<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 0 - 25112
ADVANCED MEDIA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2899603
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
80 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
(Address of principal executive offices)
(516) 244 -1616
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO
--- ---
There were 9,850,797 shares of registrant's common stock outstanding as of July
31, 1997.
<PAGE> 2
ADVANCED MEDIA INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Balance Sheets 3
Statements of Operations 4
Statements of Changes in Stockholders' Equity (Deficit) 5
Statements of Cash Flows 6
Notes to Financial Statements 7-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12-13
Signatures 14
</TABLE>
2
<PAGE> 3
ADVANCED MEDIA INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, Dec. 31,
1997 1996
------------ -----------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 14,021 $ 40,863
Accounts receivable, net of allowance for
doubtful accounts of $42,971 and $50,725, respectively 229,458 232,840
Inventories 70,551 51,669
Prepaid expenses and other current assets 202,986 78,701
------------ -----------
Total current assets 517,016 404,073
Fixed assets, net 508,247 554,169
Intangible assets, net 980,626 1,066,743
Other assets 63,428 62,907
------------ -----------
Total assets $ 2,069,317 $ 2,087,892
============ ===========
LIABILITIES & STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable $ 941,330 $ 866,130
Accrued expenses and other liabilities 208,734 245,095
Payable to related parties 243,588 184,162
Deferred revenues 79,950 102,500
Current portion of capital lease obligations 7,077 8,840
------------ -----------
Total current liabilities 1,480,679 1,406,727
------------ -----------
Loan payable - stockholder 1,171,807 1,179,472
Capital lease obligations 20,078 23,784
Payable to related parties, long term 273,055 181,925
------------ -----------
Total liabilities 2,945,619 2,791,908
============ ===========
Stockholders' deficiency:
Preferred stock, par value $.0001 per share,
Shares authorized: 10,000,000, issued 600,000 Series A
convertible shares, none and 120,000 outstanding
(entitled in liquidation to $120,000 at December 31, 1996) - 12
Common stock, par value $.0001 per share,
Shares authorized: 100,000,000
Shares issued and outstanding:
1997 - 9,822,672
1996 - 7,569,281 983 7,569
Additional paid-in capital 9,423,876 8,698,698
Accumulated deficit (10,234,258) (9,345,126)
Less deferred compensation (66,903) (65,169)
------------ -----------
Total stockholders' deficiency (876,302) (704,016)
------------ -----------
Commitments and contingencies
Total liabilities and stockholders' (deficit) equity $ 2,069,317 $ 2,087,892
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
ADVANCED MEDIA INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
June 30, June 30,
-------- --------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net revenues $ 1,802,729 $ 1,707,394 $ 1,061,410 $ 969,127
Cost of sales 1,200,697 1,311,441 713,869 711,739
----------- ----------- ------------ -----------
Gross profit 602,032 395,953 347,541 257,388
----------- ----------- ------------ -----------
EXPENSES:
Development 15,592 16,222 891 4,807
Selling and marketing 319,490 267,837 168,971 135,175
General and administrative 995,158 905,365 447,866 473,146
Amortization of intangible assets 86,118 112,346 43,059 56,172
Debt conversion expense - 309,375 - -
----------- ----------- ------------ -----------
Total expenses 1,416,358 1,611,145 660,787 669,300
----------- ----------- ------------ -----------
Loss from operations (814,326) (1,215,192) (313,246) (411,912)
OTHER INCOME (EXPENSE):
Other revenues 25,110 38,992 25,110 39,926
Interest expense, net (99,916) (101,714) (68,681) (23,551)
----------- ----------- ------------ -----------
Total other income (expense) (74,806) (62,722) (43,571) 16,375
----------- ----------- ------------ -----------
Net loss $ (889,132) $(1,277,914) $ (356,817) $ (395,537)
=========== =========== =========== ===========
Net loss per share $ (.10) $ (.22) $ (0.03) $ (0.06)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 8,624,412 5,883,571 11,089,545 6,212,238
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
ADVANCED MEDIA INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK Common Stock
-----------------------------------------------------------
.0001 par .0001 par
SHARES Amount Shares Amount
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 - - 5,531,981 5,532
Sales of common stock - - 186,857 187
Sales of Class A convertible preferred stock 600,000 60 - -
Conversion of preferred to common (480,000) (48) 737,248 737
Sales to 401K Plan - - 2,268 2
Issuance of common stock for:
Commission due broker - - 100,000 100
Consulting services - - 15,000 15
Rental expense - - 8,000 8
Public relations - - 35,000 35
Penalty shares - - 217,500 217
Acquisition revaluations - - 159,702 160
Issuance of stock options and warrants for:
Commission due broker - - - -
Employment agreement with officer - - - -
Legal services - - - -
Cancellation of shares due to:
Employment termination - - (29,275) (29)
Offset of note receivable - - (5,000) (5)
Debt conversion - - 610,000 610
Amortization of deferred compensation - - - -
Net loss - - - -
-----------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 120,000 12 7,569,281 7,569
Sales of common stock - - 1,568,968 1,569
Conversion of preferred to common (120,000) (12) 317,126 317
Sales to 401K plan - - 1,047 1
Issuance of common stock for:
Outside Services - - 170,000 125
Public relations - - 10,000 10
Services - employee - - 7,500 8
Services - directors - - 40,000 40
Penalty shares - - 138,750 139
Stock split, one-for-ten - - - (8,795)
Amortization of deferred compensation - - - -
Net loss - - - -
-----------------------------------------------------------
BALANCE AT JUNE 30, 1997 - - 9,822,672 983
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Additional Deferred Total
Paid-In Accumulated Compen- Dollar
Capital Deficit sation Amounts
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 6,179,372 (6,093,555) (110,030) (18,681)
Sales of common stock 218,357 - - 218,544
Sales of Class A convertible preferred stock 599,940 - - 600,000
Conversion of preferred to common (689) - - -
Sales to 401K Plan 3,553 - - 3,555
Issuance of common stock for:
Commission due broker 130,210 - - 130,310
Consulting services 12,922 - - 12,937
Rental expense 14,717 - - 14,725
Public relations 38,215 - - 38,250
Penalty shares (217) - - -
Acquisition revaluations (160) - - -
Issuance of stock options and warrants for:
Commission due broker 6,516 - - 6,516
Employment agreement with officer 212,500 - - 212,500
Legal services 7,500 - - 7,500
Cancellation of shares due to:
Employment termination (1,187) - 1,216 -
Offset of note receivable (6,511) - - (6,516)
Debt conversion 1,283,660 - - 1,284,270
Amortization of deferred compensation - - 43,645 43,645
Net loss - (3,251,571) - (3,251,571)
------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 8,698,698 (9,345,126) (65,169) (704,016)
Sales of common stock 590,800 - - 592,369
Conversion of preferred to common (305) - - -
Sales to 401K plan 747 - - 748
Issuance of common stock for:
Outside Services 77,963 - - 78,088
Public relations 9,365 - - 9,375
Services - employee 5,992 - - 6,000
Services - directors 31,960 - (32,000) -
Penalty shares (139) - - -
Stock split, one-for-ten 8,795 - - -
Amortization of deferred compensation - - 30,266 30,266
Net loss - (889,132) - (889,132)
------------------------------------------------------------------
BALANCE AT JUNE 30, 1997 9,423,876 (10,234,258) (66,903) (876,302)
------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
ADVANCED MEDIA INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
1997 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(889,132) $(1,277,914)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Gain on sale of trademark - (36,372)
Debt conversion expense - 309,375
Depreciation and amortization 92,365 87,794
Amortization of intangibles 86,117 112,346
Amortization of deferred compensation 30,266 21,447
Loss on disposal of fixed assets 4,777 -
Provision for doubtful accounts 782 -
Interest on loan payable - officer - 43,668
Issuance of options to officer as compensation - 75,000
Issuance of common stock for services and expenses 42,713 -
Changes in operating assets and liabilities:
Accounts receivable 2,600 (38,741)
Other receivable - (40,000)
Inventories, net (18,882) 10,138
Prepaid expenses and other current assets (67,597) (33,152)
Accounts payable 75,200 254,346
Accrued expenses and other liabilities (36,361) (23,286)
Payable to related parties 150,556 82,133
Deferred revenues (22,550) -
--------- -----------
Net cash used for operating activities (549,146) (453,218)
--------- -----------
Cash flows from investing activities:
Purchases of fixed assets (51,220) (54,629)
Net proceeds from sale of trademark - 61,372
Payment of note receivable 142 -
(Increase) decrease in security deposits (6,601) 6,881
--------- -----------
Net cash used for investing activities (57,679) 13,624
--------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock 593,117 90,371
Proceeds from loan payable - stockholder, net (7,665) 101,000
Payments of capital lease obligations (5,469) (646)
--------- -----------
Net cash provided by financing activities 579,983 190,725
--------- -----------
Net decrease in cash and cash equivalents (26,842) (248,869)
Net cash, cash overdrafts and cash equivalents:
Beginning of period 40,863 151,463
--------- -----------
End of period $ 14,021 $ (97,406)
========= ===========
Cash paid during the period for:
Interest $ 3,053 $ -
========= ===========
Taxes $ 1,610 $ -
========= ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
The Company exchanged 6,000,000 common shares for a $1,000,000 debt on March 31,
1996.
During the quarter ended June 30, 1996, the Company acquired computer equipment
pursuant to capital leases of $29,497.
During April 1997, the company exchanged 1,200,000 common shares for services
valued at $60,900 for an annual business development contract which is included
in prepaid expenses ($50,750 at June 30, 1997).
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
ADVANCED MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
1 - BASIS OF PRESENTATION
The unaudited interim financial statements of Advanced Media, Inc. (the
"Company") for the six months ended June 30, 1997 and 1996 have been prepared by
management and include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the unaudited interim periods. The
results of operations for the six months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year. These interim
financial statements should be read in conjunction with the financial statements
and related notes contained in the Company's annual report on Form 10-KSB for
the year ended December 31, 1996.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassifications - Certain amounts in the prior year financial statements have
been reclassified to conform with the current year presentation.
3 - LIQUIDITY AND BUSINESS RISKS
The Company incurred a net loss of $889,132 for six months ended June 30, 1997
and cumulative net losses of $10,234,258 since commencing operations in August
1993. As of June 30, 1997, the Company had a working capital deficit of $963,663
as compared to a working capital deficit of $1,002,654 at December 31, 1996. In
order to meet its obligations as they become due and to continue its operations
as a going concern, the Company must raise additional capital. The Company
continues to be engaged in various discussions with potential investors
regarding possible equity transactions. Additional funding of $593,117 was
raised during the first six months of 1997. Although management believes, based
on the development of the Company's business and its preliminary discussions
with various potential investors and other sources of financing, that it may be
able to raise additional capital sufficient to meet its working capital needs
over the next twelve months, no assurance can be given that it will be
successful in this respect. The Company currently has no line of credit or other
access to debt financing.
4 - DEBT AND EQUITY TRANSACTIONS
On June 23, 1997, the Board of Directors declared a one-for-ten common stock
split effective June 30, 1997. In addition, all references in the financial
statements to the number of shares, per share amounts, and market prices of the
Company's common stock have been restated.
The Company issued a total of 600,000 shares of common stock in exchange for an
aggregate $280,000 in the first quarter of 1997. As a condition of two of these
placements, the Company agreed to register 200,000 shares by April 30, 1997.
Failure to register the 200,000 shares cause the Company to pay a penalty of
5,000 shares to each of the parties, i.e., 10,000 total, for each thirty-day
period thereafter for which a registration statement is not filed. Through June
30, 1997, 30,000 shares have been reserved as penalty shares under this
agreement. Such penalty shares are required to be registered as contingency
shares in the registration statement. Furthermore, as consideration for the
investors not disposing of the 200,000 shares between April 30, 1997 and June
30, 1997, which condition has been met, the agreement provides for additional
contingency shares to be registered if the Company has not met a value guaranty
provision ensuring that the 200,000 shares will be equivalent in value to
$175,000 after the registration becomes effective.
In March 1997, the Board of Directors of the Company resolved to issue warrants
to purchase an aggregate 500,000 shares of common stock to Suan Investments
Corporation ("Suan") and its assignee, Stourbridge Investments ("Stourbridge"),
to be divided equally. The warrants become exercisable on September 30, 1997 at
an exercise price of $.65, and expire on December 31, 1998. In consideration of
the issuance of warrants to purchase 250,000 shares of common stock the
aforementioned parties have agreed to extend to June 30, 1997 the interest
payment due originally at the time of the conversion of the Suan Investment note
to equity. Further, upon payment of the interest the security interest in
substantially all of the assets of the Company which collateralizes the
Company's obligations will be terminated. The value of the warrants to purchase
the balance of the 250,000 shares will be applied against the Company's
obligation to provide a value guarantee for 600,000 shares previously issued to
Suan and
7
<PAGE> 8
ADVANCED MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
4 - DEBT AND EQUITY TRANSACTIONS (CONT.)
Stourbridge. Payable to related parties includes accrued interest of $103,588
and $96,899 at June 30, 1997 and December 31, 1996, respectively. The Company
made a $25,000 payment to the aforementioned investors in July 1997 towards the
interest due at June 30, 1997. The Company is presently in default of this
agreement and working to a remedy to cure the default.
In April 1997, the Company issued 202,690 shares of its common stock for which
the Company received $101,345 before $15,201 in commissions. The Company agreed
to attempt to have declared effective by the Securities & Exchange Commission a
registration statement on Form S-3 for these shares by July 15, 1997 or be
subject to a cumulative penalty of 10% of the amount of shares subscribed. The
penalty will continue for each thirty-day period for which the registration is
not effective. The shares have not been registered to date. The Company has also
agreed that if the value of these shares is not $1.10 on the effective date of
the registration statement, it will issue additional shares of equivalent value
to such subscribers. The Company is presently in discussions to renegotiate the
aforementioned penalties and value guaranty.
On June 9, 1997, the Company entered into a Private Equity Line of Credit
Agreement (PELOC) for an aggregate purchase price of up to $1,000,000 through
June 30, 1998. Under this agreement, the Company issued 699,301 shares of its
common stock for $250,000 before commissions and legal fees of $45,900 and
22,727 shares of common stock. The Company has agreed to continue to reserve its
stock to satisfy any obligation to issue shares incident to the PELOC. Upon the
effectiveness of a registration statement covering the shares to be issued under
the PELOC, the Company has the option to set the date of each draw down ("call")
provided that the average trading volume over the course of the previous six
months preceding each call must be greater than 20,000 shares per trading day.
Additional investments or calls under this line, above the $250,000 already
drawn down, are at 70% of the average closing bid price of the Company's common
stock on the ten days preceding the call date. Under no circumstances
will shares in excess of 20% of the Company's current outstanding shares be
issued pursuant to this agreement. In the event 500,000 is not drawn down by
June 30, 1998, the Company is obligated to issue 100,000 shares of common stock
to the investor without further consideration. Under the Registrations Rights
Agreement, all shares issued pursuant to the PELOC must be declared effective by
September 30, 1997. In the event the Company fails to obtain or maintain the
effectiveness of a registration statement on or before September 30, 1997, the
Company shall pay $5,000, and then $7,500 for each thirty-day period commencing
November 1, 1997. The Company has committed to draw down an additional minimum
$250,000 under this agreement.
The aforementioned agreement contains an antidilution provision which requires
the Company to obtain prior written consent of the Investor Agent shall the
Company desire to issue shares of common stock at a price per share less than
the daily closing bid price on the date of issue, issue options, rights or
warrants to subscribe for or purchase common stock (or securities convertible
into common stock) without consideration or at a price per share (or having a
conversion price per share, if a security convertible into common stock) less
than the daily closing bid price of the common stock on the date of issue, or in
the case of securities convertible into common stock having a conversion price
less than the daily closing bid price of the common stock on the date of
conversion.
In June 1997, the Company issued 44,250 shares of its common stock for which the
Company received $22,125.
5 - RELATED PARTY TRANSACTIONS
Deferred Revenues include payments from a corporation who is a shareholder of
the Company.
Revenue included $45,000 from a corporation who is a shareholder of the Company.
Expenses for the six and three months ended June 30, 1997 include certain
amounts payable to the Company's chief executive officer, $90,000 and $45,000,
respectively, representing compensation payable, and $91,131 and $64,063,
respectively, representing interest on the loan from officer.
8
<PAGE> 9
ADVANCED MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
6 - SIGNIFICANT CUSTOMERS
Two separate customers accounted for approximately 23% and 10%, respectively, or
33% of net revenues during the six months ended June 30, 1997.
7 - INCOME TAXES
At June 30, 1997 the Company has net operating loss carryforwards for tax
purposes of approximately $7,100,000, which expire through 2011. Deferred tax
assets are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
<S> <C> <C>
Gross deferred tax assets $ 2,557,107 $ 2,315,939
Valuation allowance (2,557,107) (2,315,939)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
</TABLE>
The gross deferred tax assets arise primarily from net operating loss
carryforwards and differences in the valuation of receivables, accruals and
deferred compensation. The Company has provided a full valuation allowance
against the gross deferred tax assets because, in management's judgement, it is
more likely than not that such benefits will not be realized.
The Company had a several changes in ownership since commencing operations in
1993, which has resulted in a restriction on the prospective annual utilization
of the loss carryforwards. Future changes in ownership may also result in
further limitations on the annual utilization of the loss carryforwards.
8 - CONTINGENCIES
Legal Proceedings
On September 29, 1995, a former employee and owner of a business acquired by the
Company, Decision Vision ("Decision"), and his wife, also a former employee of
Decision, initiated a lawsuit seeking damages of approximately $1,000,000 from
the Company, and certain present and former officers. The lawsuit was based on
claims arising out of the employees' termination, and also arising out of the
sale of the assets of Decision to the Company. The most significant aspect of
the lawsuit, pertaining to the acquisition of the assets of Decision by the
Company, was dismissed by the court in which the action had been filed, the
Superior Court of the State of California, County of San Diego, in a series of
rulings between December 1996 and February 1997, when the court dismissed
numerous causes of action and the action against all individual defendants and
eliminated any possible punitive damages award. The court also dismissed certain
aspects of the wrongful termination claims of one of the plaintiffs. The
remaining claims, including the rest of the wrongful termination claims of both
plaintiffs, relatively insignificant in scope in comparison with the claims
pertaining to the acquisition of assets, have been settled and payment by the
Company of the total sum of $42,500 has been made. This partial settlement
precludes a trial and concludes this matter as to these remaining issues and
also concludes the cross-action that the Company had previously filed against
the former employee who was the principal stockholder of Decision seeking
approximately $53,000 in damages for alleged breaches arising from the same
acquisition. The settlement arrangement allows that plaintiffs to appeal the
dismissal of the primary claims pertaining to the acquisition to the California
Court of Appeal. On March 25, 1997, the plaintiffs filed an appeal regarding the
above claims. The Court of Appeal has set a date for late August, 1997 to
discuss the possibility of settling the appeal. As to the claims that plaintiffs
are now pursuing in the California Court of Appeal, the Company plans to
vigorously contest those claims. The Company has not set aside any reserves for
these remaining claims as management of the Company believes that it is not
probable that the Company will suffer any material loss as a result of those
appeals.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Form 10-QSB.
RESULTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Revenue for the six and three months ended June 30, 1997 increased $95,335 and
$92,283, or 5.6% and 9.5%, respectively. The increase in revenue is primarily
attributable to growth in the Company's sales of architectural design software
products and related system enhancements. Additionally the Company's new
Electronic Commerce division recorded $45,000 of revenue for its first
electronic commerce project. Sales to General Nutrition Stores, Inc., primarily
on the rollout of the bio-nutritional reference kiosks, accounted for
approximately 23% of sales for the six and three month periods ended June 30,
1997.
Gross profit for the six and three months ended June 30, 1997 increased $206,079
and $90,153, or 52% and 35%, respectively, as compared to the prior six and
three month period. Gross margin for the six and three months ended June 30,
1997 was 33.4% and 32.7%, respectively, versus 23.2% and 26.6%, for the
comparable respective periods in 1996. The increase and improvement in gross
profit is due to the change in the mix of products sold by the Company as a
result of management's change in sales emphasis towards more profitable
interactive system solutions and away from less profitable hardware systems and
software sales. Management has also been able to reduce rental costs on systems
utilized for tradeshow services.
Expenses for the six and three months ended June 30, 1997 declined $194,787 and
$8,513, or 12.1% and 1.3%, respectively. The majority of the variance was caused
by a non-recurring charge for debt conversion expense, $309,375, related to the
costs associated with inducing Suan Investments Corporation to retire their
outstanding debt in the first quarter of 1996 in exchange for the Company's
equity. Selling and marketing expense for the six and three months ended June
30, 1997 increased $51,653 and $33,796, or 19.3% and 25%, respectively, of which
$26,495 and $22,726 reflects selling costs incurred in the new electronic
commerce division for the respective six and three months periods ended which
started up in September 1996. The balance of the increase in selling and
marketing expense is related to the cost of preparing sales demonstrations
related to sales proposal efforts. General and administrative expenses for the
six months ended June 30, 1997 increased $89,793 or 9.9% and decreased $25,280,
or 5.3% for the three months ended June 30, 1997, of which $114,696 and $44,375
reflects costs related to the Company's new electronic commerce division for the
respective six and three month period in 1997. Legal expenses declined
approximately $40,000 for the three month period ended June 30, 1997 as compared
to the same period ended June 30, 1996 resulting in the overall decrease in
general and administrative expenses during the quarter. The decrease of $26,228
and $13,115, or 23.3% for both periods, in amortization of intangible assets is
related to the reduction in goodwill recorded by the Company in the fourth
quarter of 1996 and reflected as an impairment loss.
Other income (expense) reflects higher interest charges during the quarter ended
June 30, 1997 versus the same period in 1996 related to interest on advances to
the chief executive officer at an increased interest rate of 14% retroactive to
January 1, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, l997, the Company had a net capital deficiency of $876,302, a
working capital deficit of $963,663 and has sustained cumulative losses of
$10,234,258 since commencing operations in August 1993. In order to meet its
obligations as they become due and to continue its operations as a going
concern, the Company must raise additional capital. The Company continues to be
engaged in various discussions with potential investors regarding additional
equity transactions. Additional funding of $593,117 was raised during the first
six months of 1997.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
Although management believes, based on the development of the Company's business
and its preliminary discussions with various potential investors and other
sources of financing, that it may be able to raise additional capital
sufficient to meet its working capital needs over the next twelve months, no
assurance can be given that it will be successful in this respect. The Company
currently has no line of credit or other access to debt financing.
The Company's stock price has steadily declined since January 1996, which has
made it difficult for the Company to raise additional equity capital without
significant dilution to present shareholders. The Company is further hampered by
its inability to obtain bank financing and the fact that all of its assets are
pledged as collateral to Suan Investments and its assignee, Stourbridge
Investments.
The Company is hopeful that anticipated improvements in the Company's operations
resulting from the sales and installation of interactive kiosks pursuant to the
Rollout Contract with GNC and the Company's improvements in the
areas of Electronic Commerce, including 21SoftwareDrive and its multiple
transaction-driven vertical applications, will result in an increase in the
market price of the Company's common stock used to raise additional equity
capital, although there can be no assurance it will do so.
Any forward looking statements contained in this document reflect management's
current intentions and expectations. Actual future results could vary materially
depending on certain risks and uncertainties, including factors such as
financing, operational spending, revenue levels, and the other factors referred
to in this document.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 29, 1995, a former employee and owner of a business acquired by the
Company, Decision Vision ("Decision"), and his wife, also a former employee of
Decision, initiated a lawsuit seeking damages of approximately $1,000,000 from
the Company, and certain present and former officers. The lawsuit was based on
claims arising out of the employees' termination, and also arising out of the
sale of the assets of Decision to the Company. The most significant aspect of
the lawsuit, pertaining to the acquisition of the assets of Decision by the
Company, was dismissed by the court in which the action had been filed, the
Superior Court of the State of California, County of San Diego, in a series of
rulings between December 1996 and February 1997, when the court dismissed
numerous causes of action and the action against all individual defendants and
eliminated any possible punitive damages award. The court also dismissed certain
aspects of the wrongful termination claims of one of the plaintiffs. The
remaining claims, including the rest of the wrongful termination claims of both
plaintiffs, relatively insignificant in scope in comparison with the claims
pertaining to the acquisition of assets, have been settled and payment by the
Company of the total sum of $42,500 has been made. This partial settlement
precludes a trial and concludes this matter as to these remaining issues and
also concludes the cross-action that the Company had previously filed against
the former employee who was the principal stockholder of Decision seeking
approximately $53,000 in damages for alleged breaches arising from the same
acquisition. The settlement arrangement allows that plaintiffs to appeal the
dismissal of the primary claims pertaining to the acquisition to the California
Court of Appeal. On March 25, 1997, the plaintiffs filed an appeal regarding the
above claims. The Court of Appeal has set a date for late August, 1997 to
discuss the possibility of settling the appeal. As to the claims that plaintiffs
are now pursuing in the California Court of Appeal, the Company plans to
vigorously contest those claims. The Company has not set aside any reserves for
these remaining claims as management of the Company believes that it is not
probable that the Company will suffer any material loss as a result of those
appeals.
Item 2. Changes in Securities
On June 23, 1997, the Board of Directors declared a one-for-ten common
stock split effective June 30, 1997.
Item 3. Defaults Upon Senior Securities
The Company is in default of an interest payment to Suan Investments
Corporation, and its assignee, Stourbridge Investments, in the
approximate amount of $80,000 at July 31, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Effective August 15, 1997 the Company accepted the resignation of its
Chief Financial Officer as well as Vice-President of Sales & Marketing.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.33 Subscription Agreement dated as of January 15, 1997 between Viking
Fund Ltd. and Advanced Media, Inc.
10.34 Subscription Agreement dated January 28, 1997 between Wanas
Investment Ltd. and Advanced Media, Inc.
12
<PAGE> 13
PART II. OTHER INFORMATION (CONT.)
Item 6. Exhibits and Reports on Form 8-K (continued)
(a) Exhibits (continued)
10.35 Stock Subscription Agreement dated February 19, 1997 between
Joseph Markus and Advanced Media, Inc.
10.36 Stock Subscription Agreement dated February 19, 1997 between Ed
Warman and Advanced Media, Inc.
10.37 Form of Stock Subscription Agreement dated April 25, 1997
between Advanced Media, Inc. and various (6) investors to
purchase an aggregate 202,690 shares.
10.38 Advanced Media, Inc. 1997 Stock Option Plan.
10.39 Private Equity Line of Credit Agreement between Coutts & Co AG
and Advanced Media, Inc. dated as of June 9, 1997.
10.40 Registration Rights Agreement dated June 9, 1997 between
Advanced Media, Inc and Coutts & Co AG.
10.41 Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of Advanced Media, Inc.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June
30, 1997.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED MEDIA, INC.
Date: 7/31/97 By /s/ Hans Kaemmlein
------------ --------------------------
Hans Kaemmlein, Chairman of the Board,
President and Chief Executive Officer
Date 7/31/97 By /s/ Alan W. Schoenbart
------------ --------------------------
Alan W. Schoenbart,
Chief Financial Officer
14
<PAGE> 15
Exhibit Index
10.33 Subscription Agreement dated as of January 15, 1997 between Viking
Fund Ltd. and Advanced Media, Inc.
10.34 Subscription Agreement dated January 28, 1997 between Wanas
Investment Ltd. and Advanced Media, Inc.
10.35 Stock Subscription Agreement dated February 19, 1997 between
Joseph Markus and Advanced Media, Inc.
10.36 Stock Subscription Agreement dated February 19, 1997 between Ed
Warman and Advanced Media, Inc.
10.37 Form of Stock Subscription Agreement dated April 25, 1997
between Advanced Media, Inc. and various (6) investors to
purchase an aggregate 202,690 shares.
10.38 Advanced Media, Inc. 1997 Stock Option Plan.
10.39 Private Equity Line of Credit Agreement between Coutts & Co AG
and Advanced Media, Inc. dated as of June 9, 1997.
10.40 Registration Rights Agreement dated June 9, 1997 between
Advanced Media, Inc and Coutts & Co AG.
10.41 Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of Advanced Media, Inc.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.33, PAGE 1 OF 5
THE SECURITIES TO BE PURCHASED AND SOLD PURSUANT TO THIS SUBSCRIPTION AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS
(OTHER THAN DISTRIBUTORS), AS SUCH TERMS ARE DEFINED IN REGULATIONS PROMULGATED
BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT, UNLESS THE SECURITIES
ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT
OF THE ACT IS AVAILABLE.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") dated as of the
15th day of January, 1997, by and between Viking Fund Ltd., a Bahamian company
(the "Purchaser") and Advanced Media, Inc. (the "Company").
WHEREAS, subject to the terms and conditions herein contained,
Purchaser desires to purchase shares of Common Stock, par value $.001 per share
("Common Stock") of the Company and the Company desires to sell shares of Common
Stock to the Purchaser.
NOW, THEREFORE, in consideration of the premises and the
terms, conditions and covenants herein contained, the parties hereto do hereby
agree as follows:
1. SUBSCRIPTION. Purchaser hereby subscribes for 2,000,000
shares of Common Stock (the "Shares") at a purchase price equal to $.04 per
share. The total consideration for the Shares shall be $80,000. Purchaser shall
pay the purchase price by delivering good funds in United States Dollars by wire
transfer to the Company for closing by delivery of securities versus payment,
the time and place to be mutually agreed.
2. REPRESENTATIONS OF PURCHASER. In order to induce the
Company to accept this subscription and sell to the Purchaser the Shares, the
Purchaser does hereby represent, warrant and covenant to and agree with the
Company, which representations, warranties, covenants and agreements shall be
deemed to be continuing and shall survive the execution of this Agreement by the
Company and the consummation of the transactions herein contained, as follows:
(a) RECEIPT OF DISCLOSURE DOCUMENTS; AVAILABILITY OF
DOCUMENTS; INDEPENDENT INVESTIGATION. The Purchase has been furnished with the
Company's press releases, Annual Report on Form 10-K for the year ended December
31, 1995, Quarterly Report on Form 10-Q for the periods ended March 31, 1996,
June 30, 1996 and September 30, 1996 and most recent proxy statement (the
"Disclosure Documents"). The Purchaser acknowledges that the Company has offered
to provide copies of any documents identified in the Disclosure Documents
requested by the Purchaser. In addition, prior to the sale of the Shares, all
documents, records and books pertaining to an investment in the Company have
been made available to the Purchaser and the Purchaser's advisers for inspection
during reasonable business hours at the office of the Company. In making the
decision to purchase the Shares, the Purchaser has relied upon independent
investigations made by Purchaser and Purchaser's representatives, if any.
(b) OPPORTUNITY TO TALK WITH MANAGEMENT. The Purchaser has
been given the opportunity and has been encouraged to discuss with management of
the Company the present and contemplated business, operations and financial
condition of the Company and the estimated expenses of this transaction and the
contemplated use of the net proceeds from this transaction.
(c) ACCREDITED INVESTOR; KNOWLEDGE AND EXPERIENCE. The
Purchaser is an "accredited investor" as that term is defined in Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"), and has
such knowledge or experience in financial and business matters that the
Purchaser is capable, either alone or together with the Purchaser's purchaser
representative (if any) of evaluating the merits and risks of investing in the
Company.
<PAGE> 2
EXHIBIT 10.33, PAGE 2 OF 5
(d) NO U.S. PERSON. The Purchaser is not a U.S. Person as
that term is defined in Rule 902(o) of Regulation S.
(e) OFFSHORE TRANSACTION. The offer and sale of the Shares
is not taking place in the United States but rather in an offshore transaction.
The Purchaser was outside the United States at the time his buy order originated
and is outside the United States as of the date of the execution and delivery of
this Agreement.
(f) OFFERING RESTRICTIONS. All offers and sales of the
Shares prior to the expiration of a period commencing on the date of this
Agreement and ending 90 days thereafter shall only be made with the consent of
the Company in its sole discretion, provided, that in no event shall any such
sale be made other than in compliance with the safe harbor contained in
Regulation S, pursuant to registration of the Shares under the Securities Act,
or pursuant to an exemption from the registration requirements of the Securities
Act. All offers and sales after the expiration of the 90-day period, or such
shorter period not to be less than 40 days in its sole discretion as is agreed
to by the Company, in the United States or to U.S. Persons shall be made only
pursuant to such a registration or to such exemption from registration.
(g) STATEMENTS CONCERNING OFFERING PROVISIONS. All
offering materials and documents received by Purchaser include statements to the
effect that the Shares have not been registered under the Securities Act and may
not be offered or sold in the United States or to U.S. Persons prior to the
expiration of a period commencing on the date of this transaction and ending 40
days thereafter unless the Shares are registered under the Securities Act or an
exemption from the registration requirements of the Securities Act is available.
(h) RISK OF PURCHASE. The Purchaser understands that the
purchase of the Shares is speculative and involves a high degree of risk, and
the Purchaser is able to bear the economic risk of the purchase of the Shares.
(i) PURCHASE FOR OWN ACCOUNT. The Purchaser is purchasing
the Shares for its own account and not on behalf of any U.S. Person, and the
sale has not been prearranged with a purchaser in the United States.
(j) U.S. ACCOUNTS. During the 40-day safe harbor period of
Regulation S referred to in paragraph (f) above, the Shares may not be held in
the United States unless held by a dealer or other professional fiduciary
organized, incorporated or (if an individual) resident in the United States
pursuant to a discretionary account or similar account (other than estate or
trust) held for the benefit or account of the Purchaser.
(k) BENEFICIARIES. If the certificate(s) for the Shares is
requested to be issued in the name of a nominee during the 40-day safe harbor
period referred to in paragraph (f) above, each and every beneficiary for which
said certificate(s) is held by the nominee will be a non-U.S. Person.
(l) RELIANCE BY COMPANY ON REPRESENTATIONS. The Purchaser
understands that the Shares are being offered and sold to Purchaser in reliance
on specific exemptions from the registration requirements of federal and
applicable state securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, covenants, agreements and
acknowledgments of Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of the Purchaser to acquire
the Shares.
(m) COMPLIANCE WITH REGULATION S. The Purchaser has no
reason to believe, and does not believe, that the sale of the Shares does not
comply with the requirements of Regulation S.
<PAGE> 3
EXHIBIT 10.33, PAGE 3 OF 5
(n) COMPLIANCE BY DISTRIBUTORS. Each Distributor (as that
term is defined in Regulation S) participating in the offering of the Shares, if
any, has agreed that all offers and sales of the Shares prior to the expiration
of a period commencing on the date of the closing of the offering of the Shares
and ending 40 days thereafter shall only be made in compliance with the safe
harbor provisions contained in Regulation S, or pursuant to registration of the
Shares under the Securities Act or pursuant to an applicable exemption from
registration under the Act. No Distributor of the Shares of any affiliate
thereof has engaged in any "Directed Selling Efforts" (as defined in Rule 902(b)
of Regulation S).
(o) NO AFFILIATION WITH COMPANY. The Purchaser is not an
officer, director or "affiliate" (as that term is defined in Rule 405 under the
Securities Act) of the Company.
(p) NO REGULATORY ENDORSEMENT OF APPROVAL. The Purchaser
understands that no United States federal or stare agency has made any finding
or determination regarding the fairness of the offering of the Shares for
investment, or any recommendation or endorsement of the offering of the Shares.
(q) NO SCHEME TO AVOID REGISTRATION. The Purchaser
understands that in the view of the Securities and Exchange Commission, the
statutory basis for the exemption claimed for the transaction would not be
present if the offering of Shares, although in technical compliance with
Regulation S, is part of a plan or scheme to evade the registration provisions
of the Securities Act. The Purchaser hereby confirms that its purchase is not
part of any such plan or scheme.
(r) NO OTHER REPRESENTATIONS TO PURCHASERS. The Purchaser
understands and acknowledges that no other person has made any representations
or warranties as to the accuracy or completeness of the information contained in
the Company reports and filings provided to Purchaser or this Agreement.
(s) COMPLIANCE WITH APPLICABLE FOREIGN LAW. The purchase
of the Shares by the Purchaser is not in violation of any securities law of the
country or territory in which Purchaser is located.
(t) NO SHORT SELLING DURING THE 40-DAY PERIOD. Purchaser
has not sold short any shares of the Company's Common Stock during the past
thirty (30) days and until the expiration of the 40-day period referred to in
paragraph (f) above, will not sell short or engage in any other hedging
transaction with respect to any shares of the Common Stock of the Company.
