GUINNESS TELLI*PHONE CORPORATION
INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES
AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE
SUCH AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT
OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED
DISCLOSURE DOCUMENTS AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS INVESTMENT AGREEMENT (this "Agreement" or "Investment Agreement")
is made as of the 24th day of April, 2000, by and between Guinness
Telli*Phone Corporation, a corporation duly organized and existing
under the laws of the State of Nevada (the "Company"), and the
undersigned Investor executing this Agreement ("Investor").
RECITALS:
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, shares of the Company's Common Stock, as part of an
offering of Common Stock by the Company to Investor, for a maximum
aggregate offering amount of Thirty Million Dollars ($30,000,000) (the
"Maximum Offering Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if accepted
by the Company, the offer and sale of the Common Stock are being made
in reliance upon the provisions of Regulation D ("Regulation D")
promulgated under the Act, Section 4(2) of the Act, and/or upon such
other exemption from the registration requirements of the Act as may be
available with respect to any or all of the purchases of Common Stock
to be made hereunder.
TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"20% Approval" shall have the meaning set forth in Section 5.25.
"9.9% Limitation" shall have the meaning set forth in Section 2.3.1(f).
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section
2.3.1(a), the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
<PAGE>57
"Affiliate" shall have the meaning as set forth Section 6.4.
"Aggregate Issued Shares" equals the aggregate number of shares of
Common Stock issued to Investor pursuant to the terms of this Agreement
or the Registration Rights Agreement as of a given date, including Put
Shares and Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in
Section 2.5.3(b).
"Agreement" shall mean this Investment Agreement.
"Automatic Termination" shall have the meaning set forth in Section
2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is
open for trading.
"Calendar Month" shall mean the period of time beginning on the numeric
day in question in a calendar month and for Calendar Months thereafter,
beginning on the earlier of (i) the same numeric day of the next
calendar month or (ii) the last day of the next calendar month. Each
Calendar Month shall end on the day immediately preceding the beginning
of the next succeeding Calendar Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.10.
"Capital Raising Limitations" shall have the meaning set forth in
Section 6.5.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
"Closing" shall mean one of (i) the Investment Commitment Closing and
(ii) each closing of a purchase and sale of Common Stock pursuant to
Section 2.
"Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security during Normal Trading on the O.T.C.
Bulletin Board, or, if the O.T.C. Bulletin Board is not the principal
securities exchange or trading market for such security, the last
closing bid price during Normal Trading of such security on the
principal securities exchange or trading market where such security is
listed or traded as reported by such principal securities exchange or
trading market, or if the foregoing do not apply, the last closing bid
price during Normal Trading of such security in the over-the-counter
market on the electronic bulletin board for such security, or, if no
closing bid price is reported for such security, the average of the bid
prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company
and the Investor in this Offering. If the Company and the Investor in
this Offering are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved by an investment
banking firm mutually acceptable to the Company and the Investor in
this offering and any fees and costs associated therewith shall be paid
by the Company.
"Commitment Evaluation Period" shall have the meaning set forth in
Section 2.6.
"Commitment Warrants" shall have the meaning set forth in Section
2.4.1, the form of which is attached hereto as Exhibit U.
"Commitment Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.1.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Guinness Telli*Phone Corporation, a corporation
duly organized and existing under the laws of the State of Nevada.
<PAGE>58
"Company Designated Maximum Put Dollar Amount" shall have the meaning
set forth in Section 2.3.1(a).
"Company Designated Minimum Put Share Price" shall have the meaning set
forth in Section 2.3.1(a).
"Company Termination" shall have the meaning set forth in Section
2.3.12.
"Conditions to Investor's Obligations" shall have the meaning as set
forth in Section 2.2.2.
"Delisting Event" shall mean any time during the term of this
Investment Agreement, that the Company's Common Stock is not listed for
and actively trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap
Market, the Nasdaq National Market, the American Stock Exchange, or the
New York Stock Exchange or is suspended or delisted with respect to the
trading of the shares of Common Stock on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section
2.5.
"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Equity Securities" shall have the meaning set forth in Section 6.5.1.
"Evaluation Day" shall have the meaning set forth in Section 2.3.1(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Day" shall have the meaning set forth in Section 2.3.1(b).
"Extended Put Period" shall mean the period of time between the Advance
Put Notice Date until the Pricing Period End Date.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section
9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section
2.3.1 (b).
"Ineffective Period" shall mean any period of time that the
Registration Statement or any Supplemental Registration Statement (each
as defined in the Registration Rights Agreement) becomes ineffective or
unavailable for use for the sale or resale, as applicable, of any or
all of the Registrable Securities (as defined in the Registration
Rights Agreement) for any reason (or in the event the prospectus under
either of the above is not current and deliverable) during any time
period required under the Registration Rights Agreement.
"Initial Exercise Price" shall have the meaning set forth in Section
2.4.1.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in
Section 2.2.1.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as
Exhibit B, or such other form as agreed upon by the parties, as to the
Investment Commitment Closing.
"Investment Date" shall mean the date of the Investment Commitment
Closing.
<PAGE>59
"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.17, as set
forth in Exhibit N.
