount of the Preferred Stock, and (b) pursuant
to the equity line of credit established herein whereby the Company has the
option of exercising its "Put" rights upon the Investors (pro rata) for the
purchase and sale of up to $8,000,000 of Put Shares for a total aggregate
purchase price of $10,000,000 (the "AGGREGATE PURCHASE PRICE"); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("SECTION 4(2)") and Regulation D ("REGULATION D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "SECURITIES ACT"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "BID PRICE" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2 "CAPITAL SHARES" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.3 "CAPITAL SHARES EQUIVALENTS" shall mean any securities,
rights, or obligations that are convertible into, exchangeable for, or have any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any
security convertible into, or exchangeable for Capital Shares.
Section 1.4 "CERTIFICATE OF DESIGNATION" shall mean the Certificate of
Designation for the Preferred Stock annexed hereto as Exhibit A.
Section 1.5 "CLOSING" shall mean one of the closings of a purchase and
sale of the Common Stock and Preferred Stock pursuant to Article II.
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Section 1.6 "CLOSING DATE" shall mean with respect to a Closing for (i)
the Initial Shares shall be deemed the Subscription Date; and (ii) the Put
Shares shall be the twentieth Trading Day following the Put Date related to such
Closing; provided all conditions to such Closing have been satisfied on or
before such Trading Day.
Section 1.7 "COMMITMENT AMOUNT" shall mean the $10,000,000 up to which
the Investors have agreed to provide to the Company in order to purchase the
Initial Shares, and Put Shares pursuant to the terms and conditions of this
Agreement.
Section 1.8 "COMMITMENT PERIOD" shall mean the period commencing on the
earlier to occur of (i) thirty calendar days after the Effective Date, or (ii)
such earlier date as the Company and the Investors may mutually agree in
writing, and expiring on the earliest to occur of (x) the date on which the
Investors shall have purchased Put Shares pursuant to this Agreement for an
aggregate Purchase Price of $8,000,000, (y) the date this Agreement is
terminated pursuant to Section 2.4, or (z) the date occurring 18 months from the
date of commencement of the Commitment Period.
Section 1.9 "COMMON STOCK" shall mean the Company's common stock, par
value $0.002 per share.
Section 1.10 "CONDITION SATISFACTION DATE" shall have the meaning set
forth in Section 7.2.
Section 1.11 "DAMAGES" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12 "EFFECTIVE DATE" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.13 "ESCROW AGENT" shall mean the law firm of The Goldstein
Law Group, PC.
Section 1.14 "ESCROW AGREEMENT" shall mean the agreement regarding the
escrow of the Initial Shares and Put Shares entered into between the Company,
the Escrow Agent and the Investors on the Subscription Date annexed hereto as
Exhibit B.
Section 1.15 "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.16 "FLOOR PRICE" shall mean a Bid Price of One ($1.00) Dollar
per share of Common Stock.
Section 1.17 "INITIAL SHARES" shall have the meaning set forth in
Section 2.7.
Section 1.18 "INITIAL SHARES INVESTMENT AMOUNT" shall mean $2,000,000
Dollars.
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Section 1.19 "INVESTMENT AMOUNT" shall mean the aggregate dollar amount
to be invested by the Investors to purchase Put Shares with respect to any Put
Date as notified by the Company to the Investors, all in accordance with Section
2.2 hereof.
Section 1.20 "LEGEND" See Section 8.1.
Section 1.21 "MARKET PRICE" on any given date shall mean the average of
the Bid Prices during each of the days of the Valuation Period.
Section 1.22 "MATERIAL ADVERSE EFFECT" shall mean any effect on the
business, Bid Price, operations, properties, prospects, or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Certificate of Designation, the Registration Rights Agreement, and/or the
Escrow Agreement, in any material respect.
Section 1.23 "MAXIMUM PUT AMOUNT" on any Put Date shall mean the amount
indicated opposite the range in which the Closing Price is on such Put Date and
below the 30 Day Average Daily Trading Volume on such Put Date, as set forth in
the Table below:
<TABLE>
<CAPTION>
--------------------- --------------------- ---------------------- -------------------- ---------------------
30-Day Avg. 30-Day Avg. 30-Day Avg. 30-Day Avg.
----------- ----------- ----------- -----------
Daily Trading Daily Trading Daily Trading Daily Trading
------------- ------------- ------------- -------------
Volume Volume Volume Volume
------ ------ ------ ------
Bid Price 20,000-50,000 50,001-75,000 75,001-100,000 100,001-Above
--------- ------------- ------------- -------------- -------------
--------------------- --------------------- ---------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
$1.00 -$3.00 $100,000 $250,000 $400,000 $500,000
--------------------- --------------------- ---------------------- -------------------- ---------------------
$3.01 - $6.00 $250,000 $500,000 $750,000 $750,000
--------------------- --------------------- ---------------------- -------------------- ---------------------
$6.01 - $9.00 $500,000 $750,000 $1,000,000 $1,000,000
--------------------- --------------------- ---------------------- -------------------- ---------------------
$9.01 - ABOVE $750,000 $1,000,000 $1,250,000 $1,250,000
--------------------- --------------------- ---------------------- -------------------- ---------------------
</TABLE>
Section 1.24 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.25 "OUTSTANDING" when used with reference to shares of Common
Stock or Capital Shares (collectively the "SHARES"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; PROVIDED, HOWEVER, that "OUTSTANDING" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.26 "PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
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Section 1.27 "PREFERRED STOCK" shall mean the Company's Series A
Preferred Stock, with all of the rights and privileges as set forth in the
Certificate of Designation.
Section 1.28 "PRINCIPAL MARKET" shall mean the Nasdaq National Market,
the Nasdaq Small-Cap Market, the Over the Counter Bulletin Board, the American
Stock Exchange or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
Section 1.29 "PURCHASE PRICE" shall mean (a) with respect to the
Initial Shares, an amount equal to the "Liquidation Preference" as defined in
the Certificate of Designation, and (b) with respect to Put Shares, 80% of the
Market Price upon a Put Date (or such other date on which the Purchase Price is
calculated in accordance with the terms and conditions of this Agreement).
Section 1.30 "PUT" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investors to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.31 "PUT DATE" shall mean the Trading Day during the
Commitment Period that a Put Notice to sell Common Stock to the Investors is
deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.32 "PUT NOTICE" shall mean a written notice to the Investors
setting forth the Investment Amount that the Company intends to sell to the
Investors and Compliance Certification from the Company as attached hereto as
Exhibit C.
Section 1.33 "PUT SHARES" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to a Put that has occurred or may
occur in accordance with the terms and conditions of this Agreement.
Section 1.34 "REGISTRABLE SECURITIES" shall mean any of the Common
Stock underlying the Initial Shares, and the Put Shares (i) in respect of which
the Registration Statement has not been declared effective by the SEC, (ii)
which have not been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("RULE 144") are met, (iii) which have not been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(iv) the sales of which, in the opinion of counsel to the Company, are subject
to any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.35 "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investors on
the Subscription Date annexed hereto as Exhibit D.
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Section 1.36 "REGISTRATION STATEMENT" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investors of the Registrable Securities under
the Securities Act.
Section 1.37 "REGULATION D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.38 "SEC" shall mean the Securities and Exchange Commission.
Section 1.39 "SECTION 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.40 "SECURITIES ACT" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.41 "SEC DOCUMENTS" shall mean the Form 10-KSB, Form 10-QSB's,
Form 8-K's, and Proxy Statements of the Company as supplemented to the date
hereof, filed by the Company for a period of at twelve (12) months immediately
preceding the date hereof until such time the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
Section 1.42 "SUBSCRIPTION DATE" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.43 "TRADING CUSHION" shall mean the mandatory 30 Trading Days
between Put Dates.
Section 1.44 "TRADING DAY" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.45 "VALUATION EVENT" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("ADDITIONAL CAPITAL SHARES"),
otherwise than as provided in the foregoing Subsections (a) and (b) above, at a
price per share less, or for other consideration lower, than the Bid Price in
effect immediately prior to such issuance, or without consideration;
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(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for Capital
Shares and the consideration per share for which Additional Capital Shares may
at any time thereafter be issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than the Bid Price in effect immediately
prior to such issuance; or
(f) makes a distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the foregoing
subsections (a) through (e).
Section 1.46 "VALUATION PERIOD" shall mean with respect to the Purchase
Price relating to any Put Notice, the average of the ten Trading Days
immediately preceding the Closing of a Put; provided, however, that if a
Valuation Event occurs during a Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately after the occurrence of such Valuation
Event and end on the tenth Trading Day thereafter.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK AND PREFERRED STOCK
Section 2.1 INVESTMENTS.
(a) Puts. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Put Date the
Company may make a Put by the delivery of a Put Notice in the form attached
hereto as Exhibit C. The number of Put Shares that the Investors shall receive
pursuant to such Put shall be divided pro rata amongst the Investors, according
to each Investors portion of the Initial Shares Investment Amount, and shall be
determined by dividing the Investment Amount specified in the Put Notice by the
Purchase Price, which number of shares shall not exceed the Maximum Put Amount
on such date, nor the limitations set forth in Sections 2.1(b) and 3.6 below.
(b) Maximum Aggregate Purchase of Common Stock. If required by the
Principal Market, unless the Company obtains shareholder approval pursuant to
the applicable corporate governance rules of the Principal Market, the Investors
may not be compelled to make a purchase which results in the issuance to the
Investors, in the aggregate, of more than 19.99% of the shares of Common Stock
(measured at the time of such purchase) as a result of the transactions
contemplated by this Agreement.
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Section 2.2 MECHANICS.
(a) Put Notice. At any time during the Commitment Period, and the
satisfaction of each of the conditions contained in Section 7.2 below, the
Company may deliver a Put Notice to the Investors, subject to Sections 2.1, 2.4
and 3.6 below; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall not be less than
$100,000 nor more than the Maximum Put Amount on the Put Date.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investors if such notice is received by the Investors prior to 12:00 noon
Eastern Time, or (ii) the immediately succeeding Trading Day if it is received
by the Investors by facsimile or otherwise after 12:00 noon Eastern Time on a
Trading Day or at any time on a day which is not a Trading Day. No Put Notice
may be deemed delivered, on a day that is not a Trading Day.
(c) In the event the Company fails to comply with the Put provisions
contained herein on two separate occasions, it shall have waived its rights to
make a Put at any time thereafter.
Section 2.3 CLOSINGS. On each Closing Date for a Put (i) the Company
shall deliver to the Escrow Agent one or more certificates, at the Investors'
option, representing the Put Shares to be purchased by the Investors pursuant to
Section 2.1 herein, registered in the name of the particular Investor, and (ii)
each Investor shall deliver to the escrow account of the Escrow Agent its
portion of the Investment Amount specified in the Put Notice by wire transfer of
immediately available funds to the Escrow Agent on or before the Closing Date
for such Put Notice. In addition, on or prior to the Closing Date for such Put
Notice, each of the Company and the Investors shall deliver to the Escrow Agent
all documents, instruments and writings required to be delivered or reasonably
requested by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein. Payment of funds to the Company and
delivery of the certificates to the Investors shall occur out of escrow in
accordance with the conditions set forth above and those contained in the Escrow
Agreement; provided, however, that to the extent the Company has not paid the
fees, expenses, and disbursements in accordance with Section 13.7, the amount of
such fees, expenses, and disbursements shall be paid in immediately available
funds, at the direction of the Investors, to the Escrow Agent with no reduction
in the number of Put Shares issuable to the Investors on such Closing Date.