3. REPRESENTATIONS OF THE COMPANY. In order to induce the
Purchaser to purchase the Shares, the Company does hereby represent, warrant and
covenant to and agree with the Purchaser, which representations, warranties,
covenants and agreements shall be deemed to be continuing and shall survive the
execution of this Agreement by the Purchaser and the consummation of the
transactions herein contained as follows:
(a) REPORTING COMPANY STATUS. The Company has a class of
securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and has filed all the material
required to be filed pursuant to Section 13(a) or 15(d) of the Exchange Act for
a period of at least twelve (12) months immediately preceding the date of this
Agreement and the date on which the Purchaser was offered an opportunity to
purchase the Shares.
(b) OFFSHORE TRANSACTION. The Company has not knowingly
offered shares of Common Stock or the Shares in this transaction to any persons
in the United States or to any U.S. Persons.
(c) NO DIRECTED SELLING EFFORTS. The Company has not
conducted any Directed Selling Efforts as that term is defined in Rule 902(b) of
Regulation S.
(d) CORPORATE AUTHORITY; VALIDITY OF THE SHARES. The
Company has all corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The Shares, when issued pursuant to the
terms of this Agreement, will be validly issued, fully paid and non-assessable.
<PAGE> 4
EXHIBIT 10.33, PAGE 4 OF 5
(e) NO PRE-ARRANGEMENT WITH U.S. PERSONS. The Company
believes that the purchase of the Shares has not been pre-arranged with a
purchaser in the United States.
(f) ONE DISTRIBUTOR. The Company believes that Eric
Wachmeister is the only distributor (as such term is defined in Rule 902(c) of
Regulation S) of the Shares.
(g) LITIGATION. Except as disclosed in the Disclosure
Documents, there is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates, that would materially affect the execution by the
Company of the performance by the Company of its obligation under this
Agreement.
(h) ADDITIONAL ISSUANCES. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common stock
and no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, any shares of Common Stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company,
except as described in the Disclosure Documents.
4. INDEMNIFICATION. The Purchaser does hereby agree to
indemnify and hold harmless the Company and its officers, directors,
stockholders, employees, agents and affiliates from and against any and all
loss, damage, liability, cost and expense (including reasonable attorneys' fees)
arising out of or relating to a breach by the Purchaser of any of the
representations, warranties or covenants herein contained. The Company does
hereby agree to indemnify and hold harmless the Purchaser from and against any
and all loss, damage, liability, cost and expense (including reasonable
attorneys' fees) arising out of or relating to a breach by the Company of any of
the representations, warranties or covenants herein contained.
5. VALIDITY AND BINDING NATURE OF AGREEMENT. This Agreement
and the subscription herein contained shall not be binding upon the Company
until accepted by the Company by execution of this Agreement by the Company.
This Agreement and the subscription herein contained shall be valid and binding
upon and irrevocable as to the Purchaser during the period commending on the
date hereof and terminating upon the acceptance or rejection of this
subscription by the Company.
6. TRANSFERABILITY. Neither this Agreement, nor the rights,
benefits, duties or obligations of the Purchaser hereunder can be transferred,
sold, assigned or conveyed by the Purchaser without the express written consent
of the Company in each instance, which consent may be given or withheld in the
sole and absolute discretion of the Company.
7. CLOSING. The date of the issuance and sale of the Shares
shall be within five (5) business days after the acceptance of this executed
Agreement by the Company. The exact date and place of the closing shall be
determined by the mutual agreement of the parties hereto.
8. MISCELLANEOUS TERMS. This Agreement sets forth the entire
agreement between the parties hereto with respect to the subject matter herein
contained and shall be governed and construed in accordance with the laws of the
State of New York applicable to contracts made and to be fully performed
therein, without regard to conflicts of laws, cannot be altered, amended,
modified, terminated, or rescinded except by a writing executed by the Purchaser
and the Company, or as herein otherwise provided; and shall inure to the benefit
of and be binding upon the parties hereto and their respective successors,
transferees, heirs, assigns and beneficiaries. There are no third party
beneficiaries of this Agreement except as expressly provided herein.
<PAGE> 5
EXHIBIT 10.33, PAGE 5 OF 5
IN WITNESS WHEREOF, the Purchaser has executed this
Subscription Agreement as of this 15th day of January, 1997.
VIKING FUND LTD.
By:/s/ Tony Inder Rieden
---------------------
Tony Inder Rieden
President
Address:
Charlotte House
Charlotte Street
Nassau, Bahamas
Accepted this 15th day of January, 1997
ADVANCED MEDIA, INC.
By: /s/ Hans J. Kaemmlein
---------------------
Name: Hans J. Kaemmlein
Title: Chairman of the Board
<PAGE> 1
EXHIBIT 10.34, PAGE 1 OF 5
THE SECURITIES TO BE PURCHASED AND SOLD PURSUANT TO THIS SUBSCRIPTION AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS
(OTHER THAN DISTRIBUTORS), AS SUCH TERMS ARE DEFINED IN REGULATIONS PROMULGATED
BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT, UNLESS THE SECURITIES
ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT
OF THE ACT IS AVAILABLE.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") dated as of the
28th day of January, 1997, by and between Wanas Investment Ltd., a Bahamian
company (the "Purchaser") and Advanced Media, Inc. (the "Company").
WHEREAS, subject to the terms and conditions herein contained,
Purchaser desires to purchase shares of Common Stock, par value $.0001 per share
("Common Stock") of the Company and the Company desires to sell shares of Common
Stock to the Purchaser.
NOW, THEREFORE, in consideration of the premises and the
terms, conditions and covenants herein contained, the parties hereto do hereby
agree as follows:
1. SUBSCRIPTION. Purchaser hereby subscribes for 2,000,000
shares of Common Stock (the "Shares") at a purchase price equal to $.05 per
share. The total consideration for the Shares shall be $100,000. Purchaser shall
pay the purchase price by delivering good funds in United States Dollars by wire
transfer to the Company for closing by delivery of securities versus payment,
the time and place to be mutually agreed.
2. REPRESENTATIONS OF PURCHASER. In order to induce the
Company to accept this subscription and sell to the Purchaser the Shares, the
Purchaser does hereby represent, warrant and covenant to and agree with the
Company, which representations, warranties, covenants and agreements shall be
deemed to be continuing and shall survive the execution of this Agreement by the
Company and the consummation of the transactions herein contained, as follows:
(a) RECEIPT OF DISCLOSURE DOCUMENTS; AVAILABILITY OF
DOCUMENTS; INDEPENDENT INVESTIGATION. The Purchase has been furnished with the
Company's press releases, Annual Report on Form 10-K for the year ended December
31, 1995, Quarterly Report on Form 10-Q for the periods ended March 31, 1996,
June 30, 1996 and September 30, 1996 and most recent proxy statement (the
"Disclosure Documents"). The Purchaser acknowledges that the Company has offered
to provide copies of any documents identified in the Disclosure Documents
requested by the Purchaser. In addition, prior to the sale of the Shares, all
documents, records and books pertaining to an investment in the Company have
been made available to the Purchaser and the Purchaser's advisers for inspection
during reasonable business hours at the office of the Company. In making the
decision to purchase the Shares, the Purchaser has relied upon independent
investigations made by Purchaser and Purchaser's representatives, if any.
(b) OPPORTUNITY TO TALK WITH MANAGEMENT. The Purchaser has
been given the opportunity and has been encouraged to discuss with management of
the Company the present and contemplated business, operations and financial
condition of the Company and the estimated expenses of this transaction and the
contemplated use of the net proceeds from this transaction.
(c) ACCREDITED INVESTOR; KNOWLEDGE AND EXPERIENCE. The
Purchaser is an "accredited investor" as that term is defined in Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"), and has
such knowledge or experience in financial and business matters that the
Purchaser is capable, either alone or together with the Purchaser's purchaser
representative (if any) of evaluating the merits and risks of investing in the
Company.
<PAGE> 2
EXHIBIT 10.34, PAGE 2 OF 5
(d) NO U.S. PERSON. The Purchaser is not a U.S. Person as
that term is defined in Rule 902(o) of Regulation S.
(e) OFFSHORE TRANSACTION. The offer and sale of the Shares
is not taking place in the United States but rather in an offshore transaction.
The Purchaser was outside the United States at the time his buy order originated
and is outside the United States as of the date of the execution and delivery of
this Agreement.
(f) OFFERING RESTRICTIONS. All offers and sales of the
Shares prior to the expiration of a period commencing on the date of this
Agreement and ending 120 days thereafter shall only be made with the consent of
the Company in its sole discretion, provided, that in no event shall any such
sale be made other than in compliance with the safe harbor contained in
Regulation S, pursuant to registration of the Shares under the Securities Act,
or pursuant to an exemption from the registration requirements of the Securities
Act. All offers and sales after the expiration of the 120-day period, or such
shorter period not to be less than 40 days in its sole discretion as is agreed
to by the Company, in the United States or to U.S. Persons shall be made only
pursuant to such a registration or to such exemption from registration.
(g) STATEMENTS CONCERNING OFFERING PROVISIONS. All
offering materials and documents received by Purchaser include statements to the
effect that the Shares have not been registered under the Securities Act and may
not be offered or sold in the United States or to U.S. Persons prior to the
expiration of a period commencing on the date of this transaction and ending 40
days thereafter unless the Shares are registered under the Securities Act or an
exemption from the registration requirements of the Securities Act is available.
(h) RISK OF PURCHASE. The Purchaser understands that the
purchase of the Shares is speculative and involves a high degree of risk, and
the Purchaser is able to bear the economic risk of the purchase of the Shares.
(i) PURCHASE FOR OWN ACCOUNT. The Purchaser is purchasing
the Shares for its own account and not on behalf of any U.S. Person, and the
sale has not been prearranged with a purchaser in the United States.
(j) U.S. ACCOUNTS. During the 40-day safe harbor period of
Regulation S referred to in paragraph (f) above, the Shares may not be held in
the United States unless held by a dealer or other professional fiduciary
organized, incorporated or (if an individual) resident in the United States
pursuant to a discretionary account or similar account (other than estate or
trust) held for the benefit or account of the Purchaser.
(k) BENEFICIARIES. If the certificate(s) for the Shares is
requested to be issued in the name of a nominee during the 40-day safe harbor
period referred to in paragraph (f) above, each and every beneficiary for which
said certificate(s) is held by the nominee will be a non-U.S. Person.
(l) RELIANCE BY COMPANY ON REPRESENTATIONS. The Purchaser
understands that the Shares are being offered and sold to Purchaser in reliance
on specific exemptions from the registration requirements of federal and
applicable state securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, covenants, agreements and
acknowledgments of Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of the Purchaser to acquire
the Shares.
(m) COMPLIANCE WITH REGULATION S. The Purchaser has no
reason to believe, and does not believe, that the sale of the Shares does not
comply with the requirements of Regulation S.
<PAGE> 3
EXHIBIT 10.34, PAGE 3 OF 5
(n) COMPLIANCE BY DISTRIBUTORS. Each Distributor (as that
term is defined in Regulation S) participating in the offering of the Shares, if
any, has agreed that all offers and sales of the Shares prior to the expiration
of a period commencing on the date of the closing of the offering of the Shares
and ending 40 days thereafter shall only be made in compliance with the safe
harbor provisions contained in Regulation S, or pursuant to registration of the
Shares under the Securities Act or pursuant to an applicable exemption from
registration under the Act. No Distributor of the Shares of any affiliate
thereof has engaged in any "Directed Selling Efforts" (as defined in Rule 902(b)
of Regulation S).
(o) NO AFFILIATION WITH COMPANY. The Purchaser is not an
officer, director or "affiliate" (as that term is defined in Rule 405 under the
Securities Act) of the Company.
(p) NO REGULATORY ENDORSEMENT OF APPROVAL. The Purchaser
understands that no United States federal or stare agency has made any finding
or determination regarding the fairness of the offering of the Shares for
investment, or any recommendation or endorsement of the offering of the Shares.
(q) NO SCHEME TO AVOID REGISTRATION. The Purchaser
understands that in the view of the Securities and Exchange Commission, the
statutory basis for the exemption claimed for the transaction would not be
present if the offering of Shares, although in technical compliance with
Regulation S, is part of a plan or scheme to evade the registration provisions
of the Securities Act. The Purchaser hereby confirms that its purchase is not
part of any such plan or scheme.
(r) NO OTHER REPRESENTATIONS TO PURCHASERS. The Purchaser
understands and acknowledges that no other person has made any representations
or warranties as to the accuracy or completeness of the information contained in
the Company reports and filings provided to Purchaser or this Agreement.
(s) COMPLIANCE WITH APPLICABLE FOREIGN LAW. The purchase
of the Shares by the Purchaser is not in violation of any securities law of the
country or territory in which Purchaser is located.
(t) NO SHORT SELLING DURING THE 40-DAY PERIOD. Purchaser
has not sold short any shares of the Company's Common Stock during the past
thirty (30) days and until the expiration of the 40-day period referred to in
paragraph (f) above, will not sell short or engage in any other hedging
transaction with respect to any shares of the Common Stock of the Company.
3. REPRESENTATIONS OF THE COMPANY. In order to induce the
Purchaser to purchase the Shares, the Company does hereby represent, warrant and
covenant to and agree with the Purchaser, which representations, warranties,
covenants and agreements shall be deemed to be continuing and shall survive the
execution of this Agreement by the Purchaser and the consummation of the
transactions herein contained as follows:
(a) REPORTING COMPANY STATUS. The Company has a class of
securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and has filed all the material
required to be filed pursuant to Section 13(a) or 15(d) of the Exchange Act for
a period of at least twelve (12) months immediately preceding the date of this
Agreement and the date on which the Purchaser was offered an opportunity to
purchase the Shares.
(b) OFFSHORE TRANSACTION. The Company has not knowingly
offered shares of Common Stock or the Shares in this transaction to any persons
in the United States or to any U.S. Persons.
(c) NO DIRECTED SELLING EFFORTS. The Company has not
conducted any Directed Selling Efforts as that term is defined in Rule 902(b) of
Regulation S.
(d) CORPORATE AUTHORITY; VALIDITY OF THE SHARES. The
Company has all corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The Shares, when issued pursuant to the
terms of this Agreement, will be validly issued, fully paid and non-assessable.
<PAGE> 4
EXHIBIT 10.34, PAGE 4 OF 5
(e) NO PRE-ARRANGEMENT WITH U.S. PERSONS. The Company
believes that the purchase of the Shares has not been pre-arranged with a
purchaser in the United States.
(f) ONE DISTRIBUTOR. The Company believes that Wanas
Investment Ltd. is the only distributor (as such term is defined in Rule 902(c)
of Regulation S) of the Shares.
(g) LITIGATION. Except as disclosed in the Disclosure
Documents, there is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates, that would materially affect the execution by the
Company of the performance by the Company of its obligation under this
Agreement.
(h) ADDITIONAL ISSUANCES. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common stock
and no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, any shares of Common Stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company,
except as described in the Disclosure Documents.
4. INDEMNIFICATION. The Purchaser does hereby agree to
indemnify and hold harmless the Company and its officers, directors,
stockholders, employees, agents and affiliates from and against any and all
loss, damage, liability, cost and expense (including reasonable attorneys' fees)
arising out of or relating to a breach by the Purchaser of any of the
representations, warranties or covenants herein contained. The Company does
hereby agree to indemnify and hold harmless the Purchaser from and against any
and all loss, damage, liability, cost and expense (including reasonable
attorneys' fees) arising out of or relating to a breach by the Company of any of
the representations, warranties or covenants herein contained.
5. VALIDITY AND BINDING NATURE OF AGREEMENT. This Agreement
and the subscription herein contained shall not be binding upon the Company
until accepted by the Company by execution of this Agreement by the Company.
This Agreement and the subscription herein contained shall be valid and binding
upon and irrevocable as to the Purchaser during the period commending on the
date hereof and terminating upon the acceptance or rejection of this
subscription by the Company.
6. TRANSFERABILITY. Neither this Agreement, nor the rights,
benefits, duties or obligations of the Purchaser hereunder can be transferred,
sold, assigned or conveyed by the Purchaser without the express written consent
of the Company in each instance, which consent may be given or withheld in the
sole and absolute discretion of the Company.
7. CLOSING. The date of the issuance and sale of the Shares
shall be within five (5) business days after the acceptance of this executed
Agreement by the Company. The exact date and place of the closing shall be
determined by the mutual agreement of the parties hereto.
8. MISCELLANEOUS TERMS. This Agreement sets forth the entire
agreement between the parties hereto with respect to the subject matter herein
contained and shall be governed and construed in accordance with the laws of the
State of New York applicable to contracts made and to be fully performed
therein, without regard to conflicts of laws, cannot be altered, amended,
modified, terminated, or rescinded except by a writing executed by the Purchaser
and the Company, or as herein otherwise provided; and shall inure to the benefit
of and be binding upon the parties hereto and their respective successors,
transferees, heirs, assigns and beneficiaries. There are no third party
beneficiaries of this Agreement except as expressly provided herein.
<PAGE> 5
EXHIBIT 10.34, PAGE 5 OF 5
IN WITNESS WHEREOF, the Purchaser has executed this
Subscription Agreement as of this 28th day of January, 1997.
WANAS INVESTMENT LTD.
By: /s/ John Metzger
----------------
John Metzger
President
Address:
Charlotte House
Charlotte Street
Nassau, Bahamas
Accepted this 28th day of January, 1997
ADVANCED MEDIA, INC.
By: /s/ Hans J. Kaemmlein
---------------------
Name: Hans J. Kaemmlein
Title: Chairman of the Board
<PAGE> 1
EXHIBIT 10.35, PAGE 1 OF 1
February 19, 1997
Mr. Joseph Markus
80 Orville Drive
Bohemia, NY 11716
Dear Mr. Markus:
We are confirming to you today that Advanced Media, Inc. will accept
$50,000.00 for a Reg. "D" offering of 1,000,000 shares at $0.05 per share, and
you are confirming herewith that all the proper corporate documentation has been
forwarded to you including all of the current filings.
This offering is made in accordance with the "accredited investors
provisions" of the applicable rules and guidelines of the SEC.
Furthermore, we are confirming that it is our intention to execute an
S3 filing for these shares in conjunction with our year-end audit to be filed
with the SEC on or before April 1, 1997 and that these shares should be tradable
not later than April 30, 1997. Should the registration statement registering
these shares not be effective on or before 4/30/97, than AMI will pay you a
penalty of 50,000 shares on 4/30/97 and 50,000 shares for each 30 day period
thereafter until the registration statement registering all of the shares
covered by this letter is effective. Such "penalty" shares shall also be
registered as contingency shares in the registration statement.