"Late Payment Amount" shall have the meaning set forth in Section
2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
"Major Transaction" shall mean and shall be deemed to have occurred at
such time upon any of the following events:
(i) a consolidation, merger or other business combination or event or
transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event
either (i) no longer hold a majority of the shares of Common Stock of
the Company or (ii) no longer have the ability to elect the board of
directors of the Company (a "Change of Control"); provided, however,
that if the other entity involved in such consolidation, merger,
combination or event is a publicly traded company with "Substantially
Similar Trading Characteristics" (as defined below) as the Company and
the holders of Common Stock are to receive solely Common Stock or no
consideration (if the Company is the surviving entity) or solely common
stock of such other entity (if such other entity is the surviving
entity), such transaction shall not be deemed to be a Major Transaction
(provided the surviving entity, if other than the Company, shall have
agreed to assume all obligations of the Company under this Agreement
and the Registration Rights Agreement). For purposes hereof, an entity
shall have Substantially Similar Trading Characteristics as the Company
if the average daily dollar Trading Volume of the common stock of such
entity is equal to or in excess of $500,000 for the 90th through the
31st day prior to the public announcement of such transaction;
(ii) the sale or transfer of all or substantially all of the Company's
assets; or
(iii) a purchase, tender or exchange offer made to the holders
of outstanding shares of Common Stock, such that following such
purchase, tender or exchange offer a Change of Control shall have
occurred.
"Market Price" shall equal the lowest Closing Bid Price for the Common
Stock on the Principal Market during the Pricing Period for the
applicable Put.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (i) the Company
Designated Maximum Put Dollar Amount, if any, specified by the Company
in a Put Notice, and (ii) $2 million.
"Maximum Offering Amount" shall mean Thirty Million Dollars
($30,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.10.
"NASD" shall have the meaning set forth in Section 6.9.
"Normal Trading" shall mean trading that occurs between 9:30 AM and
4:00 PM, New York City Time, on any Business Day, and shall expressly
exclude "after hours" trading.
"NYSE" shall have the meaning set forth in Section 6.9.
"Numeric Day" shall mean the numerical day of the month of the
Investment Date or the last day of the calendar month in question,
whichever is less.
"Offering" shall mean the Company's offering of Common Stock and
Warrants issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer
of the Company, to the effect that the representations and warranties
of the Company in this Agreement required to be true for the applicable
Closing are true and correct in all material respects and all of the
conditions and limitations set forth in this Agreement for the
applicable Closing are satisfied.
<PAGE>60
"Opinion of Counsel" shall mean, as applicable, the Investment
Commitment Opinion of Counsel, the Put Opinion of Counsel, and the
Registration Opinion.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Pricing Period" shall mean, unless otherwise shortened under the terms
of this Agreement, the period beginning on the Business Day immediately
following the Put Date and ending on and including the date which is 20
Business Days after such Put Date.
"Pricing Period End Date" shall mean the last Business Day of any
Pricing Period.
"Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, 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.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7.
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2,
the form of which is attached hereto as Exhibit D.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in Section
2.3.11(a).
"Put Cancellation Notice Confirmation" shall have the meaning set forth
in Section 2.3.11(c), the form of which is attached hereto as Exhibit
S.
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.11(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.11(a), the form of which is attached hereto as Exhibit Q.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any
Put Notice for which the Company intends to exercise a Put under
Section 2.3.1, unless the Put Date is postponed pursuant to the terms
hereof, in which case the "Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share
Amount by the respective Put Share Prices with respect to such Put
Shares, subject to the limitations herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the
form of which is attached hereto as Exhibit G.
"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's
independent counsel, in the form attached as Exhibit I, or such other
form as agreed upon by the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section
2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by
the Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
<PAGE>61
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a), the form of which is attached hereto as Exhibit R.
"Registration Opinion Deadline" shall have the meaning set forth in
Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration
rights agreement entered into by the Company and Investor on even date
herewith, in the form attached hereto as Exhibit A, or such other form
as agreed upon by the parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall mean Regulation D promulgated under the Act.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section
2.3.5.
"Risk Factors" shall have the meaning set forth in Section 3.2.4,
attached hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in Section 5,
and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the
Common Stock of the Company, the Warrants and the Warrant Shares
issuable pursuant to this Investment Agreement.
"Semi-Annual Non-Usage Fee" shall have the meaning set forth in Section
2.6.
"Share Authorization Increase Approval" shall have the meaning set
forth in Section 5.25.
"Six Month Anniversary" shall mean the date that is the same Numeric
Day of the sixth (6th) calendar month after the Investment Date, and
the date that is the same Numeric Day of each sixth (6th) calendar
month thereafter, provided that if such date is not a Business Day, the
next Business Day thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.11.
"Supplemental Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period
of time beginning on the date of this Agreement and ending on the
Termination Date.
"Termination Date" shall mean the earlier of (i) the date that is three
(3) years after the Effective Date, or (ii) the date that is thirty
(30) Business Days after the later of (a) the Put Closing Date on which
the sum of the aggregate Put Share Price for all Put Shares equal the
Maximum Offering Amount, (b) the date that the Company has delivered a
Termination Notice to the Investor, (c) the date of an Automatic
Termination, and (d) the date that all of the Warrants have been
exercised.
"Termination Fee" shall have the meaning as set forth in Section 2.6.
"Termination Notice" shall have the meaning as set forth in Section
2.3.12.
"Third Party Report" shall have the meaning set forth in Section 3.2.4.
"Trading Volume " shall mean the volume of shares of the Company's
Common Stock that trade between 9:30 AM and 4:00 PM, New York City
Time, on any Business Day, and shall expressly exclude any shares
trading during "after hours" trading.
"Transaction Documents" shall have the meaning set forth in Section 9.
<PAGE>62
"Transfer Agent Instructions" shall mean the Company's instructions to
its transfer agent, substantially in the form attached as Exhibit T, or
such other form as agreed upon by the parties.