Section 2.4 TERMINATION OF INVESTMENT OBLIGATION. The obligation of the
Investors to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for an aggregate of ten (10) Trading
Days during the Commitment Period, for any reason other than deferrals or
suspensions in accordance with the Registration Rights Agreement as a result of
corporate developments subsequent to the Subscription Date that would require
such Registration Statement to be amended to reflect such event in order to
maintain its compliance with the disclosure requirements of the Securities Act,
or (ii) the Company shall at any time fail to comply with the requirements of
Sections 6.2, 6.3, 6.4, or 6.6.
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Section 2.5 ADDITIONAL SHARES. In the event that (a) the Investors have
shares of Common Stock which are salable through the use of a prospectus, or
within five Trading Days of any Put Notice or Conversion Notice, the Company
gives notice to the Investors of an impending blackout or suspension of the
Registration Statement, and (b) the Bid Price on the Trading Day immediately
preceding such "blackout period" (the "OLD BID PRICE") is greater than the Bid
Price on the first Trading Day following such blackout or suspension period (the
"NEW BID PRICE"), the Investors may sell their Registrable Securities at the New
Bid Price pursuant to an effective Registration Statement, the Company shall
issue to the Investors a number of additional shares equal to the difference
between (y) the product of the number of Registrable Securities held by the
Investor during such blackout or suspension period that are not otherwise freely
tradable and the Old Bid Price, divided by the New Bid Price, less the number of
Registrable Securities held by the Investor during such blackout or suspension
period that are not otherwise freely tradable.
Section 2.6 LIQUIDATED DAMAGES.
(a) In the event the Company does not deliver unlegended Common Stock
as set forth in Article IX below, within five business days of surrender by the
Investors of the Common Stock certificate as is set forth in Article IV below,
(such date of receipt is referred to as the "Receipt Date"), the Company shall
pay to the Investors, in immediately available funds, upon demand, as liquidated
damages for such failure and not as a penalty, for each 500 shares of Common
Stock to be so delivered by the Company as set forth above, $500 for each of the
first ten (10) days and $1,000 per day thereafter that the unlegended shares of
Common Stock are not delivered, which liquidated damages shall run from the
fourth calendar day after the Receipt Date. Any and all payments required
pursuant to this paragraph shall be payable only in cash. The parties hereto
acknowledge and agree that the liquidated damages payable pursuant to the
Registration Rights Agreement, the Certificate of Designation, and as set forth
above, and the obligation to issue Registrable Securities shall constitute
liquidated damages and not penalties.
(b) In the event the Company fails to deliver shares of Common Stock
upon conversion of the Preferred Stock the Company will be subject to liquidated
damages as set forth in the Certificate of Designation. The parties further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, and (b) the parties are
sophisticated business parties and have been represented by sophisticated and
able legal and financial counsel and negotiated this Agreement at arm's length.
(c) The parties agree that the payment of liquidated damages pursuant
to the terms set forth herein, the Registration Rights Agreement, and in the
Certificate of Designation, shall not relieve the Company of the necessity to
perform its duties as set forth in this Agreement and all exhibits annexed
hereto.
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Section 2.7 INITIAL SHARES PURCHASE.
(a) The Company agrees to sell, and the Investors agree to purchase
$2,000,000 aggregate principal amount of Preferred Stock on the Subscription
Date (the "Initial Shares"). The number of shares of Preferred Stock to be
purchased by each Investor is set forth on Schedule A. The total number of
shares of Common Stock issuable upon conversion of the Initial Shares shall be
determined by dividing $2,000,000 by the conversion formula contained in the
Certificate of Designation.
(b) The Initial Shares shall be purchased by the Investors, upon the
satisfaction of each of the following conditions:
(i) the execution and delivery by the Company, and the Investors,
of this Agreement, and all Exhibits and Attachments hereto;
(ii) delivery into escrow by the Company of the original shares of
Preferred Stock, as more fully set forth in the Escrow Agreement;
(iii) delivery into escrow by the Investors of good cleared funds
as payment for the Initial Shares, as more fully set forth in the Escrow
Agreement;
(iv) all representations and warranties of the Investors and of the
Company contained herein being true and correct as of the Subscription Date;
(v) receipt of a signed opinion of counsel of the Company as in the
form annexed hereto as Exhibit E;
(vi) receipt of a signed Instruction to Transfer Agent Letter in
the form annexed hereto as Exhibit G;
(vii) payment of fees as set forth in Section 13.7 below; and
(viii) written proof that the Certificate of Designation has been
filed with the Secretary of State of the State of Delaware.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
The Investors represent and warrant to the Company that:
Section 3.1 ORGANIZATION AND AUTHORIZATION. Investors are duly
incorporated or organized and validly existing in the country of their
incorporation or organization and have all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by the Investors, the performance
by the Investors of their obligations hereunder and the consummation by the
Investors of the transactions contemplated hereby have been duly authorized and
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requires no other proceedings on the part of the Investors. The undersigned has
all right, power and authority to execute and deliver this Agreement on behalf
of the Investors. This Agreement has been duly executed and delivered by the
Investors and, assuming the execution and delivery hereof and acceptance thereof
by the Company, will constitute the legal, valid and binding obligations of the
Investors, enforceable against the Investors in accordance with its terms.
Section 3.2 EVALUATION OF RISKS. Investors have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of, and bearing the economic risks entailed by, an investment
in the Company and of protecting its interests in connection with this
transaction. They recognize that their investment in the Company involves a high
degree of risk.
Section 3.3 INDEPENDENT COUNSEL. Investors acknowledge that they have
been advised to consult with their own attorney regarding legal matters
concerning the Company and to consult with its tax advisor regarding the tax
consequences of acquiring the securities issuable hereunder.
Section 3.4 NO REGISTRATION. The Investors understand that the
securities issuable hereunder have not been registered under the Act or any
other securities laws but are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of Federal and State
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of Investors set forth herein in order to determine the applicability of such
exemptions and the suitability of Investors to acquire the securities hereunder.
Section 3.5 INVESTMENT INTENT. The Investors are entering into this
Agreement solely for their own account and the Investors have no present
arrangement (whether or not legally binding) at any time to sell the Initial
Shares, or Put Shares to or through any person or entity. Investors understand
and agree that they may bear the economic risk of its investment in the
Securities for an indefinite period of time.
Section 3.6 CONVERSION LIMITS. Each Investor agrees that it shall not
convert any portion of the Preferred Stock, which would result in any Investor
holding, at any time, more than 4.99% of the then outstanding shares of Common
Stock. The preceding sentence shall not interfere with any Investor's right to
convert any portion of the Preferred Stock into more than 4.99% of the then
outstanding shares of Common Stock in the aggregate, over time, and is not
intended to mean that each Investor is limited in its conversion to an aggregate
total of no more than 4.99% of then outstanding shares of Common Stock.
Section 3.7 TRANSFER RESTRICTIONS REGARDING THE PREFERRED STOCK. Upon
conversion of any part or all of the Preferred Stock, if the holder of the
Preferred Stock being converted makes the certification, pursuant to the Notice
of Conversion attached hereto as Exhibit F, that such holder has complied with
all of the requirements as set forth herein, then the Company shall cause its
transfer agent to deliver the underlying Common Stock (the "UNDERLYING SHARES")
upon such conversion without a restrictive legend or stop transfer instructions,
otherwise the Underlying Shares shall be considered restricted securities and
certificates representing such shares shall contain restrictive legends and stop
transfer instructions will be placed with the Company's transfer agent regarding
such shares.
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Section 3.8 REGISTRATION RIGHTS. The parties have entered into the
Registration Rights Agreement.
Section 3.9 NO ADVERTISEMENTS. The Investors are not entering into this
Agreement as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
Section 3.10 SOPHISTICATED INVESTORS. The Investors are each
sophisticated investors (as described in Rule 506(b)(2)(ii) of Regulation D) and
accredited investors (as defined in Rule 501 of Regulation D), and each of the
Investors has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Preferred
Stock and Common Stock. The Investors acknowledge that an investment in the
Preferred Stock and Common Stock is speculative and involves a high degree of
risk.
Section 3.11 NOT AN AFFILIATE. None of the Investors is an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and covenants with, the
Investors that the following are true and correct as of the date hereof and as
of the Subscription Date:
Section 4.1 ORGANIZATION; QUALIFICATION. The Company is a corporation
duly organized and validly existing under the laws of the State of Delaware and
is in good standing under such laws. The Company has all requisite corporate
power and authority to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the ownership of
its property or the nature of its business requires such qualification, except
where failure to so qualify would not have a Material Adverse Effect.
Section 4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, $0.002 par value per share, of
which approximately 13,000,000 are outstanding, 1,000,000 shares of non-voting
Preferred Stock, $.002 par value, of which none have been designated prior to
this Agreement, and none of which are outstanding. All issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable.
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Section 4.3 AUTHORIZATION. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the securities
issuable hereunder and the performance of the Company's obligations hereunder
have been taken. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in of this Agreement. Upon their issuance and delivery
pursuant to this Agreement, the securities will be validly issued, fully paid
and nonassessable and will be free of any liens or encumbrances other than those
created hereunder or by the actions of the Investors; PROVIDED, HOWEVER, that
the securities are subject to restrictions on transfer under state and/or
federal securities laws. The issuance and sale of the securities hereunder will
not give rise to any preemptive right or right of first refusal or right of
participation on behalf of any person.
Section 4.4 NO CONFLICT. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default, or give rise to a
right of termination, cancellation or acceleration of any material obligation or
to a loss of a material benefit, under, any provision of the Articles of
Incorporation, and any amendments thereto, Bylaws, Stockholders Agreements and
any amendments thereto of the Company or any material mortgage, indenture, lease
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets and which would have a Material Adverse
Effect.
Section 4.5 NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those disclosed in the SEC Documents, or
those incurred in the ordinary course of the Company's business since September
30, 1997, and, in each case, which individually or in the aggregate, do not or
would not have a Material Adverse Effect. No event or circumstances has occurred
or exists with respect to the Company or its properties, business, condition
(financial or otherwise), Common Stock, trading activity, results of operations
or prospects, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed.
Section 4.6 NO DEFAULT. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of the
Exhibits or attachments hereto, including the conversion provision of the
Preferred Stock contained in the Certificate of Designation, will conflict with
or result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
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charge on any assets or properties of the Company under, any material indenture,
mortgage, deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound or any
statute or the Memorandum or Articles of the Company, or any decree, judgment,
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or its properties, or the Company's listing
agreement for its Common Stock, in each case which default, lien or charge is
likely to cause a material adverse effect on the Company's business and
financial condition.