Additionally, you have agreed not to dispose of these shares between
April 30, 1997 and June 30, 1997, and as additional consideration, AMI will
provide to you a value guarantee calculated by taking the closing bid price
during June 1, 1997 and June 30, 1997 and taking a simple average of such
closing bid prices for each of the trading days in such period, or the first 20
trading days immediately following the effective date of the registration
statement registering all of the shares covered by this letter, whichever is
later. If such average closing bid price is not equal to or greater than the
closing price on February 19, 1997 (i.e. $0.0875) the difference will be offset
with (the value guarantee additional shares) registered as contingency shares in
the registration statement (the value guarantee additional shares) will be
determined as follows: 1,000,000 plus (the value guarantee additional shares)
multiplied by the average closing bid price (as determined above) will equal
$87,500.00.
If you agree to these terms and conditions as stated above, please sign
this letter below. Please be advised that funding of this transaction must occur
on February 20, 1997.
By: /s/ Hans J. Kaemmlein February 19, 1997
--------------------- -----------------
For Advanced Media, Inc. Date
Hans J. Kaemmlein
Chairman & CEO
By: /s/ Joseph Markus February 19, 1997
----------------- -----------------
Joseph Markus Date
<PAGE> 1
EXHIBIT 10.36, PAGE 1 OF 1
February 19, 1997
Mr. Ed Warman
80 Orville Drive
Bohemia, NY 11716
Dear Mr. Warman:
We are confirming to you today that Advanced Media, Inc. will accept
$50,000.00 for a Reg. "D" offering of 1,000,000 shares at $0.05 per share, and
you are confirming herewith that all the proper corporate documentation has been
forwarded to you including all of the current filings.
This offering is made in accordance with the "accredited investors
provisions" of the applicable rules and guidelines of the SEC.
Furthermore, we are confirming that it is our intention to execute an
S3 filing for these shares in conjunction with our year-end audit to be filed
with the SEC on or before April 1, 1997 and that these shares should be tradable
not later than April 30, 1997. Should the registration statement registering
these shares not be effective on or before 4/30/97, than AMI will pay you a
penalty of 50,000 shares on 4/30/97 and 50,000 shares for each 30 day period
thereafter until the registration statement registering all of the shares
covered by this letter is effective. Such "penalty" shares shall also be
registered as contingency shares in the registration statement.
Additionally, you have agreed not to dispose of these shares between
April 30, 1997 and June 30, 1997, and as additional consideration, AMI will
provide to you a value guarantee calculated by taking the closing bid price
during June 1, 1997 and June 30, 1997 and taking a simple average of such
closing bid prices for each of the trading days in such period, or the first 20
trading days immediately following the effective date of the registration
statement registering all of the shares covered by this letter, whichever is
later. If such average closing bid price is not equal to or greater than the
closing price on February 19, 1997 (i.e. $0.0875) the difference will be offset
with (the value guarantee additional shares) registered as contingency shares in
the registration statement (the value guarantee additional shares) will be
determined as follows: 1,000,000 plus (the value guarantee additional shares)
multiplied by the average closing bid price (as determined above) will equal
$87,500.00.
If you agree to these terms and conditions as stated above, please sign
this letter below. Please be advised that funding of this transaction must occur
on February 25, 1997.
By: /s/ Hans J. Kaemmlein February 19, 1997
--------------------- -----------------
For Advanced Media, Inc. Date
Hans J. Kaemmlein
Chairman & CEO
By: /s/ Ed Warman February 19, 1997
------------- -----------------
Ed Warman Date
<PAGE> 1
EXHIBIT 10.37, PAGE 1 OF 8
STOCK SUBSCRIPTION AGREEMENT
Stock Subscription Agreement, dated as of April 25, 1997, between
Advanced Media, Inc., a Delaware corporation (the "Company") and the person or
persons executing the signature page hereto (the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company
desires to issue to the Purchaser, ___________ shares of common stock, par value
$.0001 per share (the "Common Stock") of the Company, all upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
premises, covenants, representations and warranties herein contained, it is
hereby agreed as follows:
1. Subscription Price; Issuance of Stock; Price Guarantee.
(a) In reliance on the representations and warranties contained herein
and subject to the terms and conditions hereof, in exchange for the __________
shares of Common Stock to be issued to the Purchaser hereunder, the Purchaser
shall pay to the Company and amount equal to $0.05 per share or $__________ in
the aggregate (the "Purchase Price"), in immediately available funds, not later
than__________, 1997 (such shares of Common Stock described in this Section 1
being referred to herein as the "Stock").
(b) The Company agrees that if the value of the Stock purchased
hereunder (whether or not disposed of by the Purchaser) is not at least equal to
$0.11 on the date on which a registration statement on Form S-3 under the
Securities Act (as defined below) which registers shares of Common Stock is
declared effective, then the Company will issue to the Purchaser additional
shares of Common Stock so that the aggregate value, as defined below, on such
date of the Stock (whether or not disposed of by the Purchaser) and such
additional shares of Common Stock shall be at least equal to the amount obtained
by multiplying the total number of such shares by $0.11. In the event that the
number of additional shares required to be issued hereunder pursuant to the
terms of this Section 1(b) is not a whole number, then the number of shares to
be issued will be rounded to the nearest whole number, and no fractional shares
will be issued. The Company will issue such additional shares of Common Stock
within ten (10) business days following the date set forth above. For purposes
of this agreement, the "value" of shares of Common Stock shall be the average of
the closing bid price of shares of Common Stock on the ten (10) trading days
preceding the applicable date.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Purchaser as follows:
2.1. Corporate Status.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware with full corporate
power and authority to carry its business as now conducted.
2.2. Authority of Agreement.
The Company has the power and authority to execute and deliver
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and this Agreement
constitutes the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies.
<PAGE> 2
EXHIBIT 10.37, PAGE 2 OF 8
2.3. No Conflicts.
The execution, delivery and performance of this Agreement and
the other instruments and agreements to be executed, delivered and performed by
the Company pursuant hereto and the consummation of the transactions
contemplated hereby and thereby by the Company do not and will not with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, the Certificate of Incorporation or the By-Laws or any order,
judgment, decree, statute, regulation, contract, agreement or any other
restriction of any kind or description to which the Company may be bound.
2.4 Fully Paid and Non-Assessable; Available Shares
Upon issuance of the Stock and payment therefor pursuant to
the terms hereof, each share of Stock shall be validly issued, fully paid and
non-assessable.
2.5 Reporting Requirements.
The Company will timely file with the SEC all periodic reports
required by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
3. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
3.1. Status.
If the Purchaser is a corporation or other entity, the
Purchaser is a corporation or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
full power and authority to execute, deliver and perform its obligations under
this Agreement. If the Purchaser is an individual, the Purchaser has legal
capacity to execute, deliver and perform his or her obligations under this
Agreement.
3.2 Authority for Agreements.
The Purchaser has the power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Purchaser and this Agreement
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally now or hereafter in
effect and subject to the application of equitable principles and the
availability of equitable remedies.
3.3. No Conflicts.
The execution, delivery and performance of this Agreement and
the other instruments and agreements to be executed, delivered and performed by
the Purchaser pursuant hereto and the consummation of the transactions
contemplated hereby and thereby by the Purchaser do not and will not with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, the Certificate of Incorporation or the By-Laws of the Purchaser
(if the Purchaser is a corporation), any other organizational instrument (if the
Purchaser is a legal entity other than a corporation) or any order, judgment,
decree, statute, regulation, contract, agreement or any other restriction of any
kind or description to which the Purchaser is a party or by which the Purchaser
may be bound.
<PAGE> 3
EXHIBIT 10.37, PAGE 3 OF 8
3.4. Investor Representations and Acknowledgments.
(a) The Purchaser is acquiring the Stock for the Purchaser's
own account for investment only and not with a view to, or for sale in
connection with, a distribution of the Stock within the meaning of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and any applicable state, securities or blue-sky laws.
The Purchaser is an accredited investor (as defined under Regulation D under the
Securities Act).
(b) The Purchaser is not a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Stock or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement.
(c) The Purchaser acknowledges to the Company that:
(i) The Company has advised the Purchaser that the Stock has
not been registered under the Securities Act or under the laws
of any state on the basis that the issuance thereof
contemplated by this Agreement is exempt from such
registration;
(ii) The Company's reliance on the availability of such
exemption is, in part, based upon the accuracy and
truthfulness of the Purchaser's representations contained
herein;
(iii) The Stock cannot be resold without registration or an
exemption under the Securities Act and such state securities
laws, and that certificates representing the Stock will bear a
restrictive legend to such effect;
(iv) The Purchaser has evaluated the merits and risks of
purchasing the Stock, and has such knowledge and experience in
financial and business matters that the Purchaser is capable
of evaluating the merits and risks of such purchase, is aware
of and has considered the financial risks and financial
hazards of purchasing the Stock, and is able to bear the
economic risk of purchasing the Stock, including the
possibility of a complete loss with respect thereto; and
(v) The Purchaser has had access to such information regarding
the business and finances of the Company, including without
limitation copies of the Company's annual report on form 10-K,
quarterly reports on form 10-Q, any current reports on form
8-K, recent press releases and pursuant to meetings with
management of the Company, and such other matters with respect
to the Company as would concern a reasonable person
considering the transactions contemplated by this Agreement
and/or concerned with the operation of the Company.
4. Registration of the Stock.
4.1 Registration Rights. The Company agrees that, following the
execution and delivery of this Agreement, it will prepare and file a
registration statement on Form S-3 (the "Registration Statement"), which
Registration Statement will include the Stock and any additional shares of
Common Stock issued pursuant to Section 1(b) of this Agreement . The Company
agrees to use commercially reasonable efforts to cause such Registration
Statement to be declared effective by the Securities and Exchange Commission on
or before July 15, 1997, although there can be no assurance that the
Registration Statement will be declared effective within such time.
4.2 Additional Shares. In the event that the Registration Statement is
not declared effective on or before July 15, 1997, the Company shall issue to
you, in respect of each 30-day period after July 15, 1997 for which the
Registration Statement is not effective, such number of shares as shall equal
two and one-half (22%) percent of the Stock, without giving effect to the number
of shares, if any, issued pursuant to the Section 1(b) hereof.
<PAGE> 4
EXHIBIT 10.37, PAGE 4 OF 8
4.3 Delay of Registration. Notwithstanding anything in the foregoing to
the contrary, the Company shall not be obligated to effect a the registration of
the Registration Statement at any time when the Company, in the good faith
judgment of its Board of Directors, reasonably believes that the filing thereof
at the time requested, or the offering of securities pursuant thereto, would be
detrimental to the interests of Company or its shareholders. The delay of the
Registration Statement cannot be suspended, pursuant to the provisions of the
preceding sentence, for more than 120 days after the date of the Board's
determination referenced in the preceding sentence.
5. Company's Obligations for Registrations.
5.1 Costs and Expenses. The Company shall pay all costs
(excluding expenses of counsel to the Holders and underwriting, dealers or
selling commissions, if any, which shall be borne by the Holders), fees and
expenses in connection with the filing of the Registration Statement filed
pursuant to Section 4 hereof including, without limitation, the Company's legal
and accounting fees, printing expenses, blue sky fees and expenses.
5.2 Blue Sky Laws. The Company will take all necessary action
which may be required in qualifying or registering the Stock included in a
registration statement for offer and sale under the securities or blue sky laws
of such states as reasonably are requested by the Holder(s); provided, that the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction; provided, further, that the Company shall not be
obligated to qualify or register shares of Common Stock in any state where the
Company's shares are not already qualified or registered for offer and sale as
of the effective date of the Company's public offering.
5.3 Indemnification of Holders. The Company shall indemnify
the Holder(s) of the Stock to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise, arising
from such registration statement; provided, however, that the Company shall not
be required to indemnify the Holders for any loss, claim, damage, expense or
liability arising from any misstatement or omission of a material fact which is
based on information furnished in writing by or on behalf of such Holders, or
their successors or assigns, for inclusion in the registration statement. In
addition, the Company shall not be obligated to indemnify the Holders for any
loss, claims, damage, expense or liability arising from any misstatement or
omission of a material fact where the Company shall have timely delivered to the
Holders amendments or supplements of a registration statement or prospectus
which correct such misstatement or omission of a material fact and the Holders
fail to utilize such amendment or supplement in the offer and sale of the Stock.
5.4 Indemnification of the Company. The Holders(s) of the
Stock to be sold pursuant to a registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Securities Act,
the Exchange Act or otherwise, arising from information furnished in writing by
or on behalf of such Holders, or their successors or assigns, for inclusion in
such registration statement.
5.5 Copies. The Company shall furnish to each Holder of Stock
such number of copies of the registration statement, each amendment thereto, the
prospectus included in such registration (including each preliminary prospectus)
and such other documents as such Holder any reasonably request in order to
facilitate the disposition of the Stock owned by such Holder.
<PAGE> 5
EXHIBIT 10.37, PAGE 5 OF 8
6. Further Assurances.
At any time and from time to time after the date hereof, each party
shall, without further consideration, execute and deliver to the other such
other instruments or documents and shall take such other actions as the other
may reasonably request to carry out the transactions contemplated by this
Agreement.
7. Miscellaneous.
Any party may waive compliance by the other with any of the provisions
of this Agreement. No waiver of any provision shall be construed as a waiver of
any other provision. Any waiver must be in writing. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. This Agreement may not be
modified or amended except in writing signed by both parties hereto. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and all of which shall constitute one and the same instrument. This
Agreement shall be governed in all respects, including validity, interpretation
and effect, by the laws of the State of New York, applicable to contracts made
and to be performed in New York. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the successors and assigns of the
parties hereto. This Agreement shall not be assignable by either party, other
than to an affiliate (as defined under the Exchange Act and the rules and
regulations thereunder) thereof, without the prior written consent of the other,
such consent not to be unreasonably withheld. The rights and obligations
contained in this Agreement are solely for the benefit of the parties hereto and
are not intended to benefit or be enforceable by any other party, other than a
permitted assignee hereunder, under the third party beneficiary doctrine or
otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
<PAGE> 6
EXHIBIT 10.37, PAGE 6 OF 8
EXECUTION PAGE FOR SUBSCRIPTION BY INDIVIDUALS
(not applicable to subscriptions by entities, Individual
Retirement Accounts, Keogh Plans or ERISA Plans)
<TABLE>
<S> <C>
TOTAL SUBSCRIPTION AMOUNT $ ___________ .
/ / INDIVIDUAL OWNER / / CUSTODIAN UNDER
(One signature required below) Uniform Gifts to Minors Act
/ / JOINT TENANTS WITH RIGHT
OF SURVIVORSHIP (Insert applicable state)
(All tenants must sign below) (Custodian must sign below)
/ / TENANTS IN COMMON / / COMMUNITY PROPERTY
(All tenants must sign below) (Both spouses in community property
states must sign below)
Print information as it is to appear on the Company records.
___________________________
(Name of Subscriber) (Social Security or Taxpayer ID No.)
___________________________
(Home Address) (Home Telephone)
___________________________
(Business Address) (Business Telephone)
___________________________
(Name of Co-Subscriber) (Social Security or Taxpayer ID No.)
___________________________
(Home Address) (Home Telephone)
___________________________
(Business Address) (Business Telephone)
SIGNATURE(S)
Dated:______________, 1995.
(1)By:___________________________ (2) By:
Signature of Authorized Signatory Signature of Authorized Co-Signatory
_________________________________
Print Name of Signatory and Title, if applicable Print Name of Co-Signatory and Title,
if applicable
ACCEPTED AND AGREED:
ADVANCED MEDIA, INC.
By:______________________________ Dated: _____________________ , 1995.
Name:
Title:
</TABLE>
<PAGE> 7
EXHIBIT 10.37, PAGE 7 OF 8
EXECUTION PAGE FOR SUBSCRIPTION BY ENTITIES
<TABLE>
TOTAL SUBSCRIPTION AMOUNT $ ________________________________ .
<S> <C>
/ / EMPLOYMENT BENEFIT PLAN OR TRUST (including pension plan, profit sharing plan, other
defined contribution plan and SEP)
/ / IRA, IRA ROLLOVER OR KEOGH PLAN
/ / TRUST (other than employee benefit trust)
/ / CORPORATION (Please include certified corporate resolution authorizing signature)
/ / PARTNERSHIP
/ / OTHER
</TABLE>
Print information as it is to appear on the Company records.
_________________________________________
(Name of Subscriber) (Taxpayer ID Number)
_________________________________________ (Plan number, if applicable)
_________________________________________
(Address) (Telephone Number)
Name and Taxpayer ID number of sponsor, if applicable
<PAGE> 8
EXHIBIT 10.37, PAGE 8 OF 8
The undersigned trustee, partner, corporate officer or fiduciary certifies that
he or she has full power and authority from all beneficiaries, partners or
shareholders of the entity named above to execute this Note Purchase Agreement
on behalf of the entity and to make the representations, warranties and
agreements made herein on their behalf and that investment in the Notes has been
affirmatively authorized by the governing board or body of such entity and is
not prohibited by law or the governing documents of the entity.
SIGNATURE(S)
Dated: _____________ , 1995.
By: _____________________________ By:
Signature of Authorized Signatory Signature of Required Authorized
Co-Signatory
_________________________________
Print Name of Signatory Print Name of Required Co-Signatory
_________________________________
Print Name of Signatory Print Title of Required Co-Signatory
ACCEPTED AND AGREED:
ADVANCED MEDIA, INC.
By_______________________________
Dated:_______________________, 1995
Name:
Title:
<PAGE> 1
EXHIBIT 10.38, PAGE 1 OF 7
ADVANCED MEDIA, INC.
1997 STOCK OPTION PLAN
SECTION 1. GENERAL PROVISIONS
1.1. NAME AND GENERAL PURPOSE
The name of this plan is the Advanced Media, Inc. 1997 Stock Option
Plan (hereinafter called the "Plan"). The purpose of the Plan is to enable
Advanced Media, Inc. (the "Company") and its subsidiaries and affiliates to
foster and promote the interests of the Company by attracting and retaining
officers, directors and employees of the Company who contribute to the Company's
success by their ability, ingenuity and industry, to enable such officers,
directors and employees of the Company to participate in the long-term success
and growth of the Company by giving them a proprietary interest in the Company
and to provide incentive compensation opportunities competitive with those of
competing corporations.