"Trigger Price" shall have the meaning set forth in Section 2.3.1(b).
"Truncated Pricing Period" shall have the meaning set forth in Section
2.3.11(d).
"Truncated Put Share Amount" shall have the meaning set forth in
Section 2.3.11(b).
"Unlegended Share Certificates" shall mean a certificate or
certificates (or electronically delivered shares, as appropriate) (in
denominations as instructed by Investor) representing the shares of
Common Stock to which the Investor is then entitled to receive,
registered in the name of Investor or its nominee (as instructed by
Investor) and not containing a restrictive legend or stop transfer
order, including but not limited to the Put Shares for the applicable
Put and Warrant Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in
Section 3.2.4, attached hereto as Exhibit L.
"Volume Limitations" shall have the meaning set forth in Section
2.3.1(b).
"Warrant Shares" shall mean the Common Stock issued or issuable upon
exercise of the Warrants.
"Warrants" shall mean Purchase Warrants and Commitment Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the satisfaction of the
conditions to closing set forth in Sections 2.2 and 2.3 below, Investor
hereby agrees to purchase such amounts of Common Stock and accompanying
Warrants as the Company may, in its sole and absolute discretion, from
time to time elect to issue and sell to Investor according to one or
more Puts pursuant to Section 2.3 below.
2.2 Investment Commitment.
2.2.1 Investment Commitment Closing. The closing of this Agreement
(the "Investment Commitment Closing") shall be deemed to occur when
this Agreement and the Registration Rights Agreement have been executed
by both Investor and the Company, the Transfer Agent Instructions have
been executed by both the Company and the Transfer Agent, and the other
Conditions to Investor's Obligations set forth in Section 2.2.2 below
have been met.
2.2.2 Conditions to Investor's Obligations. As a prerequisite to the
Investment Commitment Closing and the Investor's obligations hereunder,
all of the following (the "Conditions to Investor's Obligations") shall
have been satisfied prior to or concurrently with the Company's
execution and delivery of this Agreement:
(a) the following documents shall have been delivered to the
Investor: (i) the Registration Rights Agreement (executed by the
Company and Investor), (ii) the Investment Commitment Opinion of
Counsel (signed by the Company's counsel), (iii) the Transfer Agent
Instructions (executed by the Company and the Transfer Agent), and (iv)
a Secretary's Certificate as to (A) the resolutions of the Company's
board of directors authorizing this transaction, (B) the Company's
Certificate of Incorporation, and (C) the Company's Bylaws;
(b) this Investment Agreement, accepted by the Company, shall have
been received by the Investor;
(c) the Company's Common Stock shall be listed for trading and
actually trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap
Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange;
<PAGE>63
(d) other than continuing losses described in the Risk Factors set
forth in the Disclosure Documents (provided for in Section 3.2.4), as
of the Closing there have been no material adverse changes in the
Company's business prospects or financial condition since the date of
the last balance sheet included in the Disclosure Documents, including
but not limited to incurring material liabilities; and
(e) the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects and the
conditions to Investor's obligations set forth in this Section 2.2.2
shall have been satisfied as of such Closing; and the Company shall
deliver an Officer's Certificate, signed by an officer of the Company,
to such effect to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the Individual Put
Limit, the Maximum Offering Amount and the Cap Amount (if applicable),
and the other conditions and limitations set forth in this Agreement,
at any time beginning on the date on which the Registration Statement
is declared effective by the SEC (the "Effective Date"), the Company
may, in its sole and absolute discretion, elect to exercise one or more
Puts according to the following procedure, provided that each
subsequent Put Date after the first Put Date shall be no sooner than
five (5) Business Days following the preceding Pricing Period End Date:
(a) Delivery of Advance Put Notice. At least ten (10) Business
Days but not more than twenty (20) Business Days prior to any intended
Put Date (unless otherwise agreed in writing by the Investor), the
Company shall deliver advance written notice (the "Advance Put Notice,"
the form of which is attached hereto as Exhibit E, the date of such
Advance Put Notice being the "Advance Put Notice Date") to Investor
stating the Put Date for which the Company shall, subject to the
limitations and restrictions contained herein, exercise a Put and
stating the number of shares of Common Stock (subject to the Individual
Put Limit and the Maximum Put Dollar Amount) which the Company intends
to sell to the Investor for the Put (the "Intended Put Share Amount").
The Company may, at its option, also designate in any Advance Put
Notice (i) a maximum dollar amount of Common Stock, not to exceed
$2,000,000, which it shall sell to Investor during the Put (the
"Company Designated Maximum Put Dollar Amount") and/or (ii) a minimum
purchase price per Put Share at which the Investor may purchase Shares
pursuant to such Put Notice (a "Company Designated Minimum Put Share
Price"). The Company Designated Minimum Put Share Price, if
applicable, shall be no greater than 80% of the Closing Bid Price of
the Company's common stock on the Advance Put Notice Date. The Company
may decrease (but not increase) the Company Designated Minimum Put
Share Price for a Put at any time by giving the Investor written notice
of such decrease not later than 12:00 Noon, New York City time, on the
Business Day immediately preceding the Business Day that such decrease
is to take effect. A decrease in the Company Designated Minimum Put
Share Price shall have no retroactive effect on the determination of
Trigger Prices and Excluded Days for days preceding the Business Day
that such decrease takes effect.