Section 4.7 ABSENCE OF EVENTS OF DEFAULT. Except as set forth in the
SEC Documents, and this Agreement, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred or is continuing, which would have a
Material Adverse Effect.
Section 4.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
securities hereunder, or the consummation of any other transaction contemplated
hereby.
Section 4.9 INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the
SEC Documents, the Company has sufficient trademarks, trade names, patent
rights, copyrights and licenses to conduct its business as presently conducted
in the SEC Documents, except where failure to have any such intellectual
property would not cause a Material Adverse Effect. To the Company's knowledge,
neither the Company nor its products is infringing or will infringe any
trademark, trade name, patent right, copyright, license, trade secret or other
similar right of others currently in existence; and there is no claim being made
against the Company regarding any trademark, trade name, patent, copyright,
license, trade secret or other intellectual property right which could have a
Material Adverse Effect.
Section 4.10 MATERIAL CONTRACTS. Except as set forth in the SEC
Documents, the agreements to which the Company is a party described in the SEC
Documents are valid agreements, in full force and effect the Company is not in
material breach or material default under any of such agreements, except where
such breach or default would not cause a Material Adverse Effect.
Section 4.11 LITIGATION. Except as disclosed in the SEC Documents,
there is no action, proceeding or investigation pending, or to the Company's
knowledge threatened, against the Company which might result, either
individually or in the aggregate, in any Material Adverse Effect. The Company is
not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.
Section 4.12 TITLE TO ASSETS. Except as set forth in SEC Documents, the
Company has good and marketable title to all properties and material assets
described in the SEC Documents as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Company.
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Section 4.13 SUBSIDIARIES. Except as disclosed in the SEC Documents,
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, association or other business
entity.
Section 4.14 REQUIRED GOVERNMENTAL PERMITS. Except as set forth in the
SEC Documents, the Company is in possession of and operating in compliance with
all authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect.
Section 4.15 LISTING. The Company's Common Stock is listed on the
NASDAQ OTC Bulletin Board. Except as set forth in the SEC Documents, the Company
has not received any notice, oral or written, regarding continued listing and,
as long as the Securities are outstanding, the Company will take no action which
would impact their continued listing or eligibility of the Company for such
listing, except to have the Common Shares listed on another Principal Market,
and the Company is currently in good standing and compliance with the listing
requirements of the NASDAQ OTC Bulletin Board.
Section 4.16 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. Other
than warrants and options to acquire shares of Common Stock as disclosed in the
SEC Documents, there are no other outstanding securities, debt or equity
presently convertible into Common Stock. Except as disclosed in the SEC
Documents, the Company has no outstanding restricted shares, or shares of Common
Stock sold under Regulation S, Regulation D or outstanding under any other
exemption from registration, which are available for sale as unrestricted ("free
trading") stock.
Section 4.17 USE OF PROCEEDS. The Company represents that the net
proceeds from this offering will be used for working capital purposes and/or
general corporate purposes. However, in no event shall the net proceeds from
this offering be used by the Company for the payment (or loaned to any such
person for the payment) of any judgment, or other liability, incurred by any
executive officer, officer, director, or employee of the Company.
Section 4.18 FURTHER REPRESENTATIONS AND WARRANTIES OF THE COMPANY. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees as
follows:
(i) It will use its best efforts to maintain the listing of
its Common Stock on a principal market.
(ii) It will permit the Investors to exercise their right to
convert the Preferred Stock pursuant to the terms of the Certificate of
Designation.
Section 4.19 SEC FILINGS. For a period of at least twelve (12) months
immediately preceding this offer and sale, none of the Company's filings with
the SEC (as they may have been amended or supplemented) contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading as of the date of such
filing (or in such amendment or supplement, as the case may be). The Company has
timely, subject to permitted extensions, filed all requisite forms, reports and
exhibits thereto with the SEC.
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Section 4.20 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 Investors that could reasonably be expected
to have a Material Adverse Effect.
Section 4.21 DILUTION. The Company is aware and acknowledges that
conversion of the Preferred Stock, and the issuance of Common Stock hereunder
may result in dilution to existing shareholders, which dilution may be
substantial under certain market conditions and could significantly increase the
outstanding number of shares of Common Stock. The Company further acknowledges
that its obligation to issue Underlying Shares in accordance with the
Certificate of Designation is unconditional and absolute regardless of the
effect of any such dilution.
Section 4.22 EMPLOYEE RELATIONS. The Company is not involved in any
labor dispute, nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union and the
Company believes that its relations with its employees are good.
Section 4.23 ENVIRONMENTAL LAWS. The Company is (i) in compliance with
any and all foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants and which the Company know is
applicable to them ("ENVIRONMENTAL LAWS"), (ii) has received all permits,
licenses or other approvals required under applicable Environmental Laws to
conduct its business, and (iii) is in compliance with all terms and conditions
of any such permit, license or approval.
Section 4.24 INSURANCE. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires, or obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operation, of the Company.
Section 4.25 SENIORITY. No class of equity securities of the Company is
senior to the Preferred Stock in right of payment, whether with respect to
dividends or upon liquidation, dissolution or otherwise.
Section 4.26 FORM S-3 ELIGIBILITY. The Company is, and at the Closing
Date for the Preferred Stock will be, eligible to register securities for resale
with the SEC under Form S-3 under the Securities Act.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND INVESTORS
Each of the Investors, and the Company represent to the other the
following with respect to itself:
Section 5.1 PREFERRED STOCK AND PRIVATE EQUITY LINE OF CREDIT
AGREEMENT. This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and each of the Investors and is a valid and
binding agreement in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally.
Section 5.2 NON-CONTRAVENTION. The execution and delivery of this
Agreement along with all Exhibits and Attachments, and the consummation of the
issuance of the securities and the transactions contemplated by this Agreement
do not and will not conflict with or result in a breach by the Company or
Investors of any of the terms or provisions of, or constitute a default under,
the articles of incorporation or by-laws of the Company or the Investors, or any
indenture, mortgage, deed of trust of other material agreement or instrument to
which the Company or the Investors 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, Federal or
State regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or the Investors or any of their properties or
assets.
Section 5.3 APPROVALS. Neither the Company, nor any Investor is aware
of any authorization, approval or consent of any governmental body which is
legally required for the issuance and sale of the securities.
Section 5.4 INDEMNIFICATION. Each of the Company and the Investors
agree to indemnify the other and to hold the other harmless from and against any
and all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has authorized and reserved and the Company shall continue to reserve
and keep available at all times, free of preemptive rights, shares of Common
Stock for the purpose of enabling the Company to satisfy any obligation to issue
the Initial Shares, and Put Shares; such amount of shares of Common Stock to be
reserved shall be calculated based upon the minimum Purchase Price therefor, and
conversion provisions under the terms of this Agreement and the Preferred Stock.
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Section 6.3 LISTING OF COMMON STOCK. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Underlying Shares, and the Put Shares on such Principal
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such application
the Underlying Shares and the Put Shares, and will take such other action as is
necessary or desirable in the opinion of the Investors to cause the Common Stock
to be listed on such other Principal Market as promptly as possible. The Company
will take all action to continue the listing and trading of its Common Stock on
the Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company will cause its
Common Stock to continue to be registered under Section 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Common Stock to be
sold by the Investors pursuant to Section 9.1 shall be free of legends, except
as set forth in Article IX.
Section 6.6 CORPORATE EXISTENCE. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company will deliver to the
Investors, as and when the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO MAKE A PUT. The Company will immediately notify the Investors upon
the occurrence of any of the following events in respect of a registration
statement or related prospectus relating to an offering of Registrable
Securities; (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
registration statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
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statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investors any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investors any Put Notice during the
continuation of any of the foregoing events.
Section 6.9 EXPECTATIONS REGARDING PUT NOTICES. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investors, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices.
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "CONSOLIDATION EVENT") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investors such shares of stock and/or securities as
the Investors are entitled to receive pursuant to this Agreement.
Section 6.11 ISSUANCE OF PUT SHARES. The sale and issuance of the
Underlying Shares and Put Shares shall be made in accordance with the provisions
and requirements of Section 4(2) of the Securities Act, or Regulation D and any
applicable state securities law.
Section 6.12 LEGAL OPINION ON SUBSCRIPTION DATE AND PUT CLOSING DATES.
The Company's independent counsel shall deliver to the Investors upon execution
of this Agreement, and upon each Put Closing Date an opinion in the form of
Exhibit E annexed hereto.
Section 6.13 OPINION OF COUNSEL UPON CONVERSION. The Company will
obtain for the Investors, at the Company's expense, any and all opinions of
counsel which may be required in order to convert, or sell the securities
issuable hereunder, including, but not limited to, obtaining for the Investors,
at the Company's expense an opinion of counsel, subject only to receipt of a
Notice of Conversion in the Form of Exhibit F, duly executed by the Investors
which shall be satisfactory to the Transfer Agent, directing the Transfer Agent
to remove the self-liquidating legend. Such draft of opinion of counsel shall be
received by the Investors on or before the Subscription Date.
Section 6.14 CONVERSION OF THE PREFERRED STOCK. The Company agrees that
it will permit the Investors to exercise their right to convert the Preferred
Stock, and comply with the conversion provisions of the Certificate of
Designation.
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Section 6.15 20% RULE. In the event the rules of the Principal Market
require, the Company agrees that it will call a stockholders' meeting for the
purpose of approving below market price issuances of Common Stock to the
Investors in excess of 20% of the number of shares of Common Stock outstanding
as of the Subscription Date. In the event that the aforementioned proposal is
not ratified by the stockholders, or no such meeting is held prior to the 45th
day after the date that the Company first becomes subject to such requirement
("RATIFICATION DATE"), the Company agrees that it shall seek a waiver from the
Principal Market for such issuance, if necessary. In the event the Company does
not get such a waiver within ten days after the Ratification Date, the Company
agrees that it will pay to the Investors, on or before the 15th day after the
Ratification Date, the "Economic Benefit" of that number of shares of Common
Stock issuable to the Investors above said 20%. The "Economic Benefit" is
defined as the number of shares of Common Stock issuable to the Investors upon
conversion pursuant to the terms hereunder and in the Certificate of Designation
in excess of 20% of the outstanding Common Stock as of the applicable Closing
Date multiplied by the Bid Price on the tenth trading day after the Ratification
Date.
Section 6.16 INTEGRATION. The Company shall not sell, offer for sale or
solicit offers to buy otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Securities in a manner that would require the registration under the
Securities Act of issue, offer or sale of the Securities to the Investors.