1.2 DEFINITIONS
a. "Affiliate" means any person or entity controlled by or under common
control with the Company, by virtue of the ownership of voting
securities, by contract or otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the Company, or in
any person directly or indirectly controlling the Company, which
shall mean:
(a) a change in control as such term is presently defined in
Regulation 240.12b-(f) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); or
(b) if any "person" (as such term is used in Section 13(d) and 14(d)
of the Exchange Act) other than the Company or any "person" who on
the date of this Agreement is a director or officer of the Company,
becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the
Exchange Act) directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the voting power of the
Company's then outstanding securities; or
(c) if during any period of two (2) consecutive years during the
term of this Plan, individuals who at the beginning of such period
constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Committee referred to in Section 1.3 of the
Plan.
f. "Common Stock" means shares of the Common Stock, par value $.0001
per share, of the Company.
g. "Company" means Advanced Media, Inc., a corporation organized under
the laws of the State of Delaware (or any successor corporation).
<PAGE> 2
EXHIBIT 10.38, PAGE 2 OF 7
h. "Fair Market Value" means the average of the high and low bid prices
of the Common Stock on the Electronic Bulletin Board of the National
Association of Securities Dealers, Inc. on the date of the grant or
on any other date on which the Common Stock is to be valued
hereunder. If no such prices shall have been reported on the
Electronic Bulletin Board of the National Association of Securities
Dealers, Inc. on such date, Fair Market Value shall be determined by
the Committee in accordance with the Treasury Regulations applicable
to incentive stock options under Section 422 of the Code.
i. "Incentive Stock Option" means an Incentive Stock Option as
described in Section 2.1 of the Plan.
j. "Non-Employee Director" shall have the meaning set forth in Rule
16(b) promulgated by the Securities and Exchange Commission
("Commission").
k. "Non-Qualified Stock Option" means a Non-Qualified Stock Option as
described in Section 2.1 of the Plan.
l. "Option" means any option to purchase Common Stock under Section 2
of the Plan.
m. "Participant" means any officer or employee of the Company, a
Subsidiary or an Affiliate who is selected by the Committee to
participate in the Plan.
n. "Subsidiary" means any corporation in which the Company possesses
directly or indirectly 50% or more of the combined voting power of
all classes of stock of such corporation.
o. "Total Disability" means accidental bodily injury or sickness which
wholly and continuously disabled an optionee. The Committee, whose
decisions shall be final, shall make a determination of Total
Disability.
1.3 ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board
consisting of two or more members of the Board all of who shall be Non-Employee
Directors. The Committee shall serve at the pleasure of the Board and shall have
such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by
it without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
1.4 ELIGIBILITY
Stock options may be granted only to officers, directors or employees
of the Company or a Subsidiary or Affiliate. Subject to Section 2.3, any person
who has been granted any Option may, if he is otherwise eligible, be granted an
additional Option or Options.
<PAGE> 3
EXHIBIT 10.38, PAGE 3 OF 7
1.5 SHARES
The aggregate number of shares reserved for issuance pursuant to the
Plan shall be 15,000,000 shares of Common Stock, or the number and kind of
shares of stock or other securities which shall be substituted for such shares
or to which such shares shall be adjusted as provided in Section 1.6.
Such number of shares may be set aside out of the authorized but
unissued shares of Common Stock or out of issued shares of Common Stock acquired
for and held in the Treasury of the Company, not reserved for any other purpose.
Shares subject to, but not sold or issued under, any Option terminating or
expiring for any reason prior to its exercise in full will again be available
for Options thereafter granted during the balance of the term of the Plan.
1.6 ADJUSTMENTS DUE TO STOCK SPLITS,
MERGERS, CONSOLIDATION, ETC.
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of
Common Stock by reason of any recapitalization, merger, consolidation,
reorganization, combination or exchange of shares or other corporate change, the
Committee shall make such substitution or adjustments, if any, as it deems to be
appropriate, as to the number or kind of shares of Common Stock or other
securities which are reserved for issuance under the Plan and the number of
shares or other securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board or
Committee, (a) all options outstanding on the date of such Change in Control
shall, for a period of sixty (60) days following such Change in Control, become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in Control
any option or portion of an option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the Fair
Market Value (on the date of surrender) of the shares of Common Stock subject to
the option or portion thereof surrendered, over the aggregate purchase price for
such Shares under the option.
1.7 NON-ALIENATION OF BENEFITS
Except as herein specifically provided, no right or unpaid benefit
under the Plan shall be subject to alienation, assignment, pledge or charge and
any attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
<PAGE> 4
EXHIBIT 10.38, PAGE 4 OF 7
1.8 WITHHOLDING OR DEDUCTION FOR TAXES
If, at any time, the Company or any Subsidiary or Affiliate is
required, under applicable laws and regulations, to withhold, or to make any
deduction for any taxes, or take any other action in connection with any Option
exercise, the Participant shall be required to pay to the Company or such
Subsidiary or Affiliate, the amount of any taxes required to be withheld, or, in
lieu thereof, at the option of the Company, the Company or such Subsidiary or
Affiliate may accept a sufficient number of shares of Common Stock to cover the
amount required to be withheld.
1.9 ADMINISTRATIVE EXPENSES
The entire expense of administering the Plan shall be borne by the
Company.
1.10 GENERAL CONDITIONS
a. The Board or the Committee may, from time to time, amend, suspend or
terminate any or all of the provisions of the Plan, provided that,
without the Participant's approval, no change may be made which
would prevent an Incentive Stock Option granted under the Plan from
qualifying as an Incentive Stock Option under Section 422 of the
Code or result in a "modification" of the Incentive Stock Option
under Section 424(h) of the Code or otherwise alter or impair any
right theretofore granted to any Participant; and further provided
that, without the consent and approval of the holders of a majority
of the outstanding shares of Common Stock of the Company present at
a meeting at which a quorum exists, neither the Board nor the
Committee may make any amendment which (i) changes the class of
persons eligible for options; (ii) increases (except as provided
under Section 1.6 above) the total number of shares or other
securities reserved for issuance under the Plan; (iii) decreases the
minimum option prices stated in Section 2.2 hereof (other than to
change the manner of determining Fair Market Value to conform to any
then applicable provision of the Code or any regulation thereunder);
(iv) extends the expiration date of the Plan, or the limit on the
maximum term of Options; or (v) withdraws the administration of the
Plan from a committee consisting of two or more members, each of
whom is a non-employee director.
b. With the consent of the Participant affected thereby, the Committee
may amend or modify any outstanding Option in any manner not
inconsistent with the terms of the Plan, including, without
limitation, and irrespective of the provisions of Sections 2.3(c)
and 2.4(b) below, to accelerate the date or dates as of which an
installment of an Option becomes exercisable.
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional incentive
compensation arrangements for employees of the Company or such
Subsidiary or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the right
of the Company or any Subsidiary or Affiliate to terminate a
Participant's employment with the Company (or such Subsidiary or
Affiliate) at any time.
e. Any decision or action taken by the Board or the Committee arising
out of or in connection with the construction, administration,
interpretation and effect of the Plan shall be conclusive and
binding upon all Participants and any person claiming under or
through any Participant.
<PAGE> 5
EXHIBIT 10.38, PAGE 5 OF 7
f. No member of the Board or of the Committee shall be liable for any
act or action, whether of commission or omission, (i) by such member
except in circumstances involving actual bad faith, nor (ii) by any
other member or by any officer, agent or employee.
1.11 COMPLIANCE WITH APPLICABLE LAW
Notwithstanding any other provision of the Plan, the Company shall not
be obligated to issue any shares of Common Stock, or grant any Option with
respect thereto, unless it is advised by counsel of its selection that it may do
so without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 EFFECTIVE DATES
The Plan was adopted by the Board on March 26, 1997. The Plan shall
terminate on March 25, 2007.
SECTION 2. OPTION GRANTS
2.1 AUTHORITY OF COMMITTEE
Subject to the provisions of the Plan, the Committee shall have the
sole and complete authority to determine (i) the Participants to whom Options
shall be granted; (ii) the number of shares to be covered by each Option; and
(iii) the conditions and limitations, if any, in addition to those set forth in
Sections 2 and 3 hereof, applicable to the exercise of an Option, including
without limitation, the nature and duration of the restrictions, if any, to be
imposed upon the sale or other disposition of shares acquired upon exercise of
an Option.
Stock options granted under the Plan may be of two types: an incentive
stock option ("Incentive Stock Option"); and a non-qualified stock option
("Non-Qualified Stock Option").
It is intended that the Incentive Stock Options granted hereunder shall
constitute incentive stock options within the meaning of Section 422 of the Code
and shall be subject to the tax treatment described in Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422 of the Code.
The Committee shall have the authority to grant Incentive Stock
Options, or to grant Non-Qualified Stock Options, or to grant both types of
Options. To the extent that any Option does not qualify as an Incentive Stock
Option, in whole or in part, it shall constitute a separate Non-Qualified Stock
Option to the extent of such disqualification.
2.2 OPTION EXERCISE PRICE
The price of stock purchased upon the exercise of Options granted
pursuant to the Plan shall be the Fair Market Value thereof at the time that the
Option is granted.
<PAGE> 6
EXHIBIT 10.38, PAGE 6 OF 7
If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of the stock of the Company or any parent
corporation of the Company or Subsidiary and an Option granted to such employee
is intended to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, the exercise price shall be no less than 110% of the
Fair Market Value of the Common Stock on the date the Option is granted. The
purchase price is to be paid in full in cash, certified or bank cashier's check
or, at the option of the Company, Common Stock valued at its Fair Market Value
on the date of exercise, or a combination thereof, when the Option is exercised
and stock certificates will be delivered only against such payment.
2.3 INCENTIVE STOCK OPTION GRANTS
Each Incentive Stock Option will be subject to the following
provisions:
a. Term of Option
An Incentive Stock Option will be for a term of not more than
ten years from the date of grant, except in the case of an
employee described in the second paragraph of Section 2.2 above
in which case an Incentive Stock Option will be for a term of
not more than five years from the date of the grant.
b. Annual Limit
To the extent the aggregate Fair Market Value of the Common
Stock (determined as of the date of grant) with respect to which
any options granted hereunder are intended to be designated as
Incentive Stock Options under the Plan (or any other incentive
stock option plan of the Company or any Subsidiary) which may be
exercisable for the first time by the optionee in any calendar
year exceeds $100,000, such options shall not be considered
incentive stock options.
c. Exercise
Subject to the power of the Committee under Section 1.10(b)
above and except in the manner described below upon the death of
the optionee, an Incentive Stock Option may be exercised only in
installments as follows: up to one-half of the subject shares on
and after the first anniversary of the date of grant, up to all
of the subject shares on and after the second such anniversary
of the date of the grant of such Option but in no event later
than the expiration of the term of the Option.
An Incentive Stock Option shall be exercisable during the
optionee's lifetime only by the optionee and shall not be
exercisable by the optionee unless, at all times since the date
of grant and at the time of exercise, such optionee is an
employee of the Company, any parent corporation of the Company
or any Subsidiary, except that, upon termination of all
employment (other than by death, Total Disability, or by Total
Disability followed by death in the circumstances provided
below) with the Company, any parent corporation of the Company
and any Subsidiary or Affiliate, the optionee may exercise an
Incentive Stock Option at any time within three months
thereafter but only to the extent such Option is exercisable on
the date of such termination.
Upon termination of all employment by Total Disability, the
Optionee may exercise such options at any time within one year
thereafter, but only to the extent such option is exercisable on
the date of such termination.
<PAGE> 7
EXHIBIT 10.38, PAGE 7 OF 7
In the event of the death of an optionee (i) while an employee
of the Company, any parent corporation of the Company or any
Subsidiary or Affiliate, or (ii) within three months after
termination of all employment with the Company, any parent
corporation of the Company and any Subsidiary or Affiliate
(other than for Total Disability) or (iii) within one year after
termination on account of Total Disability of all employment
with the Company, any parent corporation of the Company and any
Subsidiary or Affiliate, such optionee's estate or any person
who acquires the right to exercise such option by bequest or
inheritance or by reason of the death of the optionee may
exercise such optionee's Option at any time within the period of
three years from the date of death. In the case of clauses (i)
and (iii) above, such Option shall be exercisable in full for
all the remaining shares covered thereby, but in the case of
clause (ii) such Option shall be exercisable only to the extent
it was exercisable on the date of such termination.
Notwithstanding the foregoing provisions regarding the exercise
of an Option in the event of death, Total Disability or other
termination of employment, in no event shall an Option be
exercisable in whole or in part after the termination date
provided in the Option.
d. Transferability
An Incentive Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent
and distribution.
2.4 NON-QUALIFIED STOCK OPTION GRANTS
Each Non-Qualified Stock Option will be subject to the following
provisions:
a. Term of Option
A Non-Qualified Stock Option will be for a term of not more than
ten years from the date of grant.
b. Exercise
The exercise of a Non-Qualified Stock Option shall be subject to
the same terms and conditions as provided under Section 2.3(c)
above except that (i) upon termination of all employment by
Total Disability, the Optionee may exercise such options at any
time within three years thereafter and (ii) in the event of the
death of an Optionee within three years after termination on
account of Total Disability of all employment with the Company,
or any subsidiary or affiliate, such Optionee's estate or any
person who acquires the right to exercise such option by bequest
or inheritance or by reason of the death of the Optionee may
exercise such Optionee's option at any time within a period of
three years from the date of death.
c. Transferability
A Non-Qualified Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent
and distribution, except as may be permitted by the Board or the
Committee.
2.5 AGREEMENTS
In consideration of any Options granted to a Participant under the
Plan, each such Participant shall enter into an Option Agreement with the
Company providing, consistent with the Plan, such terms as the Committee may
deem advisable.
<PAGE> 1
EXHIBIT 10.39, PAGE 1 OF 20
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
COUTTS & CO AG
And
ADVANCED MEDIA, INC.
Dated as of June 9, 1997
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of June 9, 1997 (the
"Agreement"), among COUTTS & CO AG, acting in its capacity as agent for certain
non-U.S. Investors (the "Investor"), and ADVANCED MEDIA, 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 to the Investor, and the
Investor shall purchase from the Company, from time to time as provided herein,
the Company's Common Stock, par value $.001 per share (the "Common Stock"), for
an aggregate purchase price of up to $1,000,000; and
WHEREAS, except as otherwise provided in this Agreement, such
investments will be made in reliance upon the provisions of Section 4(2)
promulgated by the Securities and Exchange Commission ("SEC") under the United
States Securities Act of 1933, as amended (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.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Call." See Section 2.3.
Section 1.2 "Call Date" or "Optional Purchase Date" shall mean the date
the Company draws down a portion of the subscription amount pursuant to Section
2.3.
Section 1.3 "Closing" shall mean the consummation of each purchase and
sale of Common Stock pursuant to Section 2.1.
Section 1.4 "Closing Date" shall mean, with respect to each purchase and
sale of Common Stock pursuant to this Agreement, (i) with respect to the Initial
Shares, the third Trading Day following the Subscription Date and the third
Trading Day following the First Effective Date and the Second Effective Date,
respectively, and (ii) with respect to Optional Shares, an Optional Purchase
Date, provided in each case that all conditions to the applicable Closing have
been satisfied.
Section 1.5 "Commitment Period" shall mean the period commencing on the
date hereof and expiring on the earlier to occur of (x) the date on which the
Investor shall have purchased Common Stock pursuant to this Agreement for an
aggregate Purchase Price of $1,000,000, (y) the date this Agreement is
terminated pursuant to Section 2.7, or (z) June 30, 1998.
Section 1.6 [intentionally left blank]
Section 1.7 "Equity Credit" shall mean the equity credit incurred by the
Company from the Investor as a result of the Repricing Events. See Section
2.1(b) and (c).
<PAGE> 2
EXHIBIT 10.39, PAGE 2 OF 20
Section 1.8 "Equity Offerings" shall mean the issuance or sale by the
Company in a transaction exempt from or not subject to the registration
requirements of the Securities Act of any shares of Common Stock or securities
which are convertible into or exchangeable for its Common Stock or any warrants,
options or other rights to subscribe for or purchase its Common Stock or any
such convertible or exchangeable securities (other than shares of Common Stock
which may be issued upon exercise of options under the Company's employee or
director stock option plans, upon the conversion or exchange of convertible or
exchangeable securities or upon the exercise of warrants, or other rights, which
options, convertible or exchangeable securities, warrants or other rights are
outstanding on the date of execution and delivery of the Agreement and are
listed in the SEC Documents on file with the Commission as of the date of this
Agreement (other than the Warrants and the Additional Warrants) and other than
(x) shares of Common Stock which may be issued upon exercise of options granted
under such plans, (y) shares of Common Stock which may be issued upon exercise
of the Warrants, and (z) shares of Common Stock or securities which are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities issued in business combinations or strategic
corporate partnering transactions.)
Section 1.9 "Escrow Agent" shall mean, initially, the law firm of Morse,
Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York, New York 10022-2605,
Attention: Kenneth Rose, or such other entity or individual mutually agreed to
by the Company and the Investor Agent.
Section 1.10 "Escrow Agreement" shall mean that certain Escrow Agreement
of even date herewith entered into among the Company, the Escrow Agent and the
Investor, as the same may be amended from time to time.
Section 1.11 The "Exchange Act". See Section 4.7.
Section 1.12 "First Effective Date" shall mean the date on which the
Securities Exchange Commission declares effective the Registration Statement
pursuant to Section 3.2(a).
Section 1.13 "Initial Closing Date" shall mean the date upon which the
Closing of the purchase and sale of the Initial Shares shall occur.
Section 1.14 "Investment Amount" shall mean the amount required to be
invested by the Investor with respect to any Optional Purchase Date as notified
by the Company to the Investor Agent in accordance with Section 2.6 hereof.
Section 1.15 "Market Price" shall mean (i) with respect to sale of the
Initial Shares, the average closing bid price (as reported by Bloomberg L.P.) of
the Company's Common Stock on the ten (10) Trading Day period immediately
preceding the Subscription Date and (ii) with respect to Repricing Events and
sale of Optional Shares, the average of the closing bid price (as reported by
Bloomberg L.P.) of the Company's Common Stock over the 10-Trading Day period
following the First Effective Date, the Second Effective Date, and the
applicable Optional Purchase Date. The Market Price shall also take into effect
and be adjusted on a comparable basis to reflect, when effected, a proposed
one-for-ten reversed stock split by the Company.