Notwithstanding the above, if, at the time of delivery of an Advance
Put Notice, more than two (2) Calendar Months have passed since the
date of the previous Put Closing, such Advance Put Notice shall provide
at least twenty (20) Business Days notice of the intended Put Date,
unless waived in writing by the Investor. In order to effect delivery
of the Advance Put Notice, the Company shall (i) send the Advance Put
Notice by facsimile on such date so that such notice is received by the
Investor by 6:00 p.m., New York, NY time, and (ii) surrender such
notice on such date to a courier for overnight delivery to the Investor
(or two (2) day delivery in the case of an Investor residing outside of
the U.S.). Upon receipt by the Investor of a facsimile copy of the
Advance Put Notice, the Investor shall, within two (2) Business Days,
send, via facsimile, a confirmation of receipt (the "Advance Put Notice
Confirmation," the form of which is attached hereto as Exhibit F) of
the Advance Put Notice to the Company specifying that the Advance Put
Notice has been received and affirming the intended Put Date and the
Intended Put Share Amount.
(b) Put Share Amount. The "Put Share Amount" is the number of shares of
Common Stock that the Investor shall be obligated to purchase in a
given Put, and shall equal the lesser of (i) the Intended Put Share
Amount, and (ii) the Individual Put Limit. The "Individual Put Limit"
<PAGE>64
shall equal the lesser of (i) 15% of the sum of the aggregate daily
reported Trading Volumes in the outstanding Common Stock on the
Company's Principal Market, excluding any block trades of 20,000 or
more shares of Common Stock, for all Evaluation Days (as defined below)
in the Pricing Period, (ii) the number of Put Shares which, when
multiplied by their respective Put Share Prices, equals the Maximum Put
Dollar Amount, and (iii) the 9.9% Limitation, but in no event shall the
Individual Put Limit exceed 15% of the sum of the aggregate daily
reported Trading Volumes in the outstanding Common Stock on the
Company's Principal Market, excluding any block trades of 20,000 or
more shares of Common Stock, for the twenty (20) Business Days
immediately preceding the Put Date (this limitation, together with the
limitation in (i) immediately above, are collectively referred to
herein as the "Volume Limitations"). Company agrees not to trade Common
Stock or arrange for Common Stock to be traded for the purpose of
artificially increasing the Volume Limitations.
For purposes of this Agreement:
"Trigger Price" for any Pricing Period shall mean the greater of (i)
the Company Designated Minimum Put Share Price, plus $.25, or (ii) the
Company Designated Minimum Put Share Price divided by .91.
An "Excluded Day" shall mean each Business Day during a Pricing Period
where the lowest intra-day trading price of the Common Stock is less
than the Trigger Price.
An "Evaluation Day" shall mean each Business Day during a Pricing
Period that is not an Excluded Day.
(c) Put Share Price. The purchase price for the Put Shares (the "Put
Share Price") shall equal the lesser of (i) the Market Price for such
Put, minus $.25, or (ii) 91% of the Market Price for such Put, but
shall in no event be less than the Company Designated Minimum Put Share
Price for such Put, if applicable.
(d) Delivery of Put Notice. After delivery of an Advance Put Notice,
on the Put Date specified in the Advance Put Notice the Company shall
deliver written notice (the "Put Notice," the form of which is attached
hereto as Exhibit G) to Investor stating (i) the Put Date, (ii) the
Intended Put Share Amount as specified in the Advance Put Notice (such
exercise a "Put"), (iii) the Company Designated Maximum Put Dollar
Amount (if applicable), and (iv) the Company Designated Minimum Put
Share Price (if applicable). In order to effect delivery of the Put
Notice, the Company shall (i) send the Put Notice by facsimile on the
Put Date so that such notice is received by the Investor by 6:00 p.m.,
New York, NY time, and (ii) surrender such notice on the Put Date to a
courier for overnight delivery to the Investor (or two (2) day delivery
in the case of an Investor residing outside of the U.S.). Upon receipt
by the Investor of a facsimile copy of the Put Notice, the Investor
shall, within two (2) Business Days, send, via facsimile, a
confirmation of receipt (the "Put Notice Confirmation," the form of
which is attached hereto as Exhibit H) of the Put Notice to Company
specifying that the Put Notice has been received and affirming the Put
Date and the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On or before the Put Date for
such Put, the Company shall deliver the Required Put Documents (as
defined in Section 2.3.5 below) to the Investor (or to an agent of
Investor, if Investor so directs). Unless otherwise specified by the
Investor, the Put Shares of Common Stock shall be transmitted
electronically pursuant to such electronic delivery system as the
Investor shall request; otherwise delivery shall be by physical
certificates. If the Company has not delivered all of the Required Put
Documents to the Investor on or before the Put Date, the Put shall be
automatically cancelled, unless the Investor agrees to delay the Put
Date by up to three (3) Business Days, in which case the Pricing Period
begins on the Business Day following such new Put Date. If the Company
has not delivered all of the Required Put Documents to the Investor on
or before the Put Date (or new Put Date, if applicable), and the
Investor has not agreed in writing to delay the Put Date, the Put is
automatically canceled (an "Impermissible Put Cancellation") and,
unless the Put was otherwise canceled in accordance with the terms of
Section 2.3.11, the Company shall pay the Investor $5,000 for its
reasonable due diligence expenses incurred in preparation for the
<PAGE>65
canceled Put and the Company may deliver an Advance Put Notice for the
subsequent Put no sooner than ten (10) Business Days after the date
that such Put was canceled, unless otherwise agreed by the Investor.