Section 6.17 RIGHT OF FIRST REFUSAL. The Company will not, directly or
indirectly, without the prior written consent of each of the Investors, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale, grant any option to purchase, or other disposition) any of its
equity or equity equivalent securities or any instrument that permits the holder
thereof to acquire shares of Common Stock at any time prior to the expiration of
the Commitment Period, except (i) the granting of options or warrants to
employees, officers and directors, and the issuance of shares of Common Stock
upon exercise of options granted under any stock option plan heretofore or
hereinafter duly adopted by the Company, (ii) shares issued upon exercise of any
currently outstanding warrants or options, and (iii) shares issued in a bona
fide public offering by the Company of its securities, unless the Company
delivers to each of the Investors a written notice (the "RIGHT OF FIRST REFUSAL
NOTICE") of its intention to effect such a transaction, which Right of First
Refusal Notice shall fully describe the transaction, the gross proceeds raised
thereby, the potential investor in such transaction and a term sheet of the
proposed transaction. The Investors must notify the Company within five business
days after receipt of the Right of First Refusal Notice of its intention to
participate in such financing on substantially the same terms as set forth in
the Right of First Refusal Notice subject to the completion of mutually
agreeable documentation. In the event the Investors do not exercise their right
of first refusal (as set forth above) the Investors shall have the right, from
then on, to refuse any Put Notice that the Company subsequently serves upon the
Investors.
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ARTICLE VII
CONDITIONS TO DELIVERY OF PUTS AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
ISSUE AND SELL PUT SHARES. The obligation hereunder of the Company to issue and
sell the Put Shares to the Investors incident to each Closing is subject to the
satisfaction, or waiver by the Company, at or before each such Closing, of each
of the conditions set forth below.
(a) ACCURACY OF THE INVESTOR'S REPRESENTATION AND WARRANTIES. The
representations and warranties of the Investors shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
(b) PERFORMANCE BY THE INVESTORS. The Investors shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investors at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER
A PUT NOTICE AND THE OBLIGATION OF THE INVESTORS TO PURCHASE PUT SHARES. The
right of the Company to deliver a Put Notice and the obligation of the Investors
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction or waiver by the Investors, on (i) the date of delivery of
such Put Notice and (ii) the applicable Closing Date (each a "CONDITION
SATISFACTION DATE"), of each of the following conditions:
(a) REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Put Date and each Condition Satisfaction Date and (i) neither
the Company nor the Investors shall have received notice that the SEC has issued
or intends to issue a stop order with respect to the Registration Statement or
that the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the
Investors are reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist. The Registration Statement must have been declared
effective by the SEC prior to the first Put Date.
(b) AUTHORITY. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Put Shares,
or shall have the availability of exemptions therefrom. The sale and issuance of
the Put Shares shall be legally permitted by all laws and regulations to which
the Company is subject.
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(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Put Date and each Condition Satisfaction Date as
though made at each such time (except for representations and warranties
specifically made as of a particular date) with respect to all periods, and as
to all events and circumstances occurring or existing to and including each Put
Date and each Condition Satisfaction Date, except for any conditions which have
temporarily caused any representations or warranties herein to be incorrect and
which have been corrected with no continuing impairment to the Company or the
Investors.
(d) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Certificate of Designation, the
Escrow Agreement, and the Registration Rights Agreement to be performed,
satisfied or complied with by the Company at or prior to each Put Date and each
Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the Subscription Date, no event that had or
is reasonably likely to have a Material Adverse Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The
trading of the Common Stock (including, without limitation, the Put Shares) is
not suspended by the SEC or the Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market (including, but not limited to, shareholder approval for the
below market issuance of more than 20% of the outstanding shares of Common
Stock). The Company shall not have received any notice threatening delisting of
the Common Stock on the Principal Market.
(h) 4.99% PERCENT LIMITATION. On each Closing Date, the number of Put
Shares then to be purchased by any Investor will not exceed the number of such
shares which, when aggregated with all other shares of Common Stock then owned
by any Investor beneficially or deemed beneficially owned by such Investor,
would result in the Investor owning more than 4.99% of all of such Common Stock
as would be outstanding on such Closing Date, as determined in accordance with
Rule 13d-3 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(h), in the event that the amount of Common Stock
outstanding as determined in accordance with Rule 13d-3 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether the Investor, when aggregating all purchases of
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Common Stock made pursuant to this Agreement and, if any, Warrant Shares, would
own more than 4.99% of the Common Stock following such Closing. Then, in such
event, the Company would reduce that number of Put Shares so issuable so that it
would not exceed the aforementioned 4.99% limitation. Investor shall notify the
Company as soon as possible, but in any event within three business days of
receiving a Put Notice, if Investor believes Investor's purchase of the Put
Shares specified in the Put Notice would result in Investor exceeding the 4.99%
limitation described above.
(i) MINIMUM BID PRICE. The Bid Price equals or exceeds the Floor Price
during the applicable Valuation Period and during the ten Trading Days
immediately preceding the Put Date (as adjusted for stock splits, stock
dividends, reverse stock splits, and similar events).
(j) MINIMUM AVERAGE TRADING VOLUME. The average trading volume for the
Common Stock over the 30 Trading Days immediately preceding the Put Date and the
Condition Satisfaction Date exceeds 20,000 shares per Trading Day.
(k) NO KNOWLEDGE. The Company has no knowledge of any event more likely
than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the 30 Trading Days following the Trading Day on which such Put Notice is
deemed delivered).
(l) TRADING CUSHION. The Trading Cushion shall have elapsed since the
next preceding Put Date.
(m) MANAGEMENT. Since the Subscription Date there has been no change in
control of the Company.
(n) OTHER. On each Condition Satisfaction Date, the Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2, including, without limitation, a certificate in
substantially the form and substance of Exhibit C hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 DUE DILIGENCE REVIEW. The Company shall make available for
inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investors pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investors
or any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
22
<PAGE>
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 NON-DISCLOSURE OF NON-PUBLIC INFORMATION
(a) The Company shall not disclose non-public information to the
Investors, advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investors or their advisors or representatives, and the
Company represents that it does not disseminate non-public information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.2 shall be
construed to mean that such persons or entities other than the Investors
(without the written consent of the Investors prior to disclosure of such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
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<PAGE>
ARTICLE IX
LEGENDS
Section 9.1 LEGENDS. Unless registered, or an exemption from
registration exists, or otherwise provided below, each certificate representing
Registrable Securities will bear the following legend (the "Legend"):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION."
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit G hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investors to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investors:
(a) at any time after the Effective Date, upon surrender of one or more
certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement. The requirements set forth in subsection
9.1(a)(ii) and 9.1(a)(iii) shall only apply in the event the Company registers
the Common Stock pursuant to a Form S-3 registration statement pursuant to the
Registration Rights Agreement. In the event the Company registers the Common
Stock by means of a registration statement other than a Form S-3 registration
statement, then only the condition in subsection 9.1(a)(i) herein shall apply.
24
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(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradable
securities.
Any of the notices referred to above in this Section 9.1 may be sent by
facsimile to the Company's transfer agent.
Section 9.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 INVESTOR'S COMPLIANCE. Nothing in this Article shall affect
in any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW/JURISDICTION
Section 10.1 CHOICE OF LAW; VENUE; JURISDICTION. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the parties consents to the exclusive
jurisdiction of the U.S. District Court sitting in the Southern District of the
State 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. Each party hereby agrees that if another
party to this Agreement obtains a judgment against it in such a proceeding, the
party which obtained such judgment may enforce same by summary judgment in the
courts of any country having jurisdiction over the party against whom such
judgment was obtained, and each party hereby waives any defenses available to it
under local law and agrees to the enforcement of such a judgment. Each party to
this Agreement irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party at its address set forth herein. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law.
25
<PAGE>
ARTICLE XI
ASSIGNMENT; TERMINATION
Section 11.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Investors or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common Stock held by such person, and (b) upon the prior written consent of
the Company, which consent shall not unreasonably be withheld, the Investor's
interest in this Agreement may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investor) who agrees
to make the representations and warranties contained in Article III and who
agrees to be bound by the covenants of Article V.
Section 11.2 TERMINATION. This Agreement shall terminate two years and
six months after the Subscription Date; provided, however, that the provisions
of Articles III, IV, V, VI, VII, VIII, IX, X, XI, and XII shall survive the
termination of this Agreement.
ARTICLE XII
NOTICES
Section 12.1 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
IJNT International, Inc.
2800 Lafayette, Suite D
Newport Beach, CA 92663
Attention: President
Facsimile: 949-723-2182
Telephone: 949-723-2183
If to the Investors, at the addresses listed on Schedule A.
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<PAGE>
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 12.1 by giving at least ten (10)
calendar days' prior written notice of such changed address or facsimile number
to the other party hereto.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 COUNTERPARTS/FACSIMILE/AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 ENTIRE AGREEMENT. This Agreement, the Exhibits and
Attachments hereto, which include, but are not limited to the Certificate of
Designations, Escrow Agreement, and the Registration Rights Agreement set forth
the entire agreement and understanding of the parties relating to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written
relating to the subject matter hereof. The terms and conditions of all Exhibits
and Attachments to this Agreement are incorporated herein by this reference and
shall constitute part of this Agreement as is fully set forth herein.
Section 13.3 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 13.6 REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor.
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<PAGE>
Section 13.7 FEES AND EXPENSES. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay on the
Subscription Date to Havkit Corporation, out of escrow, ten percent of the gross
proceeds received by the Company on the Subscription Date, less the sum of
Twenty Five Thousand ($25,000) Dollars, which the Company shall pay, out of the
proceeds received by the Company on the Subscription Date, out of escrow, to The
Goldstein Law Group, PC for legal, administrative, and escrow fees. On each
Closing Date for a Put, the Company shall pay (i) three quarters of one percent
(.75%) of the proceeds to The Goldstein Law Group, PC for legal, administrative,
and escrow agent fees, and (ii) nine and one quarter percent (9.25%) of the
proceeds to Havkit Corporation.
Section 13.8 CONFIDENTIALITY. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information, without retaining copies thereof, previously furnished by
it as a result of this Agreement or in connection herewith.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock
and Private Equity Line of Credit Agreement to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
Agreed to and Accepted on
this day of December, 1998
IJNT INTERNATIONAL, INC.
By ____________________________
By_____________________________
By_____________________________
By______________________________
<PAGE>
SCHEDULE A
LIST OF INVESTORS
-----------------
<PAGE>
EXHIBIT A
IJNT INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION
FOR
SERIES A CONVERTIBLE
PREFERRED STOCK
---------------------------------
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
---------------------------------
IJNT International, Inc. (the "CORPORATION"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify that pursuant to the provisions of Section 151 of
the DGCL, the Board of Directors of the Corporation, at a meeting duly convened
on December 1, 1998 at which a quorum was present at all times, adopted the
following resolution, which resolution remains in full force and effect as of
the date hereof:
WHEREAS, the Board of Directors of the Corporation is authorized,
within the limitations and restrictions stated in the Corporation's Certificate
of Incorporation, to fix by resolution or resolutions the designation of each
class or series of preferred stock (the "PREFERRED STOCK") and the voting
powers, and any designations, preferences, and relative, participating, optional
or other special rights of any such class or series of Preferred Stock, as well
as such other provisions with regard to redemption (at the option of the holders
thereof and/or at the option of the Corporation), dividends, dissolution or the
distribution of assets, conversion or exchange, and any qualifications or
restrictions thereof or such other subjects or matters as shall be stated and
expressed in the resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to such authority, to authorize and fix the terms of the series of
Preferred Stock designated as Series A Convertible Preferred Stock.