Section 1.16 "Material Adverse Effect". See Section 5.5.
Section 1.17 "Optional Purchase Date" shall mean a Trading Day during the
Commitment Period on which the Company elects by delivery of an Optional
Purchase Notice pursuant to Section 2.6 to sell Common Stock to the Investor, in
conformity with the provisions of this Agreement.
Section 1.18 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small-Cap Market, the Nasdaq 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 1.19 "Registration Rights Agreement". See Section 2.9.
<PAGE> 3
EXHIBIT 10.39, PAGE 3 OF 20
Section 1.20 "Registration Statement". See Section 3.2(a).
Section 1.21 "Second Effective Date" shall mean the thirtieth (30th) day
(or, if such day is not a Trading Day, the first Trading Day thereafter) after
the First Effective Date.
Section 1.22 "Securities Act". See the introductory paragraphs hereof.
Section 1.23 "SEC Documents". See Section 5.2.
Section 1.24 "Subscription Date" shall mean June 9, 1997.
Section 1.25 "Stock Split" shall mean, when effected, the proposed
one-for-ten reverse stock split to be effected by the Company.
Section 1.26 "Trading Cushion" shall mean the mandatory 15 Trading Days
between Optional Purchase Dates.
Section 1.27 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.28 "Warrants". See Section 2.9.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article III hereof), during
the Commitment Period the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, Common Stock.
Section 2.2 Initial Purchase. (a) The Company agrees to sell and the
Investor agree to purchase that number of shares of Common Stock (the "Initial
Shares") determined by dividing $250,000 by 65% of the Market Price on the
Subscription Date. The Initial Shares will be subject to repricing as described
in Section 2.2(b) and (c).
(b) In the event the Market Price with respect to the First
Effective Date is lower than the Market Price on the Subscription Date, the
Company will be required with respect to the Initial Shares to issue additional
shares of Common Stock to the Investor such that the Investor shall receive an
additional number of shares of Common Stock equal to (i) the quotient of (x) Two
Hundred Twenty Five Thousand Dollars ($250,000) divided by (y) the number equal
to 65% of the Market Price on the First Effective Date less (ii) that number of
shares of Common Stock equal to the Initial Shares.
Section 2.3. Optional Shares. (a) In addition to the purchase of the
Initial Shares pursuant to Section 2.2(a), the Investor agree to make additional
purchases of shares of Common Stock for up to Seven Hundred Fifty Thousand
Dollars ($750,000) in the aggregate (the "Optional Shares"). Each purchase of
such shares shall occur on an Optional Purchase Date. During the Commitment
Period, the Company will be obligated to draw down a minimum of Five Hundred
Thousand Dollars ($500,000), including the Initial Shares commitment, from the
full subscription commitment of $1,000,000. The Company will have the option to
set the date of each draw down and the Investment Amount relating to such draw
down (each, a "Call"); provided, however, that under no circumstances will
shares in excess of 20% of the Company's currently outstanding shares be issued
pursuant to this Agreement and provided further that the average daily trading
volume over the course of the previous six months preceding each Call must be
greater than 200,000 shares per Trading Day as reported by Bloomberg L.P (which
volume shall be proportionately reduced upon the Company effecting the Stock
Split.
<PAGE> 4
EXHIBIT 10.39, PAGE 4 OF 20
(b) The Company may in its sole discretion on any Optional Purchase Date
sell to the Investor the number of shares of Common Stock determined by dividing
the Investment Amount by the per share purchase price equal to 70% of the Market
Price on the Optional Purchase Date with respect to each Call (provided,
however, that in no event will such purchase price be greater than 100% of the
Market Price on the Subscription Date). The Investment Amount relating to each
Call be determined by the Company, shall be in the minimum amount of $50,000 and
may be in increments of $10,000 in excess thereof but shall not exceed $100,000.
In addition, the Company shall not deliver an Optional Purchase Notice until the
expiration of an applicable Trading Cushion. Notwithstanding the foregoing, the
Company and the Investor Agent may by mutual agreement from time to time provide
for a greater Investment Amount per Call.
Section 2.4 [intentionally left blank]
Section 2.5 Closings.
(a) With respect to the sale of the Initial Shares (i) on or before the
Initial Closing Date, the Company shall deliver to the Escrow Agent for deposit
into escrow one or more certificates aggregating a total of 6,993,007 of shares
of Common Stock (based on the Market Price) to be purchased by the Investor
pursuant to Sections 2.2, registered in the names of the Investor as designated
in writing by the Investor Agent or, at the Investor' option, deposit such
certificates into such account or accounts previously designated by the Investor
Agent and (ii) on or before the Initial Closing Date the Investor Agent shall
deliver or cause to be delivered to the Escrow Agent for deposit into escrow the
amount of $250,000 by wire transfer of immediately available funds to the
account provided for in the Escrow Agreement.
(b) With respect to repricing of the Initial Shares on the First Effective
Date, immediately following determination of the Market Price on the First
Effective Date, as applicable, the Company shall send a written notice to the
Investor Agent informing the Investor Agent of the applicable Market Price,
calculating the appropriate price per share in accordance with Section 2.2(b) or
(c) and setting forth the number of additional shares of Common Stock to be
delivered to the Investor. Certificates for additional shares, if any, shall be
delivered to the Investor Agent within three (3) business days after the notice
is sent pursuant to written instructions of the Investor Agent delivered to the
Company.
(c) With respect to each Closing relating to Optional Shares (i)
concurrently with delivery of the Optional Purchase Notice to the Investor
Agent, the Company shall deliver to the Escrow Agent for deposit into escrow one
or more certificates representing the number of shares to be purchased by the
Investor pursuant to Section 2.3, provided, however, the number of shares
delivered pursuant to this clause (i) shall be determined based on the average
closing bid price of the Company's Common Stock as reported by Bloomberg L.P. on
the ten (10) Trading Days immediately preceding the date of the applicable
Optional Purchase Notice, such shares to be registered in the names of the
Investor as designated in writing by the Investor Agent or, at the Investor'
option, deposited in such account or accounts as previously designated by the
Investor Agent, (ii) on or before the Closing Date, the Investor Agent shall
deliver to the Escrow Agent for deposit into escrow the Investment Amount by
wire transfer to the account designated in the Escrow Agreement, (iii)
concurrently with the delivery of the Investment Amount by the Investor, the
Escrow Agent shall be directed to deliver the certificates representing the
shares described in clause (i) to the Investor Agent and release the Investment
Amount to the Company, and (iv) upon determination of the definitive number of
shares to be sold to the Investor with respect to the applicable Call in
accordance with Section 2.3(b), if such determination requires additional shares
to be delivered to the Investor, the Company shall immediately notify the
Investor Agent and promptly cause the issuance and delivery of certificates in
the requisite number of shares to be delivered to the Investor Agent in
accordance with the Investor Agent's written instructions.
(d) In addition, on or prior to each Closing Date, each of the Company and
the Investor Agent shall deliver 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. Delivery of certificates to escrow shall occur three (3) business days
following the Subscription Date, the First or Second Effective Date or Call
Date, as applicable. Payment of funds to the Company shall occur out of escrow
on the business day following receipt of the related stock certificates,
concurrently with delivery of such certificates to the Investor. The 10-Trading
Day period applicable to a determination of Market Price with respect to any
Closing shall not commence until all funds, certificates
<PAGE> 5
EXHIBIT 10.39, PAGE 5 OF 20
and other required documents, instruments and writings have been deposited in
escrow with the Escrow Agent or delivered to the appropriate party, as provided
herein.
Section 2.6 Mechanics of Exercise Relating to Optional Shares.
(a) Delivery of Optional Purchase Notice. At any time during the
Commitment Period following the Second Effective Date, the Company may deliver
written notices to the Investor Agent (each such notice hereinafter referred to
as an "Optional Purchase Notice") setting forth the Investment Amount, subject
to the limitations imposed by Sections 2.3 and 3.2 herein, which the Company
proposes to draw down. Any Optional Purchase Notice shall be revocable at the
Company's option. The Company may not deliver an Optional Purchase Notice to the
Investor Agent if the events described in Section 2.7 occur or if the conditions
set forth in Article III are not satisfied. If any of the events described in
Section 2.7 occur on or after the date on which an Optional Purchase Notice is
given, but prior to the closing of the transaction on the Closing Date
associated with such Optional Purchase Notice, or if the conditions set forth in
Article III are not satisfied as of the Closing Date (subject to any extension
as mutually agreed by the Company and the Investor Agent), such Optional
Purchase Notice shall be null, void and of no further force or effect.
(b) Date of Delivery of Optional Purchase Notice. An Optional Purchase
Notice shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor Agent if such notice is received prior to
5:00 P.M. New York time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 5:00 P.M. New York time. No Optional
Purchase Notice may be delivered or deemed delivered, on a day which is not a
Trading Day.
Section 2.7 Termination or Suspension of Investment Obligation. The
Investor shall not be required to purchase any shares of Common Stock from the
Company on any Closing Date nor may an Optional Purchase Notice be delivered at
any time during the Commitment Period that there shall exist any one or more of
the following: (i) the withdrawal of the effectiveness of the Registration
Statement, (ii) the Company's failure to satisfy in all material respects the
requirements in Section 3.2, or (iii) any failure or interruption in the
compliance in all material respects with the Company's covenants provided in
Article VI; provided, however that the obligation of the Investor to purchase
shares of Common Stock shall be terminated (including with respect to a Closing
Date which has not yet occurred) in the event that (x) there shall occur any
stop order or suspension of the effectiveness of the Registration Statement, for
any reason other than as a result of subsequent corporate developments which
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 (y) the Company shall at any time fail to comply with the
requirements of Sections 6.3, 6.4, 6.5 or 6.6.
Section 2.8 Intentionally left blank.
Section 2.9 Commitment Fee.
(a) In the event at least Five Hundred Thousand Dollars ($500,000) is not
drawn down by the Company during the Commitment Period (inclusive of the Initial
Shares) pursuant to this Agreement, the Company shall issue one million shares
of the Company's Common Stock to the Investor without further consideration. The
shares of Common Stock to be issued shall be registered for resale on the
Registration Statement referenced in Section 3.2(a) herein and shall be subject
to the Registration Rights Agreement.
(b) The Company agrees that a breach of its obligations under Section
2.9(a) could cause the Investor irreparable injury and that monetary damages may
not be an adequate remedy for any such breach.. In the event of a breach or
threatened breach by the Company of this Section 2.9(a) or (b), the Company
agrees that the Investor are entitled to equitable relief in any court of
competent jurisdiction, including the remedy of specific performance, in
addition to all other remedies available to the Investor at law or in equity.
<PAGE> 6
EXHIBIT 10.39, PAGE 6 OF 20
ARTICLE III
Conditions to Closing
Section 3.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
Common Stock to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor' Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
(c) 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 which, in the
reasonable opinion of the Company and its legal counsel, prohibits or materially
adversely affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced which may have the effect of prohibiting or
materially adversely affecting any of the transactions contemplated by this
Agreement.
(d) Closing Legal Opinion. The Investor shall have received the opinion of
Blau, Kramer, Wactlar, Lieberman, P.C., in form and substance reasonably
satisfactory to the Investor and its counsel.
Section 3.2 Conditions Precedent to the Right of the Company to Deliver an
Optional Purchase Notice and the Obligation of the Investor to Purchase Common
Stock. The right of the Company to deliver an Optional Purchase Notice and the
obligation of the Investor hereunder to acquire and pay for Common Stock
incident to a Closing for the sale and purchase of Optional Shares is subject to
the satisfaction, on the date of delivery of such Optional Purchase Notice and
on 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 on the appropriate form (the
"Registration Statement") for the registration of the resale by the Investor of
Common Stock to be acquired pursuant to this Agreement (including Common Stock
to be issued upon exercise of the Warrants) under the Securities Act, which
Registration Statement shall have been declared effective by the SEC on the
First Effective Date, no later than September 30, 1997, and no stop order or
suspension or withdrawal of the effectiveness of or with respect to any such
registration statement or any other suspension of the use of any such
registration statement or related prospectus shall have been issued by the SEC
or any state securities commission during the Commitment Period; and the Company
shall be in compliance in all material respects with the terms of the
Registration Rights Agreement.
(b) Effective Registration Statement. The Registration Statement shall
have previously become effective and shall remain effective on each Closing Date
and (i) neither the Company nor the Investor 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, and (ii) no other suspension of the use of the
Registration Statement or prospectus shall exist pursuant to the Registration
Rights Agreement.
(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 Closing 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 Closing Date.
<PAGE> 7
EXHIBIT 10.39, PAGE OF 7 OF 20
(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 to be performed, satisfied or complied
with by the Company at or prior to each Closing 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 which prohibits
or materially adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced which may have the effect
of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's most recent
SEC Document prior to the Subscription Date, no event which had or is reasonably
likely to have a Material Adverse Effect (as that term is defined in Section 5.5
hereof) has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock. The trading
of the Common Stock shall not have been suspended by the SEC, the Principal
Market or the National Association of Securities Dealers, Inc. (the "NASD") and
the Common Stock 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.
(h) Legal Opinions. The Company shall have caused to be delivered to the
Investor Agent, (i) within five (5) Trading Days prior to the effective date of
the Registration Statement and (ii) to the extent provided by Section 3.3, an
opinion of the Company's independent counsel in form and substance reasonably
acceptable to the Investor Agent and its counsel, addressed to the Investor
stating, inter alia, that nothing shall have come to such counsel's attention
that causes such counsel to believe that the Registration Statement (if
applicable, as so amended by such SEC Document) contains an untrue statement of
material fact or omits a material fact required to make the statements contained
therein, not misleading or that the underlying prospectus (if applicable, as so
amended or supplemented) contains an untrue statement of a material fact or
omits a material fact required to make the statements contained therein, in
light of the circumstances in which they were made, not misleading, except with
respect to the financial statements and the notes thereto and the schedules and
other financial and statistical data derived therefrom in the Registration
Statement or the Prospectus, as to which such counsel shall express no opinion;
provided, however, that in the event that such an opinion cannot be delivered by
the Company's independent counsel to the Investor, the Company shall promptly
revise the Registration Statement and shall not deliver an Optional Purchase
Notice. If an Optional Purchase Notice shall have been delivered in good faith
without knowledge by the Company that an opinion of independent counsel cannot
be delivered as required, the Company may postpone such Closing Date for a
period of up to five (5) Trading Days until such an opinion is delivered to the
Investor (or such Closing shall otherwise be canceled). In the event of such a
postponement, the Purchase Price of the Common Stock to be issued at such
Closing as determined pursuant of Section 2.2 or Section 2.3 shall be the lower
of such Purchase Price as calculated as of the originally scheduled Closing Date
and as of the actual Closing Date. The Company's independent counsel shall also
deliver to the Investor on the Initial Closing Date an opinion in form and
substance satisfactory to the Investor Agent and its counsel addressing, among
other things, general corporate matters and the exemption from registration
under the Securities Act of the issuance of the Initial Shares by the Company to
the Investor under this Agreement.
(i) Officer's Certificate. The Company shall have delivered to the
Investor Agent, on each Closing Date, a certificate dated as of such Closing
Date, executed by an executive officer of the Company and to the effect that all
the conditions to such Closing have been satisfied as at the date of each such
certificate.
(j) Due Diligence. No dispute between the Company and the Investor Agent
shall remain unresolved pursuant to Section 3.3 as to the adequacy of the
disclosures contained in the Registration Statement.
(k) Other. On each Closing Date, the Investor Agent shall have received
and been reasonably satisfied with such other certificates and documents as
shall have been reasonably requested by the Investor Agent in order for the
Investor Agent to confirm the Company's satisfaction of the conditions set forth
in Section 3.2.
<PAGE> 8
EXHIBIT 10.39, PAGE 8 OF 20
Section 3.3 Due Diligence Review. The Company shall make available for
inspection and review by the Investor Agent, advisors to and representatives of
the Investor Agent (who may or may not be affiliated with the Investor Agent),
any underwriter participating in any disposition of Common Stock on behalf of
the Investor 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 Investor Agent or any such representative, advisor
or underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investor Agent 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.
The Company shall not disclose non-public information to the Investor,
advisors to or representatives of the Investor 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' advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.
Nothing herein shall require the Company to disclose non-public
information to the Investor, their respective advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any Investor 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
underwriters, if any, 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 3.3 shall be construed
to mean that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information) may not
obtain 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; provided, however, that in no event shall the
Investor' advisors or representatives disclose to the Investor the nature of the
specific event or circumstances constituting any non-public information
discovered by such advisors or representatives in the course of their due
diligence (without the written consent of the Investor prior to disclosure of
such information).
The Investor' advisers or representatives shall make complete disclosure
to the Investor' independent counsel of all events or circumstances constituting
non-public information discovered by such advisors or representatives in the
course of their due diligence upon which such advisors or representatives form
the opinion that the Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in the light of
the circumstances in which they were made, not misleading. Upon receipt of such
disclosure, the Investor' independent counsel shall consult with the Company's
independent counsel in order to address the concern raised as to the existence
of a material misstatement or omission and to discuss appropriate disclosure
with respect thereto. In the event after such consultation the Investor'
independent counsel believes that the Registration Statement contains an untrue
statement or 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
<PAGE> 9
EXHIBIT 10.39, PAGE 9 OF 20
were made, not misleading, (x) the Company shall file with the SEC an amendment
to the Registration Statement responsive to such alleged untrue statement or
omission and provide the Investor, as promptly as practicable with copies of the
Registration Statement and related prospectus, as so amended, (y) if the Company
disputes the existence of any such material misstatement or omission, (i) the
Company's independent counsel shall provide the Investor' independent counsel
with an opinion stating that nothing has come to their attention that would lead
them to believe that the Registration Statement or the related prospectus, as of
the date of such opinion contains an untrue statement of a material fact or
omits a material fact required to be stated in the Registration Statement or the
related prospectus or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading and (ii) in
the event the dispute relates to the adequacy of financial disclosure and the
Investor shall reasonably request, the Company's independent auditors shall
provide to the Company a letter outlining the performance of such "agreed upon
procedures" as shall be reasonably requested by the Investor and the Company
shall provide the Investor with a copy of such letter, or (z) if the Company
disputes the existence of any such material misstatement or omission, and the
dispute relates to the timing of disclosure of a material event and the
Company's independent counsel is unable to provide the opinion referenced in
clause (y) above to the Investor, then this Agreement shall be suspended for a
period of up to thirty (30) days, at the end of which, if the dispute still
exists between the Company's independent counsel and the Investor' independent
counsel, the Company shall either (i) amend the Registration Statement as
provided above, (ii) provide to the Investor the Company's independent counsel
opinion and a copy of the letter of the Company's independent auditors
referenced above, or (iii) this Agreement shall be suspended for an additional
period of up to thirty (30) days; provided, however, that at the end of such
sixty (60) day period, if the dispute still exists between the Company's
independent counsel and the Investor's independent counsel, the Company shall
either (i) amend the Registration Statement as provided above, (ii) provide the
Company's independent counsel opinion referenced above, or (iii) the obligation
of the Investor to purchase shares of Common Stock pursuant to this Agreement
shall terminate.