(f) Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no event
shall the Investor be required to purchase, and an Intended Put Share
Amount may not include, an amount of Put Shares, which when added to
the number of Put Shares acquired by the Investor pursuant to this
Agreement during the 31 days preceding the Put Date with respect to
which this determination of the permitted Intended Put Share Amount is
being made, would exceed 9.99% of the number of shares of Common Stock
outstanding (on a fully diluted basis, to the extent that inclusion of
unissued shares is mandated by Section 13(d) of the Exchange Act) on
the Put Date for such Pricing Period, as determined in accordance with
Section 13(d) of the Exchange Act (the "Section 13(d) Outstanding Share
Amount"). Each Put Notice shall include a representation of the
Company as to the Section 13(d) Outstanding Share Amount on the related
Put Date. In the event that the Section 13(d) Outstanding Share Amount
is different on any date during a Pricing Period than on the Put Date
associated with such Pricing Period, then the number of shares of
Common Stock outstanding on such date during such Pricing Period shall
govern for purposes of determining whether the Investor, when
aggregating all purchases of Shares made pursuant to this Agreement in
the 31 calendar days preceding such date, would have acquired more than
9.99% of the Section 13(d) Outstanding Share Amount. The limitation
set forth in this Section 2.3.1(f) is referred to as the "9.9%
Limitation."
2.3.2 Termination of Right to Put. The Company's right to require
the Investor to purchase any subsequent Put Shares shall terminate
permanently (each, an "Automatic Termination") upon the occurrence of
any of the following:
(a) the Company shall not exercise a Put or any Put thereafter if, at
any time, either the Company or any director or executive officer of
the Company has engaged in a transaction or conduct related to the
Company that has resulted in (i) a Securities and Exchange Commission
enforcement action, or (ii) a civil judgment or criminal conviction for
fraud or misrepresentation, or for any other offense that, if
prosecuted criminally, would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or any Put thereafter, on any
date after a cumulative time period or series of time periods,
including both Ineffective Periods and Delisting Events, that lasts for
an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put thereafter if at
any time the Company has filed for and/or is subject to any bankruptcy,
insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the
relief of debtors instituted by or against the Company or any
subsidiary of the Company;
(d) the Company shall not exercise a Put after the sooner of (i) the
date that is three (3) years after the Effective Date, or (ii) the Put
Closing Date on which the aggregate of the Put Dollar Amounts for all
Puts equal the Maximum Offering Amount; and
(e) the Company shall not exercise a Put after the Company has breached
any covenant in Section 2.6, Section 6, or Section 9 hereof.
(f) if no Registration Statement has been declared effective by the
date that is one (1) year after the date of this Agreement, the
Automatic Termination shall occur on the date that is one (1) year
after the date of this Agreement.
2.3.3 Put Limitations. The Company's right to exercise a Put shall be
limited as follows:
(a) notwithstanding the amount of any Put, the Investor shall not be
obligated to purchase any additional Put Shares once the aggregate Put
Dollar Amount paid by Investor equals the Maximum Offering Amount;
<PAGE>66
(b) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which the Company has announced a
subdivision or combination, including a reverse split, of its Common
Stock or has subdivided or combined its Common Stock during the
Extended Put Period;
(c) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which the Company has paid a
dividend of its Common Stock or has made any other distribution of its
Common Stock during the Extended Put Period;
(d) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which the Company has made, during
the Extended Put Period, a distribution of all or any portion of its
assets or evidences of indebtedness to the holders of its Common Stock;
(e) the Investor shall not be obligated to acquire and pay for the Put
Shares with respect to any Put for which a Major Transaction has
occurred during the Extended Put Period.
2.3.4 Conditions Precedent to the Right of the Company to Deliver an
Advance Put Notice or a Put Notice and the Obligation of the Investor
to Purchase Put Shares. The right of the Company to deliver an Advance
Put Notice or a Put Notice and the obligation of the Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (i) the date of delivery of such Advance Put
Notice or Put Notice and (ii) the applicable Put Closing Date, of each
of the following conditions:
(a) the Company's Common Stock shall be listed for and actively
trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the
Nasdaq National Market or the New York Stock Exchange and the Put
Shares shall be so listed, and to the Company's knowledge there is no
notice of any suspension or delisting with respect to the trading of
the shares of Common Stock on such market or exchange;
(b) the Company shall have satisfied any and all obligations
pursuant to the Registration Rights Agreement, including, but not
limited to, the filing of the Registration Statement with the SEC with
respect to the resale of all Registrable Securities and the requirement
that the Registration Statement shall have been declared effective by
the SEC for the resale of all Registrable Securities and the Company
shall have satisfied and shall be in compliance with any and all
obligations pursuant to this Agreement and the Warrants;
(c) the representations and warranties of the Company are true and
correct in all material respects as if made on such date and the
conditions to Investor's obligations set forth in this Section 2.3.4
are satisfied as of such Closing, and the Company shall deliver a
certificate, signed by an officer of the Company, to such effect to the
Investor;
(d) the Company shall have reserved for issuance a sufficient
number of Common Shares for the purpose of enabling the Company to
satisfy any obligation to issue Common Shares pursuant to any Put and
to effect exercise of the Warrants;
(e) the Registration Statement is not subject to an Ineffective
Period as defined in the Registration Rights Agreement, the prospectus
included therein is current and deliverable, and to the Company's
knowledge there is no notice of any investigation or inquiry concerning
any stop order with respect to the Registration Statement; and
(f) if the Aggregate Issued Shares after the Closing of the Put
would exceed the Cap Amount, the Company shall have obtained the
Stockholder 20% Approval as specified in Section 6.11, if the Company's
Common Stock is listed on the NASDAQ Small Cap Market or NMS, and such
approval is required by the rules of the NASDAQ.