NOW THEREFORE, be it resolved, that the terms and provisions of such
series and all other right or preferences granted to or imposed upon such series
or the holders thereof are as herein set forth:
1. DESIGNATION, AMOUNT AND PAR VALUE. Of the authorized but unissued
shares of Preferred Stock, 2,000 shares are designated Series A Convertible
Preferred Stock (the "SERIES A PREFERRED STOCK"). The Series A Preferred Stock
will have a par value equal to $0.01 per share.
<PAGE>
2. RANK. The Series A Preferred Stock shall, with respect to dividend
rights or rights upon liquidation, dissolution and winding-up of the
Corporation, rank PARI PASSU with all other series of Preferred Stock or other
class of security expressly ranking PARI PASSU ("PARI PASSU CLASSES") with the
Series A Preferred Stock and prior to all series or classes of common stock of
the Corporation $0.002 par value per share (the "COMMON STOCK"). Nothing
contained herein shall be construed to prohibit the Corporation from authorizing
or issuing, in accordance with its Certificate of Incorporation and By-Laws, as
the same may be amended and in effect from time to time, any classes or series
of equity securities of the Corporation ranking senior to or PARI PASSU with the
Series A Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution and winding-up of the Corporation or both.
3. DIVIDENDS. The holders of the shares of the Series A Preferred Stock
shall be entitled to receive a dividend, payable, in cash or unrestricted shares
of Series A Preferred Stock, at the option of the Corporation, on each share of
Series A Preferred Stock held by such holders (the "SERIES A DIVIDEND") in an
amount equal to eight percent (8%) per annum (computed on the basis of a 360 day
year of twelve 30 day months) of the Series A Liquidation Preference (as defined
below) on the Conversion Date (as defined below), or upon the Expiration Date
(as defined below). In the event dividends become due and the Corporation is
unable to issue unrestricted shares of Common Stock the Corporation shall pay
such dividends in cash as set forth above.
4. LIQUIDATION PREFERENCE.
a) Subject to the rights of holders of any class of capital stock or
series thereof expressly ranking senior to the Series A Preferred Stock, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, the holder of each share of the Series A Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount equal to
One Thousand ($1,000) Dollars for each share of Series A Preferred Stock (the
"STATED VALUE") then held by such holder plus the Series A Dividend owed through
such date (such amount being herein called the "LIQUIDATION PREFERENCE") before
any payment shall be made or any assets distributed to the holders of Common
Stock or any other series of capital stock junior to the Series A Preferred
Stock. If the assets of the Corporation are not sufficient to pay in full the
payments payable to the holders of outstanding shares of Series A Preferred
Stock and any Pari Passu Classes upon the liquidation, dissolution or winding up
of the affairs of the Corporation, then the holders of all such shares shall
share ratably with all other holders of shares of Series A Preferred Stock and
Pari Passu Classes in such distribution of assets in proportion to the
Liquidation Preference of the respective shares.
b) For the purposes of this Section 4, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more other corporations or other entities shall be deemed to be a
liquidation, dissolution or winding up of the Corporation.
-2-
<PAGE>
5. CONVERSION.
a) RIGHTS OF HOLDER TO CONVERT. The holders of shares of Series A
Preferred Stock shall have the right to convert all or a portion of the Series A
Preferred Stock into shares of Common Stock so that each share of Series A
Preferred Stock is convertible into such numbers of shares of Common Stock
determined by dividing the Stated Value of each share of Series A Preferred
Stock by the Conversion Price defined herein (the "CONVERSION RATIO"). For the
purposes hereof, the "CONVERSION PRICE" shall be equal to 80% of the average of
the Closing Bid Price (as defined below) per share of the Common Stock over the
five consecutive trading days ending on the trading day immediately preceding
the date the applicable holder of Series A Preferred Stock elects to have shares
of Series A Preferred Stock converted (the "CONVERSION DATE"). The "CLOSING BID
PRICE" means, for any security as of any date, the last closing bid price on the
OTC Bulletin Board (the "OTC") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the OTC is not the principal trading market for such
security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security on the pink sheets for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as reported by
Bloomberg. If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing bases, the Closing Bid Price of such security
on such date shall be the fair market value as reasonably determined in good
faith by the Board of Directors of the Company (all as appropriately adjusted
for any stock dividend, stock split or other similar transaction during such
period).
b) ADJUSTMENTS TO CONVERSION RATIO. The Conversion Ratio shall be
adjusted, from time to time by the Board of Directors of the Corporation, to
reflect the effect of any stock dividend, stock split, reverse stock split,
merger, consolidation, recapitalization (other than the issuance of Common Stock
in exchange for indebtedness or other obligation of similar value),
reorganization or other similar transaction affecting the Corporation so that
immediately following such event the holders of the Series A Preferred Stock
shall be entitled to receive upon conversion thereof the kind and amount of
shares of securities of the Corporation and other property which they would have
owned or been entitled to receive upon or by reason of such event if such shares
of Series A Preferred Stock had been converted immediately before the record
date (or, if no record date, the effective date) for such event. An adjustment
made pursuant to this paragraph b) of this Section 5 shall become effective
immediately after the opening of business on the next day immediately following
the record date in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination, reclassification,
merger, recapitalization, reorganization or other similar transaction. In case
of (i) any consolidation or merger to which the Corporation is a party, other
than a merger or consolidation in which the Corporation is the surviving or
continuing corporation and which does not result in any reclassification of, or
change (other than a change in par value or from par value to no par value or
from no par value to par value, or as a result of a subdivision or combination)
in, outstanding shares of Common Stock (or such other class or series of common
stock into which shares of Series A Preferred Stock are then convertible) or
-3-
<PAGE>
(ii) any sale or conveyance of all or substantially all of the property and
assets of the Corporation, then provision shall be made as part of the terms of
such transaction whereby the holder of each share of Series A Preferred Stock
which is not converted into the right to receive stock or other securities and
property in connection with such transaction shall have the right thereafter to
convert such share of Series A Preferred Stock into the kind and amount of
shares of stock or other securities and property receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock into which such shares of Series A Preferred Stock could have been
converted immediately prior to such consolidation, merger, sale or conveyance,
subject to adjustment which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this paragraph (b) of this Section 5. The
Corporation shall not enter into any of the transactions referred to in clauses
(i) or (ii) of the first sentence of this paragraph unless, prior to the
consummation thereof, effective provision shall be made in a certificate or
articles of incorporation or other constituent document or written instrument of
the Corporation or the Surviving Entity, as the case may be, so as to provide
for the assumption by the Corporation or such Surviving Entity, as the case may
be, of the obligation to deliver to each holder of shares of Series A Preferred
Stock such stock or other securities and property and otherwise give effect to
the provisions set forth in this paragraph. For the purposes hereof, "SURVIVING
ENTITY" means any entity (other than the Corporation) surviving any
consolidation or merger referred to in this paragraph, or the entity acquiring
the Corporation's assets. The provisions of this paragraph shall apply similarly
to successive consolidations, mergers, sales or conveyances.
The Corporation shall give each holder of Series A Preferred Stock
prior written notice delivered to the applicable address set forth on the record
books of the Corporation of each adjustment made pursuant to this paragraph b)
of Section 5.
c) PROCEDURES FOR CONVERSION. Any holder of Series A Preferred Stock
electing to convert such shares or any portion thereof shall deliver to the
Corporation at its principal office by telecopying an executed and completed
Notice of Conversion and, by express courier, the certificate representing the
Series A Preferred Stock to the Corporation. Each business date (between the
hours of 9:00 a.m. and 5:00 p.m. local time for the holder) on which a Notice of
Conversion is telecopied to and received by the Corporation in accordance with
the provisions hereof shall be deemed a "CONVERSION DATE". The Corporation will
transmit the certificates representing shares of Common Stock issuable upon
conversion of any Series A Preferred Stock (together with the certificates
representing the Series A Preferred Stock not so converted) to the holders via
express courier, by electronic transfer or otherwise within five business days
after the Conversion Date if the Corporation has received the original Notice of
Conversion and Series A Preferred Stock certificate being so converted by such
date, or within five business days after receipt by the Corporation of the
original Notice of Conversion and Series A Preferred Stock certificate being so
converted. In addition to any other remedies which may be available to the
holders, in the event that the Corporation fails for any reason to effect
delivery of such shares of Common Stock within such five business day period,
the holders will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Corporation whereupon the Corporation
and the holders shall each be restored to their respective positions immediately
prior to delivery of such Notice of Conversion. The Notice of Conversion and
Series A Preferred Stock representing the portion of the shares converted shall
be delivered to the principal office of the Corporation at its then current
address.
-4-
<PAGE>
In the event that the Common Stock issuable upon conversion of the
Series A Preferred Stock is not delivered within three business days after the
Conversion Date, the Corporation shall pay to the holders, in immediately
available funds, upon demand, as liquidated damages for such failure and not as
a penalty, for each $100,000 principal amount of Series A Preferred Stock sought
to be converted, Five Hundred ($500) Dollars for each of the first 10 calendar
days and One Thousand ($1,000) Dollars per calendar day thereafter that the
shares of Common Stock due upon conversion are not delivered. Such liquidated
damages shall run from the sixth business day after the Conversion Date up until
the time that either the Notice of Conversion is revoked or the Common Stock has
been delivered, at which time liquidated damages shall cease. Any and all
payments required pursuant to this paragraph shall be payable only in
immediately available funds to the holders of the Series A Preferred Stock at
the addresses indicated in the records of the Corporation. Payment by the
Corporation of liquidation damages as set forth herein, shall not relieve the
Corporation of its obligation to deliver the shares of Common Stock upon
conversion of the Series A Preferred Stock pursuant to the conversion provisions
contained herein.
d) NO FRACTIONAL SECURITIES. No fractional shares of Common Stock shall
be issued upon conversion of shares of Series A Preferred Stock. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any share or shares of Series A Preferred Stock, the Corporation
shall pay to such holder, within the time restraints set forth in Section 5 c)
above, in cash, the value of such fractional share which value shall be based
upon the Closing Bid Price of the Common Stock on the trading day immediately
preceding the Conversion Date.
e) TAXES. If a holder converts shares of Series A Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of securities of the Corporation to the holder upon the
conversion.
f) RESERVATION OF SHARES. At all times, the Company shall reserve and
keep available out of its authorized but unissued Common Stock solely for
issuance upon the conversion of shares of the Series A Preferred Stock as herein
provided, such number of shares of Common Stock as, from time to time, shall be
issuable upon the conversion of all the shares of the Series A Preferred Stock
at the time outstanding. If at any time the number of authorized but unissued
shares of Common Stock shall be insufficient to satisfy the conversion rights
hereunder, in addition to such other remedies as shall be available to the
holder of Series A Preferred Stock, the Company will take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose. All
shares of Common Stock issued upon due conversion of shares of Series A
Preferred Stock shall be validly issued, fully paid and non-assessable.