ARTICLE IV
Representations and Warranties of Investor
Each of the Investor represent and warrant to the Company that:
Section 4.1 Intent. The Investor is entering into this Agreement for
investment and for its own account (and not for the account of others) and the
Investor has no present arrangement (whether or not legally binding) at any time
to sell the Common Stock to or through any person or entity; provided, however,
that by making the representations herein, the Investor reserves the right to
dispose of the Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
Section 4.2 Sophisticated and Accredited Investor. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Common Stock. The
Investor acknowledges that an investment in the Common Stock is speculative and
involves a high degree of risk and that it may lose its entire investment. The
Investor acknowledges that the Initial Shares to be issued pursuant to this
Agreement are "restricted securities" within the meaning of the Securities Act
and the rules and regulations promulgated thereunder and may not be resold in
the absence of an effective registration statement under the Securities Act or
an available exemption from the Securities Act registration requirements, and
the securities issued hereunder will contain a restrictive legend to this
effect.
Section 4.3 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
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.
Section 4.4 Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
<PAGE> 10
EXHIBIT 10.39, PAGE 10 OF 20
Section 4.5 Organization and Standing. The Investor Agent is a limited
liability company duly organized, validly existing, and in good standing under
the laws of Illinois. Bartholomew Investment, L.P. is a limited partnership duly
organized, validly existing and in good standing under the laws of Illinois.
Section 4.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or the
provision of any indenture, instrument or agreement to which Investor is a party
or is subject, or by which Investor or any of its assets is bound, or conflict
with or constitute a material default thereunder, or result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party, or require the approval of any third-party (which has not been
obtained) pursuant to any material contract, agreement, instrument, relationship
or legal obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 4.7 Disclosure; Access to Information. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. Investor further
acknowledges that it understands that the Company is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Investor has reviewed or received copies of any such
reports that have been requested by it.
Section 4.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE V
Representations and Warranties of the Company
The Company represents and warrants to the Investor that:
Section 5.1 Company Status. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in compliance with
all applicable reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq Bulletin
Board.
Section 5.2 Current Public Information. The Company has furnished the
Investor Agent with true and correct copies of all registration statements,
reports and documents, including proxy statements (other than preliminary proxy
statements), filed with the SEC by or with respect to the Company since January
1, 1996, pursuant to the Securities Act or Exchange Act. All such registration
statements, reports and documents, together with those registration statements,
reports and documents filed pursuant to the Securities Act or Exchange Act
subsequent to the date of this Agreement are collectively referred to herein as
the "SEC Documents").
Section 5.3 No General Solicitation in Regard to this Transaction. Neither
the Company nor any of its affiliates nor any distributor or any person acting
on its or their behalf has conducted any general solicitation (as that term is
used in Rule 502(c) of Regulation D) with respect to any of the Common Stock,
nor have they made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Common Stock under the Securities Act.
Section 5.4 Valid Issuance of Common Stock. As of the date of this
Agreement, the Company has authorized capitalization consisting of 100 million
shares of Common Stock, par value $.0001 and 10,000,000 shares of Serial
Preferred Stock, $.001 par value. Stock options granted or reserved for issuance
to employees and directors of the Company are as described in the SEC Documents
on file with the Commission as of the date of this Agreement. As of May
<PAGE> 11
EXHIBIT 10.39, PAGE 11 OF 20
30, 1997, there were issued and outstanding approximately 88,500,000 shares of
Common Stock and no shares of Serial Preferred Stock. As of the date of this
Agreement, the Company has no other outstanding securities convertible into
Common Stock other than as described in the SEC Documents on file with the
Commission as of the date of this Agreement. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable. Upon issuance of the Common Stock to the
Investor pursuant to the terms of this Agreement, the Common Stock will be duly
and validly issued, fully paid and nonassessable, and the holders of outstanding
Common Stock of the Company are not and shall not be entitled to preemptive or
other rights afforded by the Company or other rights afforded by the Company to
subscribe for the capital stock or other securities of the Company as a result
of the sale of the Common Stock to the Investor hereunder.
Section 5.5 Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company has no subsidiaries.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a Material Adverse
Effect. "Material Adverse Effect" means any effect on the business, operations,
properties, prospects, or financial condition of the Company and which is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole and/or any condition
or situation which would prohibit or otherwise interfere in any material respect
with the ability of the Company to enter into and perform its obligations under
this Agreement.
Section 5.6 Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Common Stock and the Warrants, (ii) the execution, issuance and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby 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 (other than such stockholder
approval as may be required by the standards imposed on companies listed on the
Nasdaq Stock Market with respect to issuances by such companies of greater than
20% of such companies' outstanding voting stock), (iii) this Agreement has been
duly executed and delivered by the Company and constitutes valid and binding
obligations of the Company enforceable against the Company in accordance with
its 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 and (iv) the Common Stock issuable in accordance with the
terms of this Agreement or upon exercise of the Warrants will be validly issued,
fully paid and nonassessable.
Section 5.7 Corporate Documents. The Company has furnished or made
available or will furnish and make available prior to the Initial Closing Date
to the Investor Agent true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 5.8 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of Common Stock
and the Warrants do not and will not (i) result in a violation of the Company's
Certificate of Incorporation or By-Laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its subsidiaries is a party, or (iii) result in a
violation of any federal, state, local or foreign law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, in conflict with
or in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (iii), such representations and warranties
are made only to the best of the Company's knowledge insofar as the
<PAGE> 12
EXHIBIT 10.39, PAGE 12 OF 20
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby are or may
be affected by the status of the Investor under or pursuant to any such foreign
law, rule or regulation). The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations which either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or issue and sell the Common Stock or the Warrants in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings which may be required to be made by the Company subsequent to any
Closing, and any registration statement which may be filed pursuant hereto and
other than any shareholder approval required by the rules applicable to
companies whose common stock trades on the Nasdaq National Market referenced in
Section 5.6); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 5.9 SEC Documents. The Company has delivered or made available to
the Investor Agent true and complete copies of the SEC Documents (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Investor Agent any information which, according to
applicable law, rule or regulation, should have been disclosed publicly prior to
the date hereof by the Company but which has not been so disclosed. As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and rules and regulations of the SEC promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained at the time it was filed any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
Section 5.10 No Material Adverse Effect. Since January 1, 1996, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents, copies of which have been delivered or
made available to the Investor prior to the date hereof.
Section 5.11 No Undisclosed Liabilities. The Company and its subsidiaries
have no liabilities or obligations which are material, individually or in the
aggregate, and are not disclosed in the SEC Documents or otherwise publicly
announced, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since the filing of the Company's most
recent SEC Document, and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company and upon any of its
subsidiaries.
Section 5.12 No Undisclosed Events or Circumstances. Since the filing of
the Company's most recent SEC Document, no event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, 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 in the SEC Documents.
Section 5.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor, to the Company's knowledge, any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, other than pursuant to this Agreement,
under circumstances that would require registration of the Common Stock under
the Securities Act.
<PAGE> 13
EXHIBIT 10.39, PAGE 13 OF 20
Section 5.14 Litigation and Other Proceedings. Except as may be set forth
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect on the Company or which could reasonably be expected to materially
adversely affect the transactions contemplated by this Agreement. Except as set
forth in the SEC Documents no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which could reasonably be expected to
result in a Material Adverse Effect on the Company or which could reasonably be
expected to materially adversely affect the transactions contemplated by this
Agreement.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Registration Rights Agreement shall
remain in full force and effect and the Company shall comply in all respects
with the terms thereof.
Section 6.2 Reservation of Common Stock. After giving effect to the Stock
Split, as of the date hereof, the Company has 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 shares of its Common Stock incident to the Closings and
incident to the exercise of the Warrants; such amount of shares of Common Stock
to be reserved to be calculated based upon the minimum purchase price therefor
under the terms of this Agreement, and assuming the full exercise of the
Warrants. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered hereunder and the number of shares so reserved shall
be increased to reflect (a) potential increases in the Common Stock which the
Company may thereafter be so obligated to issue by reason of adjustments to the
purchase price therefore and the issuance of the Warrants and (b) stock splits
and stock dividends and distributions.
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 additional shares of Common Stock issuable under this Agreement
(including Common Stock issuable upon exercise of the Warrant). 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 Common Stock
issuable under this Agreement (including Common Stock issuable upon exercise of
the Warrant), and will take such other action as is necessary or desirable to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company shall undertake its best efforts to obtain the
shareholder approval referenced in Section 5.6 required for the issuance of
Common Stock under this Agreement within such time period as shall not at any
time preclude the Company from providing an Optional Purchase Notice for the
maximum Investment Amount provided by Section 2.2.
Section 6.4 Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all material respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act. The Company will take all action to continue the
listing and trading of its Common Stock on the Principal Market and will comply
in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal Market.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
issued to the Investor at each Closing after the First Effective Date and upon
the exercise of the Warrants, subject to the continued effectiveness of the
appropriate registration statement, shall be free of legends, so-called "stop
transfer," or "stock transfer restrictions," or other restrictions upon transfer
by the Investor to a bona fide third party which is not an affiliate of the
Company. Notwithstanding the absence or such legends or restrictions, the
Investor agree to comply with Securities Act prospectus
<PAGE> 14
EXHIBIT 10.39, PAGE 14 OF 20
delivery requirements in any sale of Common Stock not made in compliance with
Rule 144 or another available exemption. Immediately following the First
Effective Date, subject to the continued effectiveness of the appropriate
registration statement, the Investor shall have the right to surrender
certificates representing the Initial Shares in exchange for new certificates
free of legends, "stop transfer" or "stock transfer restrictions," of other
restrictions upon transfer, and the Company agrees to perform whatever acts are
reasonably necessary to facilitate such exchange on a timely basis.
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 furnish to the
Investor Agent upon request copies of all SEC Documents furnished or submitted
to the SEC.
Section 6.8 "Blackout Period." (a) The Company will immediately notify the
Investor Agent upon the occurrence of any of the following events in respect of
a registration statement or related prospectus in respect of an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other 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
which 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 which 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
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 (vi) 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 Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Optional Purchase Notice during
the continuation of any of the foregoing events.
Section 6.9 Expectations Regarding Optional Purchase Notices. Within 10
days after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify the
Investor Agent as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance of
Optional Purchase 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 Optional
Purchase Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor Agent at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.10 Penalties for Failure to Obtain or Maintain
Effectiveness of Registration Statements. In the event the Company fails to
obtain the effectiveness of a Registration Statement on or before September 30,
1997 as set forth in Section 3.2(a), the Company shall pay to the Investor Agent
for the benefit of the Investor at the end of each thirty (30) day period
following the date by which such Registration Statement was required to have
been declared effective, in cash, an amount equal to $5,000 for the first 30-day
period such registration is not declared effective, pro-rated on a daily basis,
and $7,500 per each 30-day period thereafter, pro-rated on a daily basis.
Section 6.11 Stock Split. The Company will take all steps
necessary to effect the Stock Split as soon as practicable and in no event later
than June 23, 1997.
<PAGE> 15
EXHIBIT 10.39, PAGE 15 OF 20
ARTICLE VII
Legends
Section 7.1 Legends. The Initial Shares and each Warrant will bear the
following legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
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 coterminous with the Company's appointment
of any such substitute or replacement transfer agent) irrevocable instructions.
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 Common Stock by the Investor to
issue certificates evidencing Common Stock 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 Investor:
(a) At any time after the First Effective Date: (i) incident to any
Closing or other issuance of shares of Common Stock; (ii) incident to the
exercise of any Warrant; or (iii) 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; and
(b) At any time 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 and containing representations that (i) the Investor has a bona fide
intention to dispose of such Common Stock pursuant to Rule 144 under the
Securities Act or is otherwise permitted to dispose thereof 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 Common Stock 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; provided that in
connection with an event described in clause (i) or (ii), the transfer agent
shall be entitled to receive an opinion of counsel to the Investor that in such
circumstances the Legend may be removed and that the transferee (provided that
such transferee is not an affiliate of the Company) shall be entitled to hold
freely tradable securities.
Section 7.2 No Other Legend or Stock Transfer Restrictions. No Legend has
been or shall be placed on the share certificates representing the Common Stock
and no instructions or "stop transfers," 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 VII.
Section 7.3 Investor' Compliance. Nothing in this Article VII shall affect
in any way the Investor' obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
Section 7.4 Covenants of the Investor. During the term of this Agreement
(i) the Investor' trading activities with respect to shares of the Company's
Common Stock will be in compliance with all applicable state and federal
securities laws, rules and regulations and rules and regulations of the
Principal Market on which the Company's Common Stock is listed, and (ii) the
Investor will not engage in short sales of the Company's Common Stock.
<PAGE> 16
EXHIBIT 10.39, PAGE 16 OF 20
ARTICLE VIII
Other Issuances of Common Stock
Section 8.1 Antidilution Prohibition. Except with the prior written
consent of the Investor Agent which consent shall not unreasonably be withheld,
the Company may not at any time within the time period commencing from the
Subscription Date to the last day of the Commitment Period, issue shares of
Common Stock without consideration (other than in the form of a dividend) at a
price per share less than the daily closing bid price on the date of issue,
issue options, rights or warrants to subscribe for or purchase Common Stock (or
securities convertible into Common Stock) without consideration or at a price
per share (or having a conversion price per share, if a security convertible
into Common Stock) less than the daily closing bid price of the Common Stock on
the date of issue, or in the case of securities convertible into Common Stock
having a conversion price less than the daily closing bid price of the Common
Stock on the date of conversion. The foregoing prohibition shall not apply to
the issuance of shares of Common Stock which may be issued upon exercise of
options under the Company's employee or director stock option plans, upon the
conversion or exchange of convertible or exchangeable securities or upon the
exercise of warrants, or other rights, which options, convertible or
exchangeable securities, warrants or other rights are outstanding on the date of
execution and delivery of this Agreement and are listed in the SEC Documents on
file with the Commission as of the date of this Agreement.
ARTICLE IX
Choice of Law and Venue, Waiver of Jury Trial
Section 9.1 Choice of Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The parties hereby agree that
all actions or proceedings arising directly or indirectly from or in connection
with this Agreement shall, at the option of either party, be litigated only in a
state or federal court located in the County of New York, State of New York. The
parties consent to the jurisdiction and venue of the foregoing court and consent
that any process or notice of motion or other application to said court or a
judge thereof may be served inside or outside the State of New York by
registered mail, return receipt requested, directed to the party for which it is
intended at its address set forth in this Agreement (and service so made shall
be deemed complete five (5) days after the same has been posted as aforesaid) or
by personal service or in such other manner as may be permissible under the
rules of said court.
ARTICLE X
Assignment; Entire Agreement, Amendment; Termination
Section 10.1 Assignment. Neither this Agreement nor any rights of the
Investor 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) the Investor' 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 any Investor) upon the prior written
consent of the Company, which consent shall not to be unreasonably withheld,
provided that any such assignee agrees in writing to be bound by the terms and
conditions of this Agreement.
Section 10.2 Entire Agreement, Amendment. This Agreement, the Registration
Rights Agreement, and the other documents delivered or to be delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
<PAGE> 17
EXHIBIT 10.39, PAGE 17 OF 20
Section 10.3 Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the names of the Investor without
their consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such required disclosure.
ARTICLE XI
Notices, Etc.; Cost and Expenses; Indemnification
Section 11.1 Notices, Etc. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: ADVANCED MEDIA, INC., 80 Orville Drive, Bohemia, NY 11716, Attn.:
Mr. Hans Kaemmlein, Facsimile No.: (516) 244-1415 with copies (which shall not
constitute notice) to: Blau, Kramer, Wactlar & Lieberman, P.C., 100 Jericho
Quadrangle, Jericho, NY 11753, Attn.: David Lieberman, Esq., Facsimile No.:
(516) 822-4824; and (ii) if to the Investor, to COUTTS & CO AG, Talstrasse 59,
PO Box CH 8022, Attention: Uli Leuenberger, Facsimile No.: 011-411-214-72-60
Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the third business
day following the date mailed or on the second business day following delivery
of such notice by a reputable air courier service.
Section 11.2 Indemnification.
(a) Indemnification of Investor. The Company agrees to indemnify and hold
harmless the Investor and each person, if any, who controls the Investor within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), including any prospectus, or in any offering circular or other
document, as applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statement
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any prospectus (or any amendment or
supplement thereto), or in any offering circular or other document, as
applicable, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such statement or omission, or any such alleged untrue statement
or omission; provided that (subject to Section 11.3(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Investor),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i ) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Registration Statement (or any amendment thereto),
including any prospectus (or any amendment or supplement thereto), or in any
offering circular or other document, as applicable.
<PAGE> 18
EXHIBIT 10.39, PAGE 18 OF 20
(b) Indemnification of Company. The Investor agree to indemnify and hold
harmless the Company its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all loss, liability, claim, damage and expense described in
the indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including any prospectus (or any amendment or supplement thereto), or in
offering circular or other document, as applicable, in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Registration Statement (or any amendment or supplement
thereto) or in any offering circular or other document, as applicable.