2.3.5 Documents Required to be Delivered on the Put Date as Conditions
to Closing of any Put. The Closing of any Put and Investor's
obligations hereunder shall additionally be conditioned upon the
delivery to the Investor of each of the following (the "Required Put
Documents") on or before the applicable Put Date:
(a) a number of Unlegended Share Certificates (or freely tradeable
electronically delivered shares, as appropriate) equal to the Intended
Put Share Amount, in denominations of not more than 50,000 shares per
certificate;
<PAGE>67
(b) the following documents: Put Opinion of Counsel, Officer's
Certificate, Put Notice, Registration Opinion, and any report or
disclosure required under Section 2.3.6 or Section 2.5;
(c) all documents, instruments and other writings required to be
delivered on or before the Put Date pursuant to any provision of this
Agreement in order to implement and effect the transactions
contemplated herein.
2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be delivered to the Investor, (i)
whenever required by Section 2.3.6(b) or by Section 2.5.3, and (ii) on
the date that is three (3) Business Days prior to each Put Date (the
"Registration Opinion Deadline"), an opinion of the Company's
independent counsel, in substantially the form of Exhibit R (the
"Registration Opinion"), addressed to the Investor stating, inter alia,
that no facts ("Material Facts") have come to such counsel's attention
that have caused it to believe that the Registration Statement is
subject to an Ineffective Period or to believe that the Registration
Statement, any Supplemental Registration Statement (as each may be
amended, if applicable), and any related prospectuses, contain an
untrue statement of material fact or omits a material fact required to
make the statements contained therein, in light of the circumstances
under which they were made, not misleading. If a Registration Opinion
cannot be delivered by the Company's independent counsel to the
Investor on the Registration Opinion Deadline due to the existence of
Material Facts or an Ineffective Period, the Company shall promptly
notify the Investor and as promptly as possible amend each of the
Registration Statement and any Supplemental Registration Statements, as
applicable, and any related prospectus or cause such Ineffective Period
to terminate, as the case may be, and deliver such Registration Opinion
and updated prospectus as soon as possible thereafter. If at any time
after a Put Notice shall have been delivered to Investor but before the
related Pricing Period End Date, the Company acquires knowledge of such
Material Facts or any Ineffective Period occurs, the Company shall
promptly notify the Investor and shall deliver a Put Cancellation
Notice to the Investor pursuant to Section 2.3.11 by facsimile and
overnight courier by the end of that Business Day.
(b) (i) the Company shall engage its independent auditors to
perform the procedures in accordance with the provisions of Statement
on Auditing Standards No. 71, as amended, as agreed to by the parties
hereto, and reports thereon (the "Bring Down Cold Comfort Letters") as
shall have been reasonably requested by the Investor with respect to
certain financial information contained in the Registration Statement
and shall have delivered to the Investor such a report addressed to the
Investor, on the date that is three (3) Business Days prior to each Put
Date.
(ii) in the event that the Investor shall have requested delivery of
an Agreed Upon Procedures Report pursuant to Section 2.5.3, the Company
shall engage its independent auditors to perform certain agreed upon
procedures and report thereon as shall have been reasonably requested
by the Investor with respect to certain financial information of the
Company and the Company shall deliver to the Investor a copy of such
report addressed to the Investor. In the event that the report
required by this Section 2.3.6(b) cannot be delivered by the Company's
independent auditors, the Company shall, if necessary, promptly revise
the Registration Statement and the Company shall not deliver a Put
Notice until such report is delivered.
2.3.7 Investor's Obligation and Right to Purchase Shares. Subject
to the conditions set forth in this Agreement, following the Investor's
receipt of a validly delivered Put Notice, the Investor shall be
required to purchase (each a "Purchase") from the Company a number of
Put Shares equal to the Put Share Amount, in the manner described
below.
2.3.8 Mechanics of Put Closing. Each of the Company
and the Investor shall deliver all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement
at or prior to each Closing. Subject to such delivery and the
satisfaction of the conditions set forth in Sections 2.3.4 and 2.3.5,
the closing of the purchase by the Investor of Shares shall occur by
5:00 PM, New York City Time, on the date which is five (5) Business
Days following the applicable Pricing Period End Date (or such other
time or later date as is mutually agreed to by the Company and the
<PAGE>68
Investor) (the "Payment Due Date") at the offices of Investor. On
each or before each Payment Due Date, the Investor shall deliver to the
Company, in the manner specified in Section 8 below, the Put Dollar
Amount to be paid for such Put Shares, determined as aforesaid. The
closing (each a "Put Closing") for each Put shall occur on the date
that both (i) the Company has delivered to the Investor all Required
Put Documents, and (ii) the Investor has delivered to the Company such
Put Dollar Amount and any Late Payment Amount, if applicable (each a
"Put Closing Date").
If the Investor does not deliver to the Company the Put Dollar Amount
for such Put Closing on or before the Payment Due Date, then the
Investor shall pay to the Company, in addition to the Put Dollar
Amount, an amount (the "Late Payment Amount") at a rate of X% per
month, accruing daily, multiplied by such Put Dollar Amount, where "X"
equals one percent (1%) for the first month following the date in
question, and increases by an additional one percent (1%) for each
month that passes after the date in question, up to a maximum of five
percent (5%) per month; provided, however, that in no event shall the
amount of interest that shall become due and payable hereunder exceed
the maximum amount permissible under applicable law.