-5-
<PAGE>
g) AUTOMATIC CONVERSION. In the event that this Series A Preferred
Stock has not all been converted prior to the second anniversary of the date the
Series A Preferred Stock was issued, then the Series A Preferred Stock shall
automatically be converted on the second anniversary of the date the Series A
Preferred Stock was issued as if the holder voluntarily elected such conversion
in accordance with the procedure, terms and conditions as set forth in this
Certificate of Designation.
h) CONVERSION LIMITS. Each holder agrees that it shall not convert any
portion of the Series A Preferred Stock, which would result in any holder
holding, at any time, more than 4.99% of the then outstanding shares of Common
Stock. The preceding sentence shall not interfere with any holders right to
convert any portion of the Series A Preferred Stock into more than 4.99% of the
then outstanding shares of Common Stock in the aggregate, over time, and is not
intended to mean that each holder is limited in its conversion to an aggregate
total of no more than 4.99% of then outstanding shares of Common Stock. This
restriction shall not apply in the event of an automatic conversion pursuant to
Section 5 g) above.
6. ADJUSTMENTS.
a) If the Company shall, at any time or from time to time, declare and
pay to the holders of Common Stock a dividend in shares of Common Stock, or the
Company shall subdivide the outstanding shares of Common Stock into a greater
number of shares of Common Stock, or combine the outstanding shares of Common
Stock into a smaller number of shares of Common Stock the Conversion Price shall
be adjusted to equal the price determined by multiplying the Conversion Price by
a fraction, the numerator of which shall be the number of shares of Common Stock
issued and outstanding immediately prior to the happening of such event and the
denominator of which shall be the number of shares of Common Stock issued and
outstanding immediately after the happening of such event. Such adjustment shall
become effective immediately after the opening of business on the day
immediately following the record date, in the event of a stock dividend, or the
day upon which the subdivision or combination becomes effective, as the case may
be.
b) If the Company shall, at any time or from time to time after the
date on which the Series A Preferred Stock was first issued by the Company, make
or issue, or fix a record date for the determination of holders of shares of
Common Stock entitled to receive a dividend or other distribution payable in
securities of the Company, including a distribution of evidence of indebtedness
of the Company, other than shares of Common Stock, then, and in each such event,
provision shall be made by the Company so that the holders of shares of Series A
Preferred Stock shall receive upon conversion thereof, in addition to the shares
of Common Stock receivable upon conversion, the amount of those securities of
the Company that such holders would have received had their shares of Series A
Preferred Stock been converted on the date of such event and had they
thereafter, during the period from the date of such event to and including the
date of conversion, retained such securities receivable by them as aforesaid
during such period.
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<PAGE>
c) If the shares of Common Stock issuable upon the conversion of shares
of Series A Preferred Stock shall be changed into the same or any different
number of shares of any class or any series of any class of capital stock,
whether by capital reorganization, reclassification or otherwise, then, and in
each such event, the holder of shares of Series A Preferred Stock shall have the
right thereafter to convert such shares of Series A Preferred Stock into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change by holders of the
number of shares of Common Stock into which such shares of Series A Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or change.
d) Upon any conversion of Series A Preferred Stock pursuant to Section
5 above, the shares of Series A Preferred Stock which are converted shall not be
reissued. Upon conversion of all of the then outstanding Series A Preferred
Stock pursuant to Section 5 above and upon the taking of any action required by
law, all matters set forth in this Certificate of Designation shall be
eliminated from the Certificate of Incorporation, shares of Series A Preferred
Stock shall not be deemed outstanding for any purpose whatsoever and all such
shares shall revert to the status of authorized and unissued shares of Preferred
Stock.
7. VOTING RIGHTS. The holders of record of shares of Series A Preferred
Stock shall not be entitled to vote on any matters presented to the stockholders
of the Company for approval, except as required by law.
8. NO IMPAIRMENT. This Corporation will not, by amendment of its
Certificate of Incorporation 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 by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Certificate of Designation and in taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the holders of Series A Preferred Stock against impairment.
9. GENERAL PROVISIONS.
a) "OUTSTANDING" SECURITIES. The term "outstanding", when used with
reference to shares of stock, shall mean issued shares, excluding shares held by
the Corporation, or a subsidiary thereof.
b) HEADINGS. The headings of the paragraphs, subparagraphs, clauses,
and sub-clauses of this Certificate of Designations are for convenience of
reference only and shall not define, limit, or affect any of the provisions
hereof.
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<PAGE>
IN WITNESS WHEREOF, IJNT International, Inc. has caused this
certificate to be signed by its Chairman and Secretary, respectively, this ____
day of December, 1998.
------------------------------------------
Name:
Title: Chairman
------------------------------------------
Name:
Title: Secretary
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of the __ day of December, 1998 by and
among IJNT INTERNATIONAL, INC., with its principal office at 2800 Lafayette,
Suite D, Newport Beach, California 92663 (hereinafter the "COMPANY"), HAVKIT
CORPORATION (the "PLACEMENT AGENT") located at 64-31 Ellwell Crescent, Forest
Hills, New York 11374, the "PURCHASERS" specified on Schedule A attached hereto,
with their respective principal offices at the addresses set forth in Schedule
A, and The Goldstein Law Group, PC, 65 Broadway, 10th Fl., New York, NY 10006
(hereinafter the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing Preferred Stock and Common
Stock from the Company at a purchase price as set forth in Preferred Stock and
Private Equity Line Of Credit Agreement (the "EQUITY LINE AGREEMENT") dated
December, 1998, which will be issued as per the terms contained herein and in
the Equity Line Agreement executed by the Company and Purchasers; all
capitalized terms not defined herein shall have the definition as set forth in
the Equity Line Agreement; and
WHEREAS, the Placement Agent is to receive a fee from the Company as
set forth in the Equity Line Agreement in connection with transactions
contemplated thereby; and
WHEREAS, the parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase
of the Initial Shares and Put Shares (collectively referred to as the
"SECURITIES"); and
WHEREAS, the Company shall have a Put for the remainder of the
Commitment Amount after the Initial Shares Investment Amount has been paid to
the Company, in accordance with the terms and conditions in the Agreement; and
WHEREAS, it is intended that the purchase of Securities be consummated
in accordance with the requirements set forth by Regulation D promulgated under
the Securities Act of 1933, as amended; and
WHEREAS, the Company has requested that the Escrow Agent hold the
Initial Shares Investment Amount and the remainder of the Commitment Amount in
escrow until the Escrow Agent has received the Initial Shares and the Put
Shares, as applicable. The Escrow Agent will then immediately wire transfer or
otherwise deliver at the Company's discretion immediately available funds to the
Company's account and arrange for delivery of the Initial Shares and Put Shares
to Investors as per the terms and conditions in the Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW FOR THE INITIAL SHARES
1.1 Upon Escrow Agent's receipt of the Initial Shares Investment Amount
into its attorney trustee account, it shall notify the Company, or the Company's
designated attorney or agent, of the amount of funds it has received into its
account.
1.2 The Company, upon receipt of said notice and acceptance of the
Agreement by both parties, as evidenced by the Company's and the Investor's
execution thereof, shall deliver to the Escrow Agent the Initial Shares being
purchased on the Subscription Date. Escrow Agent shall then communicate with the
Company to confirm the validity of its issuance.
1.3 Once Escrow Agent confirms the validity of the issuance of the
Initial Shares, he shall immediately wire that amount of funds necessary to
purchase the Initial Shares per the written instructions of the Company net of
all fees as set forth below. The Company will furnish Escrow Agent with a "Net
Letter" directing payment out of escrow of (i) Placement Agent fees as per the
terms of the Agreement to the Placement Agent; and (ii) legal, administrative,
and escrow costs as per the terms of the Agreement to The Goldstein Law Group,
PC, such fees are to be remitted in accordance with wire instructions that will
be sent to Escrow Agent from the Company, with the net balance payable to the
Company. Once the funds (as set forth above) have been received per the
Company's instructions, the Escrow Agent shall then arrange to have the
Securities delivered as per instructions from the Investor.
ARTICLE 2
TERMS OF THE ESCROW FOR THE PUT SHARES
2.1 Upon Escrow Agent's receipt of confirmation in writing that the
Company has properly served a Put Notice in accordance with the Agreement, and
once it has received the Purchase Price for the Put Shares into its attorney
trustee account, it shall notify the Company, or the Company's designated
attorney or agent, of the amount of funds it has received into its account.
2.2 The Company, upon receipt of said notice and acceptance by the
Investor, as evidenced by written notice by the Investor, shall deliver to the
Escrow Agent the Put Shares being purchased. Escrow Agent shall then communicate
with the Company to confirm the validity of its issuance.
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<PAGE>
2.3 Once Escrow Agent confirms the validity of the issuance of the Put
Shares, he shall immediately wire that amount of funds necessary to purchase of
the Put Shares net of all fees as set forth below per the written instructions
of the Company. The Company will furnish Escrow Agent with a "Net Letter"
directing payment out of escrow the fees as per the terms of the Agreement. Such
fees are to be remitted in accordance with wire instructions that will be sent
to Escrow Agent from the Company, with the net balance payable to the Company.
Once the funds have been received per the Company's instructions, the Escrow
Agent shall then arrange to have the Securities delivered as per instructions
from the Investors.
2.4 This Agreement may be altered or amended only with the consent of
all of the parties hereto. Should the Company or Investor attempt to change this
Agreement in a manner which, in the Escrow Agent's discretion, shall be
undesirable, the Escrow Agent may resign as Escrow Agent by notifying the
Company and the Investor in writing. In the case of the Escrow Agent's
resignation or removal pursuant to the foregoing, its only duty, until receipt
of notice from the Company and the Investor or its agent that a successor escrow
agent shall have been appointed, shall be to hold and preserve the funds. Upon
receipt by the Escrow Agent of said notice from the Company and the Investor of
the appointment of a successor escrow agent, the name of a successor escrow
account and a direction to transfer the funds, the Escrow Agent shall promptly
thereafter transfer all of the funds held in escrow to said successor escrow
agent. Immediately after said transfer, the Escrow Agent shall furnish the
Company and the Investor with proof of such transfer. The Escrow Agent is
authorized to disregard any notices, requests, instructions or demands received
by it from the Company or the Investor after notice of resignation or removal
shall have been given, unless the same shall be the aforementioned notice from
the Company and the Investor to transfer the funds to a successor escrow agent
or to return same to the respective parties.
2.5 The Escrow Agent shall be reimbursed by the Company and the
Investor for any reasonable expenses incurred in the event there is a conflict
between the parties and the Escrow Agent shall deem it necessary to retain
counsel.
2.6 The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith in accordance with the advice of the Escrow Agent's
counsel; and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.
2.7 The Company and the Investor warrant to and agree with the Escrow
Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities or any part
thereof;
(ii) no financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest or in
describing (whether specifically or generally) the Securities or
any part thereof; and
(iii) the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the
Securities or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Securities or
any part thereof.
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<PAGE>
2.8 The Escrow Agent in its capacity as such has no liability hereunder
to either party other than to hold the funds and the Securities and to deliver
them under the terms hereof. Each party hereto agrees to indemnify and hold
harmless the Escrow Agent in its capacity as such from and with respect to any
suits, claims, actions or liabilities arising in any way out of this transaction
including the obligation to defend any legal action brought which in any way
arises out of or is related to this Escrow.