(c) Action against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of his indemnity
agreement. In the case of parties indemnified pursuant to Section 11.2(a) above,
counsel to the indemnified parties shall be selected by the Company, subject to
the reasonable approval of the Investor, and in the case of parties indemnified
pursuant to Section 11.2(b) above, counsel to the indemnified parties shall be
selected by the Investor, subject to the reasonable approval of the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with he consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnifies parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry or any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section or Section 11.3 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnifies part form all
liability arising out of such litigation , investigation proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of an any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for the fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 11.2(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 11.3 Contribution. If the indemnification provided for in Section
11.2 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to herein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Investor on the other hand from the offering of the Common Stock
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Investor on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor on the other hand in connection with the offering of the Common Stock
pursuant to this Agreement shall be deemed to be in the same respective
proportions
<PAGE> 19
EXHIBIT 10.39, PAGE 19 OF 20
as the total net proceeds from the offering of the Common Stock pursuant to this
Agreement (before deducting expenses) received by the Company and the total net
proceeds received by the Investor (before deducting expenses) bear to the
aggregate public offering price.
The relative fault of the Company on the one hand and the Investor on the
other hand shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Investor and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investor agree that it would not be just and equitable
if contribution pursuant to this Section 11.3 were determined on a pro-rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 11.3. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 11.3 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 11.3, the Investor shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Common Stock purchased by it and resold to the public
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of any such untrue or alleged untrue statement or omission or
alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 11.3, each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Investor,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Company.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument.
Section 12.2 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. The indemnity and contribution agreements contained in Sections 11.2
and 11.3 hereof shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or of the Commitment Period, (ii) any
investigation made by or on behalf of any indemnified party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Common Stock. 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 12.3 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 12.4 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
<PAGE> 20
EXHIBIT 10.39, PAGE 20 OF 20
shall be Bloomberg L.P. or any other reputable pricing service chosen by the
Investor and reasonably acceptable to the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized offices as of the date hereof.
COUTTS & CO AG, as agent for certain non-U.S. ADVANCED MEDIA, INC.
residents
By:/s/ U. Leuenberger By:/s/ Hans Kaemmlein
------------------------------ ---------------------------
Its Senior Vice-President Its Chief Executive Officer
<PAGE> 1
EXHIBIT 10.40, PAGE 1 OF 8
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 9,
1997 is made and entered into between ADVANCED MEDIA, INC., a Delaware
corporation (the "Company"), and Coutts & Co AG, acting in its capacity as agent
for certain non-U.S. residents (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Private Equity Line of Credit Agreement, dated as of June 9, 1997 (the
"Investment Agreement"), pursuant to which the Company will issue, from time to
time, to the Investor shares of Common Stock, par value $.001 per share (the
"Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor's agreement to enter into the Investment Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Registrable Securities (as defined below);
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and in the Investment
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms defined in the Investment
Agreement or the Warrant shall have the same meanings herein as are ascribed to
them therein. In addition, the following terms shall have the meanings ascribed
below:
"Registrable Securities" means all of the Common Stock and any
other securities issued or issuable in respect thereof until (i) a registration
statement under the Act covering the offering of such securities has been
declared effective by the SEC and such securities have been disposed of pursuant
to such effective registration statement, (ii) such securities are sold under
circumstances in which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Act ("Rule 144") are met, (iii) such
securities have been otherwise transferred and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, which counsel shall be reasonably acceptable to the Investor, such
securities may be sold without any time, volume or manner limitation pursuant to
Rule 144(k) (or any similar provision then in effect) under the Act.
"Registration Statement" See Section 2.1(a).
ARTICLE II
REGISTRATION RIGHTS
Section 2.1. Form S-3 Registration Statements.
(a) Filing of Form S-3 Registration Statements. Subject to the
terms and conditions of this Agreement and in accordance with the provisions of
Section 3.2(a) of the Investment Agreement, the Company shall file with the SEC
a registration statement on the appropriate form (the "Registration Statement")
under the Securities Act for the registration of the resale by the Investor of
Common Stock to be issued upon exercise of the Warrant.
<PAGE> 2
EXHIBIT 10.40, PAGE 2 OF 8
(b) Effectiveness of Registration Statement. The Registration
Statement shall be declared effective by the SEC no later than September 30,
1997 and shall remain in effect until such time as no Registrable Securities
remain unsold.
(c) Penalties for Failure to Obtain or Maintain Effectiveness
of Registration Statement. In the event the Company fails to obtain the
effectiveness of a Registration Statement within the time period set forth in
Section 2.1(b), subject to extension as provided in Section 6.10 of the
Investment Agreement, the Company shall pay to the Investor the amounts set
forth in such Section 6.10.
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. Filings; Information. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1, the Company will use its best efforts to effect the registration of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request:
(a) The Company will as expeditiously as possible, prepare and
file with the SEC a registration statement on the appropriate form and use its
best efforts to cause such filed Registration Statement to become and remain
effective (pursuant to Rule 415 under the Act or otherwise), and the Company
will as expeditiously as possible prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the time periods prescribed by Section 2.1(b) and comply with the
provisions of the Act with respect to the disposition of all securities covered
by such Registration Statement during such period in accordance with the
intended methods of disposition by the Investor set forth in such Registration
Statement.
(b) The Company will, prior to filing a Registration Statement
or prospectus or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), furnish to the Investor and one firm of counsel representing the
Investor, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review by
such parties, and thereafter furnish to the Investor and its counsel for their
review such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents or information as the Investor or counsel may
reasonably request in order to facilitate the disposition of the Registrable
Securities.
(c) After the filing of the Registration Statement, the
Company will promptly notify the Investor of any stop order issued or threatened
by the SEC in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as the Investor may reasonably (in
light of its intended plan of distribution) request, and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable the
Investor to consummate the disposition of the Registrable Securities; provided
that the Company will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (d), (B) subject itself to taxation in any such jurisdiction or
(C) consent or subject itself to general service of process in any such
jurisdiction.
(e) The Company will immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities; (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental
<PAGE> 3
EXHIBIT 10.40, PAGE 3 OF 8
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 which 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
which 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 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 (vi) 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 Investor any such supplement or
amendment to the related prospectus.
(f) The Company will enter into customary agreements and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (the Investor may, at its option,
require that any or all of the representations, warranties and covenants of the
Company also be made to and for the benefit of the Investor).
(g) The Company will make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, its counsel or auditors and
will also make available for inspection by the Investor and any attorney,
accountant or other professional retained by the Investor (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
Registration Statement. Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. The
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such information is made generally available to the
public. The Investor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to the Investor a signed
counterpart, addressed to the Company, of an opinion or opinions of counsel to
the Company, upon which the Investor can rely, in customary form and covering
such matters of the type customarily covered by opinions, as the Investor
therefor reasonably requests.
<PAGE> 4
EXHIBIT 10.40, PAGE 4 OF 8
(i) The Company will otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
(j) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration Statement not
later than the effective date of such Registration Statement.
The Company may require the Investor to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the SEC or the NASD. The Investor agrees to provide such
information requested in connection with such registration within ten (10)
business days after receiving such written request and the Company shall not be
responsible for (and the penalties specified in Section 2.1(c) shall not apply
in respect of) any delays in obtaining or maintaining the effectiveness of the
Registration Statement caused by the Investor's failure to timely provide such
information. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, the Investor will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(e) hereof, and, if so directed by
the Company, the Investor will deliver to the Company all copies, other than
permanent file copies then in the Investor's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such Registration Statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 3.1(e) hereof to the date when the Company shall make
available to the Investor a prospectus supplemented or amended to conform with
the requirements of Section 3.1(e) hereof.
Section 3.2. Registration Expenses. In connection with each Registration
Statement, the Company shall pay the following registration expenses incurred in
connection with the registration thereunder (the "Registration Expenses"): (i)
all registration and filing fees, (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses, if any, for independent certified public accountants retained by
the Company, and (vii) the fees and expenses of any special experts retained by
the Company in connection with such registration. The Company shall have no
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities or any legal fees or expenses of counsel
to the Investors or the Investor Agent, such costs to be borne by the Investors.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 Indemnification.
(a) Indemnification of Investor. The Company agrees to indemnify and hold
harmless the Investor and each person, if any, who controls the Investor within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), including any prospectus, or in any offering circular or other
document, as applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statement
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any prospectus (or any amendment or
supplement
<PAGE> 5
EXHIBIT 10.40,PAGE 5 OF 8
thereto), or in any offering circular or other document, as applicable, or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such statement or omission, or any such alleged untrue statement
or omission; provided that (subject to Section 4.1(d) below) any such settlement
is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the fees and disbursements of one counsel chosen by the Investor
Agent who shall represent all Investors under the Investment Agreement),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i ) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Registration Statement (or any amendment thereto),
including any prospectus (or any amendment or supplement thereto), or in any
offering circular or other document, as applicable.
(b) Indemnification of Company. The Investor agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all loss, liability, claim, damage and expense (i) described
in the indemnity contained in subsection (a) of this Section, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including any prospectus (or any amendment or supplement thereto), or
offering circular or other document, as applicable, in reliance upon and in
conformity with written information furnished to the Company by the Investor
expressly for use in the Registration Statement (or any amendment or supplement
thereto) or in any offering circular or other document, as applicable and (ii)
arising as a result of the Investor's failure to comply with any prospectus
delivery requirements in connection with the resale of Registrable Securities.
(c) Action against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of his indemnity
agreement. In the case of parties indemnified pursuant to Section 4.1(a) above,
counsel to the indemnified parties shall be selected by the Company, subject to
the reasonable approval of the Investor, and in the case of parties indemnified
pursuant to Section 4.1(b) above, counsel to the indemnified parties shall be
selected by the Investor, subject to the reasonable approval of the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnifies parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry or any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section or Section 4.2 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation , investigation proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of an any indemnified party.
<PAGE> 6
EXHIBIT 10.40,PAGE 6 OF 8
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for the fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 4.1(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 4.2 Contribution. If the indemnification provided for in Section
4.1 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to herein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Investor on the other hand from the offering of the Common Stock
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Investor on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor on the other hand in connection with the offering of the Common Stock
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Common Stock
pursuant to the Investment Agreement (before deducting expenses) received by the
Company and the total net proceeds received by the Investor (before deducting
expenses) bear to the aggregate public offering price.
The relative fault of the Company on the one hand and the Investor on the
other hand shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Investor and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this Section 4.2 were determined on a
pro-rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 4.2.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 4.2 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4.2, the Investor shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Common Stock purchased by it and resold to the public exceeds
the amount of any damages which the Investor has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4.2, each person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Investor,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Company.
<PAGE> 7
EXHIBIT 10.40, PAGE 7 OF 8
ARTICLE V
MISCELLANEOUS
Section 5.1. Term. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as no Registrable
Securities are outstanding; provided, however, that the provisions of Article IV
hereof shall survive any termination of this Agreement.
Section 5.2. Rule 144. The Company covenants that it will file all reports
required to be filed by it under the Act and the Exchange Act and that it will
take such further action as holders of Registrable Securities may reasonably
request, all to the extent required from time to time to enable the Investor to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144, as such Rule may be
amended from time to time, or (b) any successor or similar rule or regulation
hereafter adopted by the SEC. If at any time the Company is not required to file
such reports, it will, upon the request of any holder of Registrable Securities,
make publicly available other information so long as necessary to permit sales
pursuant to Rule 144. Upon the request of the Investor, the Company will deliver
to the Investor a written statement as to whether it has complied with such
requirements.
Section 5.3. Amendment and Modification. Any provision of this Agreement
may be waived, provided that such waiver is set forth in a writing executed by
the party against whom the enforcement of such waiver is sought. The provisions
of this Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the holders of a majority of the then outstanding Registrable
Securities. Notwithstanding the foregoing, the waiver of any provision hereof
with respect to a matter that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by holders of at least a
majority of the Registrable Securities being sold by such holders; provided that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
No course of dealing between or among any Persons having any interest in this
Agreement will be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
Section 5.4. Successors and Assigns; Entire Agreement. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The Investor may
assign its rights under this Agreement to any subsequent holder of Warrants or
Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder. This
Agreement, together with the Investment Agreement and the Warrants, set forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
Section 5.5. Separability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
Section 5.6. Notices. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice: (i) if to the Company, to: ADVANCED
MEDIA, INC., 80 Orville Drive, Bohemia, NY 11716, Attn.: Mr. Hans Kaemmlein,
Facsimile No.: (516)
<PAGE> 8
EXHIBIT 10.40, PAGE 8 OF 8
244-1415, with copies (which shall not constitute notice) to: Blau, Kramer,
Wactlar & Lieberman, P.C., 100 Jericho Quadrangle, Jericho, NY 11753, Attn.:
David Lieberman, Esq., Facsimile No.: (516) 822-4824; and (ii) if to the
Investor, to COUTTS & CO AG, Talstrasse 59, PO Box CH 8022, Attention: Uli
Leuenberger, Facsimile No.: 011-411-214-72-60. Notice shall be deemed given on
the date of service or transmission if personally served or transmitted by
telegram, telex or facsimile. Notice otherwise sent as provided herein shall be
deemed given on the third business day following the date mailed or on the
second business day following delivery of such notice by a reputable air courier
service.
Section 5.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
Section 5.8. Headings. The headings in this Agreement are for convenience
of reference only and shall not constitute a part of this Agreement, nor shall
they affect their meaning, construction or effect.
Section 5.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 5.10. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 5.11. Remedies. In the event of a breach or a threatened breach by
any party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
ADVANCED MEDIA, INC.
By:/s/ Hans Kaemmlein
----------------------------------
Name: Hans Kaemmlein
Title: Chief Executive Officer
COUTTS & CO AG, as agent for certain
non-U.S. residents
By: U. Leuenberger
---------------------------------
Name: U. Leuenberger
Title: Senior Vice-President
<PAGE> 1
EXHIBIT 10.41, PAGE 1 OF 2
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANCED MEDIA, INC.
ADVANCED MEDIA, INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the board of directors of the Corporation, pursuant to a
unanimous written action in lieu of a meeting pursuant to Section 141(f) of the
General Corporation Law of the State of Delaware, adopted a resolution proposing
and declaring advisable the following amendment to the Corporation's Certificate
of Incorporation:
RESOLVED, that the Certificate of Incorporation of this Corporation be
amended by changing the Article thereof numbered "FOURTH" so that, as
amended, said Article shall be and read as follows:
FOURTH: (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is ONE HUNDRED TEN
MILLION (110,000,000) shares. Of these (i) ONE HUNDRED MILLION
(100,000,000) shares shall be shares of Common Stock of the par value
of $.0001 per share; and (ii) TEN MILLION (10,000,000) shares shall be
shares of Serial Preferred Stock of the par value of $.0001 per share.
(b) Corporation (the "Old Common Stock") as of the
date of filing of this amended Certificate of Incorporation (the
"Effective Date") shall automatically and without any action on the
part of the holder thereof, be reclassified as and changed into
one-tenth (1/10) of one share of Common Stock of the par value of
$.0001 per share (the "New Common Stock"), subject to the treatment of
fractional share interests as described below. Each holder of a
certificate or certificates which immediately prior to the Effective
Date represented outstanding shares of Old Common Stock (the "Old
Certificates", whether one or more) shall be entitled to receive upon
surrender of such Old Certificates to the Company's Transfer Agent for
cancellation, a certificate or certificates (the "New Certificates",
whether one or more) representing the number of whole shares of the New
Common Stock into which any for which the shares of the Old Common
Stock formerly represented by such Old Certificates so surrendered, are
reclassified under the terms hereof. From and after the Effective Date,
Old Certificates shall represent only the right to receive New
Certificates (and, where applicable, cash in lieu of fractional shares,
as provided below) pursuant to the provisions hereof. No certificates
or scrip representing fractional share interests in New Common Stock
will be issued, and no such fractional share interest will entitle the
holder thereof to vote, or to any rights of a stockholder of the
Company. A holder of Old Certificates shall receive, in lieu of any
fraction of a share of New Common Stock to which the holder would
otherwise be entitled, a cash payment therefor on the basis of the
average of the last reported "bid" and "asked" prices of the Old Common
Stock on the OTC Bulletin Board on the Effective Date (or in the event
the Company's Common Stock is not so traded on the Effective Date, such
average of the last reported "bid" and "asked" prices on the next
preceding day on which such stock was traded on the OTC Bulletin
Board). If more than one Old Certificate shall be surrendered at one
time for the account of the same Stockholder, the number of full shares
of New Common Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares represented by
the Old Certificates so surrendered. In the event that the Company's
Transfer Agent determines that a holder of Old Certificates has not
tendered all his certificates for exchange, the Transfer Agent shall
carry forward any fractional share until all certificates of that
holder have been presented for exchange such that payment for
fractional shares to any one person shall not exceed the value of one
share. If any New Certificate is to be issued in a name other than that
in which the Old Certificates surrendered for exchange are issued, the
Old Certificates so surrendered shall be properly
<PAGE> 2
EXHIBIT 10.41, PAGE 2 OF 2
endorsed and otherwise in proper form for transfer, and the person or
persons requesting such exchange shall affix any requisite stock
transfer tax stamps to the Old Certificates surrendered, or provide
funds for their purchase, or establish to the satisfaction of the
Transfer Agent that such taxes are not payable. From and after the
Effective Date, the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law.
(c) The statement of the relative rights, preferences
and limitations of the shares of each class is as follows:
A. Serial Preferred Stock. The Serial Preferred Stock may be
issued from time to time in classes or series and shall have such voting powers,
full or limited, or no voting powers and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions of the Board of Directors providing for the issuance
of such stock.
B. Common Stock. Subject to the rights, privileges,
preferences and priorities of any holders of Serial Preferred Stock, the Common
Stock shall be entitled to dividends out of funds legally available therefor,
when, as and if declared and paid to the holders of Common Stock, and upon
liquidation, dissolution or winding up of the Corporation, to share ratably in
the assets of the Corporation available for distribution to the holders of
Common Stock. Except as otherwise provided herein or by law, the holders of the
Common Stock shall have full voting rights and powers, and each share of Common
Stock shall be entitled to one vote. All shares of Common Stock shall be
identical with each other in every respect.
SECOND: That the Stockholders of the Corporation have approved such
amendment pursuant to a unanimous written action in lieu of a meeting pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That such amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Hans Kaemmlein, its Chairman of the Board, and attested by Alan
Schoenbart, its Assistant Secretary this 27th day of June, 1997.
ADVANCED MEDIA, INC.
By: /s/ Hans Kaemmlein
---------------------------------
Hans Kaemmlein
Chairman of the Board
ATTEST:
By:/s/ Alan Schoenbart
-------------------------------
Alan Schoenbart
Assistant Secretary
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<PERIOD-START> APR-01-1997
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