2.3.9 Limitation on Short Sales. The Investor and its Affiliates
shall not engage in short sales of the Company's Common Stock;
provided, however, that the Investor may enter into any short exempt
sale or any short sale or other hedging or similar arrangement it deems
appropriate with respect to Put Shares after it receives a Put Notice
with respect to such Put Shares so long as such sales or arrangements
do not involve more than the number of such Put Shares specified in the
Put Notice.
2.3.10 Cap Amount. If the Company becomes listed on the Nasdaq Small
Cap Market or the Nasdaq National Market, then, unless the Company has
obtained Stockholder 20% Approval as set forth in Section 6.11 or
unless otherwise permitted by Nasdaq, in no event shall the Aggregate
Issued Shares exceed the maximum number of shares of Common Stock (the
"Cap Amount") that the Company can, without stockholder approval, so
issue pursuant to Nasdaq Rule 4460(i)(1)(d)(ii) (or any other
applicable Nasdaq Rules or any successor rule) (the "Nasdaq 20%
Rule").
2.3.11 Put Cancellation.
(a) Mechanics of Put Cancellation. If at any time during a Pricing
Period the Company discovers the existence of Material Facts or any
Ineffective Period or Delisting Event occurs, the Company shall cancel
the Put (a "Put Cancellation"), by delivering written notice to the
Investor (the "Put Cancellation Notice"), attached as Exhibit Q, by
facsimile and overnight courier. The "Put Cancellation Date" shall be
the date that the Put Cancellation Notice is first received by the
Investor, if such notice is received by the Investor by 6:00 p.m., New
York, NY time, and shall be the following date, if such notice is
received by the Investor after 6:00 p.m., New York, NY time.
(b) Effect of Put Cancellation. Anytime a Put Cancellation Notice
is delivered to Investor after the Put Date, the Put, shall remain
effective with respect to a number of Put Shares (the "Truncated Put
Share Amount") equal to the Individual Put Limit for the Truncated
Pricing Period.
(c) Put Cancellation Notice Confirmation. Upon receipt by the
Investor of a facsimile copy of the Put Cancellation Notice, the
Investor shall promptly send, via facsimile, a confirmation of receipt
(the "Put Cancellation Notice Confirmation," a form of which is
attached as Exhibit S) of the Put Cancellation Notice to the Company
specifying that the Put Cancellation Notice has been received and
affirming the Put Cancellation Date.
(d) Truncated Pricing Period. If a Put Cancellation Notice has
been delivered to the Investor after the Put Date, the Pricing Period
for such Put shall end at on the close of trading on the last full
trading day on the Principal Market that ends prior to the moment of
initial delivery of the Put Cancellation Notice (a "Truncated Pricing
Period") to the Investor.
<PAGE>69
2.3.12 Investment Agreement Cancellation. The Company may terminate
(a "Company Termination") its right to initiate future Puts by
providing written notice ("Termination Notice") to the Investor, by
facsimile and overnight courier, at any time other than during an
Extended Put Period, provided that such termination shall have no
effect on the parties' other rights and obligations under this
Agreement, the Registration Rights Agreement or the Warrants.
Notwithstanding the above, any cancellation occurring during an
Extended Put Period is governed by Section 2.3.11.
2.3.13 Return of Excess Common Shares. In the event that the number
of Shares purchased by the Investor pursuant to its obligations
hereunder is less than the Intended Put Share Amount, the Investor
shall promptly return to the Company any shares of Common Stock in the
Investor's possession that are not being purchased by the Investor.
2.4 Warrants.
2.4.1 Commitment Warrants. In consideration hereof, following the
execution of the Letter of Agreement dated on or about March 16, 2000
between the Company and the Investor, the Company issued and delivered
to Investor or its designated assignees, warrants (the "Commitment
Warrants") in the form attached hereto as Exhibit U, or such other form
as agreed upon by the parties, to purchase 810,000 shares of Common
Stock. The Commitment Warrants shall be exerciseable at a price (the
"Commitment Warrant Exercise Price") which shall initially equal the
lowest Closing Bid Price for the five (5) Business Days immediately
preceding March 16, 2000 ("Initial Exercise Price"), or, if lower, the
lowest Closing Bid Price for the five (5) Business Days immediately
preceding the date of execution by the Company of this Investment
Agreement, and shall have reset provisions. Each Commitment Warrant
shall be immediately exercisable at the Commitment Warrant Exercise
Price, and shall have a term beginning on the date of issuance and
ending on date that is five (5) years thereafter. The Warrant Shares
shall be registered for resale pursuant to the Registration Rights
Agreement. The Investment Commitment Opinion of Counsel shall cover the
issuance of the Commitment Warrant and the issuance of the common stock
upon exercise of the Commitment Warrant.
Notwithstanding any Termination or Automatic Termination of this
Agreement, regardless of whether or not the Registration Statment is or
is not filed, and regardless of whether or not the Registration
Statement is approved or denied by the SEC, the Investor shall retain
full ownership of the Commitment Warrant as partial consideration for
its commitment hereunder.