ARTICLE 3
MISCELLANEOUS
3.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
3.2 All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as follows:
(a) IJNT International, Inc.
2800 Lafayette, Suite D
Newport Beach, CA 92663
Attention: President
Telephone:949-723-2183
Facsimile:949-723-2182
(b) if to the Investors, to such Investor's address set forth on
Schedule A hereto.
(c) The Goldstein Law Group, PC
65 Broadway, 10th Fl.
New York, NY 10006
Attention: Scott H. Goldstein, Esq.
Telephone: (212) 809-4220
Facsimile: (212) 809-4228
or to such other person at such other place as the such party shall
designate to the other party in writing;
3.3 This Agreement shall be binding upon and shall inure to the benefit
of the permitted successors and assigns of the parties hereto.
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<PAGE>
3.4 This Agreement is the final expression of, and contains the entire
Agreement between, the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Agreement may not
be modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the parties to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein.
3.5 Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
3.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by The Goldstein Law Group, PC and it has had
the opportunity to consult with its own legal advisors prior to the signing of
this Agreement.
3.7 This Agreement will be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters arising
under the Act, without reference to principles of conflicts of law. Each of the
parties consents to the exclusive jurisdiction of the U.S. District Court
sitting in the Southern District of the State 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. Each
party hereby agrees that if another party to this Agreement obtains a judgment
against it in such a proceeding, the party which obtained such judgment may
enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day of December, 1998.
IJNT INTERNATIONAL, INC.
By___________________________________
The Goldstein Law Group, PC
Escrow Agent
By___________________________________
<PAGE>
EXHIBIT C
PUT NOTICE/COMPLIANCE CERTIFICATE
The undersigned, hereby certifies, with respect to shares of common stock of
IJNT International, Inc. (the "COMPANY") issuable in connection with this Put
Notice and Compliance Certificate dated _____________ (the "Notice"), delivered
pursuant to Article II of the Preferred Stock and Equity Private Line Of Credit
Agreement (the "AGREEMENT"), as follows:
1. The undersigned is the duly elected __________ of the Company.
2. The representations and warranties of the Company set forth in the Agreement
dated as of ________, are true and correct in all material respects as though
made on and as of the date hereof.
3. The Company has performed in all material respects all of the conditions,
covenants and agreements to be performed by the Company on or prior to the
Closing Date related to this Notice and has complied in all material respects
with all obligations and conditions contained in the Agreement.
4. The Investment Amount is $____________.
The undersigned has executed this Certificate this ____ day of ________, ___.
IJNT International, Inc.
By___________________________________
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the day of December, 1998,
between the entities listed on Schedule A attached hereto (referred to as the
"PURCHASERS"), and IJNT International, Inc., a corporation incorporated under
the laws of the state of Delaware, and having its principle place of business at
2800 Lafayette, Suite D, Newport Beach, CA 92663, (the "COMPANY").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Purchasers are purchasing from the Company, pursuant to a
Preferred Stock and Private Equity Line of Credit Agreement dated the date
hereof (the "EQUITY LINE AGREEMENT"), an aggregate of up to Eight Million
($8,000,000) Dollars principal amount of shares of Common Stock and an aggregate
of Two Million ($2,000,000) Dollars principal amount of Series A Preferred
Stock; All capitalized terms not hereinafter defined shall have that meaning
assigned to them in the Equity Line Agreement; and
WHEREAS, the Company desires to grant to the Purchasers the
registration rights set forth herein with respect to the Put Shares, and the
shares of Common Stock underlying the Initial Shares (hereinafter referred to as
the "STOCK" or "SECURITIES" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term "REGISTRABLE
SECURITY" means the Securities; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a Registrable
Security when, as of the date of determination, (i) it has been effectively
registered under the Securities Act of 1933, as amended (the "1933 ACT") and
disposed of pursuant thereto, (ii) registration under the 1933 Act is no longer
required for the immediate public distribution of such security as a result of
the provisions of Rule 144 promulgated under the 1933 Act, or (iii) it has
ceased to be outstanding. The term "Registrable Securities" means any and/or all
of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. RESTRICTIONS ON TRANSFER. The Purchasers acknowledge and
understand that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. The Purchasers understand that no disposition or transfer of the
Securities may be made by Purchasers in the absence of (i) an opinion of counsel
to the Purchasers that such transfer may be made without registration under the
1933 Act or (ii) such registration.
<PAGE>
Section 3. REGISTRATION RIGHTS.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("SEC"), within 30 calendar days after the
Subscription Date, a registration statement (on Form S-3), under the 1933 Act
(the "REGISTRATION STATEMENT"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), in respect of all holders of Registrable
Securities, so as to permit a public offering and sale of the Registrable
Securities under the Act. The Company shall use its best efforts to cause the
Registration Statement to become effective within 90 calendar days from the
Subscription Date. The number of shares designated in the Registration Statement
to be registered shall be 200% of the number of Securities that would be
required if all the Registrable Securities were issued on the Trading Day
immediately preceding before the filing of the Registration Statement.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144 or (iii) three years
after the Subscription Date.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Purchasers shall bear the
cost of underwriting discounts and commissions, if any, applicable to the
Registrable Securities being registered and the fees and expenses of its
counsel. The Company shall qualify any of the securities for sale in such states
as such Purchasers reasonably designate and shall furnish indemnification in the
manner provided in Section 6 hereof. However, the Company shall not be required
to qualify in any state which will require an escrow or other restriction
relating to the Company and/or the sellers. The Company at its expense will
supply the Purchasers with copies of the Registration Statement and the
prospectus or offering circular included therein and other related documents in
such quantities as may be reasonably requested by the Purchasers.
(d) The Company shall not be required by this Section 3 to
include a Purchasers' Registrable Securities in any Registration Statement which
is to be filed if, in the opinion of counsel for both the Purchasers and the
Company (or, should they not agree, in the opinion of another counsel
experienced in securities law matters acceptable to counsel for the Purchasers
and the Company) the proposed offering or other transfer as to which such
registration is requested is exempt from applicable federal and state securities
laws and would result in all purchasers or transferees obtaining securities
which are not "restricted securities", as defined in Rule 144 under the 1933
Act.
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<PAGE>
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed with the SEC within thirty
(30) calendar days from the Subscription Date and/or the Registration Statement
is not declared effective by the SEC within 90 days from the Subscription Date,
then the Company will pay Purchasers (pro rated on a daily basis), as liquidated
damages for such failure and not as a penalty, two (2%) percent of the purchase
price of the then outstanding Securities for every 30 calendar day period until
the Registration Statement has been filed and/or declared effective. Such
payment of the liquidated damages shall be made to the Purchasers in cash,
immediately upon demand, provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Securities pursuant to this Section. If the Company does not remit the damages
to the Purchasers as set forth above, the Company will pay the Purchasers
reasonable costs of collection, including attorneys fees, in addition to the
liquidated damages. The registration of the Securities pursuant to this
provision shall not affect or limit Purchasers' other rights or remedies as set
forth in this Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
(g) The Company agrees to only include the Registrable
Securities in the Registration Statement.
(h) The Company agrees that it will declare the Registration
Statement effective within five days after being informed by the SEC that the
Registration Statement may be declared effective, and will respond to any
questions and/or comments from the SEC within five business days after receipt
of same.
Section 4. COOPERATION WITH COMPANY. Purchasers will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
Section 5. REGISTRATION PROCEDURES. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Purchasers of such securities shall desire to sell or otherwise dispose of
the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act);
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<PAGE>
(b) furnish to each Purchaser such numbers of copies of a
summary prospectus or other prospectus, including a preliminary prospectus or
any amendment or supplement to any prospectus, in conformity with the
requirements of the Act, and such other documents, as such Purchasers may
reasonably request in order to facilitate the public sale or other disposition
of the securities owned by such Purchasers;
(c) register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Purchasers shall reasonably request, and do any and all
other acts and things which may be necessary or advisable to enable each
Purchaser to consummate the public sale or other disposition in such
jurisdiction of the securities owned by such Purchasers, except that the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process;
(d) list such securities on the Nasdaq OTC Bulletin Board or
other national securities exchange on which any securities of the Company are
then listed, if the listing of such securities is then permitted under the rules
of such exchange or Nasdaq;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(f) notify each holder of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto covered
by the Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
Section 6. INFORMATION BY PURCHASERS. Each holder of Registrable
Securities included in any registration shall furnished to the Company such
information regarding such Purchasers and the distribution proposed by such
Purchasers as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 6.
Section 7. ASSIGNMENT. The rights granted the Purchasers under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. This Agreement is binding upon
and inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 8. TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to this Agreement shall terminate as to each Purchaser (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
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<PAGE>
(a) all such Purchasers' securities subject to this Agreement
have been registered;
(b) all of such Purchasers' securities subject to this
Agreement may be sold without such registration pursuant to Rule 144 promulgated
by the SEC pursuant to the Securities Act;
(c) all of such Purchasers' securities subject to this
Agreement can be sold pursuant to Rule 144(k); or
(d) two years from the issuance of the Registrable Securities.
Section 9. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement
with respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Purchasers and each officer or
director of the Purchasers or person, if any, who controls the Purchasers within
the meaning of the Securities Act ("DISTRIBUTING PURCHASERS") against any
losses, claims, damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), to which the Distributing Purchasers
may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such Registration Statement, or any related
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
the Distributing Purchasers, specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) Each Distributing Purchaser agrees that it will indemnify
and hold harmless the Company, and each officer, director of the Company or
person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof; arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in a Registration
Statement requested by such Distributing Purchaser, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or the
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<PAGE>
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Purchaser,
specifically for use in the preparation thereof and, provided further, that the
indemnity agreement contained in this Section 9(b) shall not inure to the
benefit of the Company with respect to any person asserting such loss, claim,
damage or liability who purchased the Registrable Securities which are the
subject thereof if the Company failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Company was obligated to do so under the Securities Act or
the rules and regulations promulgated thereunder. This indemnity agreement will
be in addition to any liability which the Distributing Purchasers may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Purchaser, the fees and expenses of such counsel shall be at
the expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party, or (ii) the
named parties to any such action (including any impleaded parties) include both
the Distributing Purchaser and the indemnifying party and the Distributing
Purchaser shall have been advised by such counsel that there may be one or more
legal defenses available to the indemnifying party different from or in conflict
with any legal defenses which may be available to the Distributing Purchaser (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the Distributing Purchaser, it being understood,
however, that the indemnifying party shall, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
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<PAGE>
liable only for the reasonable fees and expenses of one separate firm of
attorneys for the Distributing Purchaser, which firm shall be designated in
writing by the Distributing Purchaser). No settlement of any action against an
indemnified party shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld.
Section 10. CONTRIBUTION. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Purchaser makes a claim for indemnification pursuant to Section 9 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Purchaser, then the Company and
the applicable Distributing Purchaser shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Section 11. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Purchasers shall be in writing and shall be deemed to have
been duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Purchasers, to their respective address set forth
on Schedule A annexed to this Agreement.
(b) If to the Company, at the address set forth herein, or to
such other address as any such party may designate by notice to the other party.
Notices shall be deemed given at the time they are delivered personally or five
(5) days after they are mailed in the manner set forth above. If notice is
delivered by facsimile to the Company and followed by mail, delivery shall be
deemed given two (2) days after such facsimile is sent.
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<PAGE>
Section 12. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 14. JURISDICTION. This Agreement will be construed and enforced
in accordance with and governed by the laws of the State of New York, except for
matters arising under the Act, without reference to principles of conflicts of
law. Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the State 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.
Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
Section 15. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
Attest: IJNT International, Inc.
By:________________________________ By:________________________________
Name: Name:
Title: Title:
<PAGE>
EXHIBIT E
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]
Address
Re: Preferred Stock and Private Equity
Line of Credit Agreement dated December __, 1998
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Preferred Stock and
Private Equity Line of Credit Agreement by and between, the entities (the
"INVESTORS") listed on Schedule A, and IJNT International, Inc. (the "COMPANY"),
dated December, 1998 (the "LINE OF CREDIT AGREEMENT"), which provides for the
issuance of Preferred Stock, and sale by the Company of up to ____ shares of
Common Stock of the Company (the "PUT SHARES"). All terms used herein have the
meanings defined for them in the Line of Credit Agreement unless otherwise
defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Line of Credit Agreement, the Certificate of Designation, the
Escrow Agreement, and the Registration Rights Agreement (the "REGISTRATION
RIGHTS AGREEMENT") between the Investors, and the Company, dated December,
1998, and the Escrow Agreement between the Investors, the Company and the Escrow
Agent, dated December, 1998 (the "ESCROW Agreement", and together with the Line
of Credit Agreement and the Registration Rights Agreement, the "Agreements"). As
counsel, we have made such legal and factual examinations and inquires as we
have deemed advisable or necessary for the purpose of rendering this opinion. In
addition, we have examined, among other things, originals or copies of such
corporate records of the Company, certificates of public officials and such
other documents and questions of law that we consider necessary or advisable for
the purpose of rendering this opinion. In such examination we have assumed the
genuineness of all signatures on original documents, the authenticity and
completeness of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons, and the due execution and delivery of all documents
(except as to due execution and delivery by the Company) where due execution and
delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreements and the
transactions contemplated thereby.
For purposes of this opinion, we have assumed that you have all
requisite power and authority, and have taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by the Investor in the Agreements and
pursuant thereto are true and correct.
<PAGE>
The opinions hereinafter expressed are subject to the following
qualifications:
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority (corporate and other) to carry on its business and to own,
lease and operate its properties and assets as described in the Company's SEC
Documents. To our knowledge, the Company does not own or control any other
business entity. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the Company owns
or leases property, other than those in which the failure so to qualify would
not have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements, and the Certificate of
Designation, and to issue the Preferred Stock, the Put Shares, and the shares of
Common Stock underlying the Preferred Stock (the "Underlying Shares"). The
execution and delivery of the Agreements, and the execution, issuance and
delivery of the Common Stock, the Preferred Stock, and the Underlying Shares, by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required. Each of the Agreements has been duly executed and
delivered, and the Common Stock, and Preferred Stock have been duly executed,
issued and delivered, by the Company and each of the Agreements, the Put Shares
and the Preferred Stock constitutes valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
3. The execution, delivery and performance of the Agreements, and the
issuance of the Common Stock and the Preferred Stock, by the Company and the
consummation by the Company of the transactions contemplated thereby, including,
without limitation, the issuance of the Put Shares, the Preferred Stock, and the
Underlying Shares, do not and will not (i) result in a violation of the
Company's Articles or By-Laws; (ii) conflict with, or constitute a material
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, except for such conflicts, defaults,
terminations, amendments, accelerations and cancellations as would not,
individually or in the aggregate, have a Material Adverse Effect; or (iii)
result in a violation of any federal or state law, rule or regulation applicable
to the Company or by which any property or asset of the Company is bound or
affected, except for such violations as would not, individually or in the
aggregate, have a Material Adverse Effect. To our knowledge, the Company is not
in violation of any terms of its Articles or Bylaws.
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<PAGE>
4. The issuance of the Put Shares, the Preferred Stock, the Underlying
Shares, and the Blackout Shares in accordance with the Line of Credit Agreement
will be exempt from registration under the Securities Act of 1933 and will be in
compliance with Delaware state securities laws. When so issued, the Put Shares,
the Blackout Shares, the Preferred Stock, and the Underlying Stock, will be duly
and validly issued, fully paid and nonassessable, and free of any liens,
encumbrances and preemptive or similar rights contained in the Company's
Articles of Incorporation (the "ARTICLES") or Bylaws or, to our knowledge, in
any agreement to which the Company is party.
5. To our knowledge, except as disclosed in the SEC Documents, there
are no claims, actions, suits, proceedings or investigations that are pending
against the Company or its properties, or against any officer or director of the
Company in his or her capacity as such, nor has the Company received any written
threat of any such claims, actions, suits, proceedings, or investigations which
are required to be and have not been disclosed in the SEC Documents.
6. To our knowledge, there are no outstanding options, warrants, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any right to
subscribe for or acquire any shares of Common Stock or contracts, commitments,
understanding, or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock, except as described in the SEC
Documents. To our knowledge, the Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
7. The issuance of the Securities will not violate the applicable
listing agreement between the Company and any securities exchange or market on
which the Company's securities are listed.
8. As more specifically described in the Reports, the authorized
capital stock of the Company consists of shares of Common Stock, no par value
per share ("COMMON STOCK") and shares of Preferred Stock, par value $___ per
share.
This opinion is furnished to the Investors solely for their benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
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<PAGE>
EXHIBIT F
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT THE
SERIES A PREFERRED STOCK)
The undersigned hereby irrevocably elects to convert the Series A Preferred
Stock No. ____ into Shares of common stock of IJNT INTERNATIONAL, INC. (the
"Company") according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that:
(i) that all offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of
the Series A Preferred Stock shall be made pursuant to an
exemption from registration under the Securities Act of 1933,
as amended (the "Act"), or pursuant to registration of the
Common Stock under the Act, subject to any restrictions on
sale or transfer set forth in the Preferred Stock Private
Equity Line Of Credit Agreement between the Company and the
original holder of the Series A Preferred Stock submitted
herewith for conversion;
(ii) the undersigned has not engaged in any transaction or series
of transaction that is a part of or a plan or scheme to evade
the registration requirements of the Act; and
(iii) upon conversion pursuant to this Notice of Conversion, the
undersigned will not own more than 4.99% of the then
outstanding shares of Common Stock of the Company.
--------------------------- ---------------------------
Date of Conversion Applicable Conversion Price
--------------------------- ---------------------------
Number of Common Shares upon $ Amount of Conversion
Conversion
--------------------------- ---------------------------
Signature Name
Address: Delivery of Shares to:
* The original Preferred Stock Certificate and Notice of Conversion must be
received by the Company by the third business day following the Date of
Conversion.
<PAGE>
EXHIBIT G
INSTRUCTIONS TO TRANSFER AGENT
IJNT INTERNATIONAL, INC.
December 2, 1998
Brian Kelley, President
Executive Registrar & Transfer Agency, Inc.
P.O. Box 56517
Phoenix, AZ 85079-6517
Re: Equity Line Financing
Dear Mr. Kelley:
Reference is made to the Preferred Stock and Private Equity Line of
Credit Agreement and all Exhibits and Attachments thereto (the "Agreement")
dated as of December 2, 1998, between Investors listed in Schedule A (the
"Investor") and IJNT International, Inc. (the "Company"). Pursuant to the
Agreement, subject to the terms and conditions set forth in the Agreement the
Investor has agreed to purchase from the Company and the Company has agreed to
sell to the Investor from time to time during the term of the Agreement shares
of Series A Preferred Stock (the "Preferred Stock"), and Common Stock of the
Company, par value $.01 per share (the "Common Stock"). As a condition to the
effectiveness of the Agreement, the Company has agreed to issue to you, as the
transfer agent for the Common Stock (the "Transfer Agent"), these instructions
relating to the Common Stock to be issued to the Investors (or a permitted
assignee) pursuant to the Agreement or upon conversion of the Preferred Stock.
All terms used herein and not otherwise defined shall have the meaning set forth
in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file with the
SEC, and maintain the effectiveness of, a registration statement or registration
statements registering the resale of the Common Stock to be acquired by the
Investors under the Agreement. The Company will advise the Transfer Agent in
writing of the effectiveness of any such registration statement promptly upon
its being declared effective. The Transfer Agent shall be entitled to rely on
such advice and shall assume that the effectiveness of such registration
statement remains in effect unless the Transfer Agent is otherwise advised in
writing by the Company and shall not be required to independently confirm the
continued effectiveness of such registration statement. In the circumstances set
forth in the following two paragraphs, the Transfer Agent shall deliver to the
Investor certificates representing Common Stock not bearing the Legend without
requiring further advice or instruction or additional documentation from the
Company or its counsel or the Investor or its counsel or any other party (other
than as described in such paragraphs).
<PAGE>
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates evidencing Common Stock which bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered, the Transfer Agent shall deliver to
the Investor the certificates representing the Common Stock not bearing the
Legend, in such names and denominations as the Investor shall request.
In the event the Company files a Form S-3 registration statement and
such registration statement is declared effective by the SEC in connection with
any such event, the Investor (or its permitted assignee) shall confirm in
writing to the Transfer Agent that (i) the Investor has sold, pledged or
otherwise transferred or agreed to sell, pledge or otherwise transfer such
Common Stock in a bona fide transaction to a third party that is not an
affiliate of the Company; and (ii) the Investor confirms to the transfer agent
that the Investor has complied with the prospectus delivery requirement.
In the event the Company files a registration statement other than on
Form S-3, which is subsequently declared effective by the SEC, the Investors
need not confirm the above in writing to the Transfer Agent.
In the event a registration statement is not filed by the Company, or
for any reason the registration statement which is filed by the Company is not
declared effective by the SEC the Investor, or its permitted assignee, or either
of their brokers confirms to the Transfer Agent that (i) the Investor has held
the shares of Common Stock for at least one year, (ii) counting the shares
surrendered as being sold upon the date the unlegended Certificates would be
delivered to the Investor (or the Trading Day immediately following if such date
is not a Trading Day), the Investor will not have sold more than the greater of
(a) one percent (1%) of the total number of outstanding shares of Common Stock
or (b) the average weekly trading volume of the Common Stock for the preceding
four weeks during the three months ending upon such delivery date (or the
Trading Day immediately following if such date is not a Trading Day), and (iii)
the Investor has complied with the manner of sale and notice requirements of
Rule 144 under the Securities Act.
Any advice, notice, or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of (602) 415-1391.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver to the
Transfer Agent as defined in the Agreement certificates representing Common
Stock (with or without the Legend, as appropriate) immediately.
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<PAGE>
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investors are an express third party beneficiary of these Irrevocable
Instructions and shall be entitled to rely upon, and enforce, the provisions
thereof.
IJNT INTERNATIONAL, INC.
By:________________________________________
AGREED:
Executive Registrar & Transfer Agency, Inc.
By:________________________________________
Name:
Title:
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