2.4.2 Purchase Warrants. Within five (5) Business Days of the end of
each Pricing Period, the Company shall issue and deliver to the
Investor a warrant ("Purchase Warrant"), in the form attached hereto as
Exhibit D, or such other form as agreed upon by the parties, to
purchase a number of shares of Common Stock equal to 10% of the Put
Share Amount for that Put. Each Purchase Warrant shall be exerciseable
at a price (the "Purchase Warrant Exercise Price") which shall
initially equal 110% of the Market Price for the applicable Put, and
shall have semi-annual reset provisions. Each Purchase Warrant shall
be immediately exercisable at the Purchase Warrant Exercise Price, and
shall have a term beginning on the date of issuance and ending on the
date that is five (5) years thereafter. The Warrant Shares shall be
registered for resale pursuant to the Registration Rights Agreement.
2.5 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"),
advisors to and representatives of the Investor (who may or may not be
affiliated with the Investor and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of Common
Stock on behalf of the Investor pursuant to the Registration Statement,
any Supplemental Registration Statement, or amendments or supplements
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 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
<PAGE>70
enabling the Investor 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.
2.5.1 Treatment of Nonpublic Information. The Company shall not
disclose nonpublic information to the Investor or to its advisors or
representatives unless prior to disclosure of such information the
Company identifies such information as being nonpublic information and
provides the Investor and such advisors and representatives with the
opportunity to accept or refuse to accept such nonpublic information
for review. The Company may, as a condition to disclosing any nonpublic
information hereunder, require the Investor and its advisors and
representatives to enter into a confidentiality agreement (including an
agreement with such advisors and representatives prohibiting them from
trading in Common Stock during such period of time as they are in
possession of nonpublic information) in form reasonably satisfactory to
the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate nonpublic information
to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided,
however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the advisors
and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to
disclose the specific event or circumstance) of which it becomes aware,
constituting nonpublic information (whether or not requested of the
Company specifically or generally during the course of due diligence by
and 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 2.5 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 nonpublic information in the course of
conducting due diligence in accordance with the terms of this
Agreement; provided, however, that in no event shall the Investor's
advisors or representatives disclose to the Investor the nature of the
specific event or circumstances constituting any nonpublic 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.
2.5.2 Disclosure of Misstatements and Omissions. The Investor's
advisors or representatives shall make complete disclosure to the
Investor's counsel of all events or circumstances constituting
nonpublic 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's 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; provided, however, that
such consultation shall not constitute the advice of the Company's
independent counsel to the Investor as to the accuracy of the
Registration Statement and related Prospectus.
2.5.3 Procedure if Material Facts are Reasonably Believed to be Untrue
or are Omitted. In the event after such consultation the Investor or
the Investor's counsel reasonably 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 were made, not misleading,
<PAGE>71
(a) 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, or
(b) if the Company disputes the existence of any such material
misstatement or omission, (i) the Company's independent counsel shall
provide the Investor's counsel with a Registration Opinion 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 ("Agreed Upon Procedures
Report") 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.
2.6 Commitment Payments.
On the last Business Day of each six (6) Calendar Month period
following the Effective Date (each such period a "Commitment Evaluation
Period"), if the Company has not Put at least $1,000,000 in aggregate
Put Dollar Amount during that Commitment Evaluation Period, the
Company, in consideration of Investor's commitment costs, including,
but not limited to, due diligence expenses, shall pay to the Investor
an amount (the "Semi-Annual Non-Usage Fee ") equal to the difference of
(i) $100,000, minus (ii) 10% of the aggregate Put Dollar Amount of the
Put Shares put to Investor during that Commitment Evaluation Period.
In the event that the Company delivers a Termination Notice to the
Investor or an Automatic Termination occurs, the Company shall pay to
the Investor (the "Termination Fee") the greater of (i) the Semi-Annual
Non-Usage Fee for the applicable Commitment Evaluation Period, or (ii)
the difference of (x) $200,000, minus (y) 10% of the aggregate Put
Dollar Amount of the Put Shares put to Investor during all Puts to
date, and the Company shall not be required to pay the Semi-Annual Non-
Usage Fee thereafter.
Each Semi Annual Non-Usage Fee or Termination Fee is payable, in cash,
within five (5) business days of the date it accrued. The Company
shall not be required to deliver any payments to Investor under this
subsection until Investor has paid all Put Dollar Amounts that are then
due.
3. Representations, Warranties and Covenants of Investor.
Investor hereby represents and warrants to and agrees with the Company
as follows:
3.1 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and
has checked the applicable box set forth in Section 10 of this
Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Investor or Investor's professional
advisor has been granted the opportunity to ask questions of and
receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the terms and conditions of
this Offering, the Company and its business and prospects, and to
obtain any additional information which Investor or Investor's
professional advisor deems necessary to verify the accuracy and
completeness of the information received.
3.2.2 Reliance on Own Advisors. Investor has relied completely on the
advice of, or has consulted with, Investor's own personal tax,
investment, legal or other advisors and has not relied on the Company
or any of its affiliates, officers, directors, attorneys, accountants
or any affiliates of any thereof and each other person, if any, who
controls any of the foregoing, within the meaning of Section 15 of the
Act for any tax or legal advice (other than reliance on information in
the Disclosure Documents as defined in Section 3.2.4 below and on the
Opinion of Counsel). The foregoing, however, does not limit or modify
Investor's right to rely upon covenants, representations and warranties
of the Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has such knowledge and
experience in financial and business matters so as to enable such
Investor to utilize the information made available to it in connection
<PAGE>72
with the Offering in order to evaluate the merits and risks of the
prospective investment, which are substantial, including without
limitation those set forth in the Disclosure Documents (as defined in
Section 3.2.4 below).
3.2.4 Disclosure Documents. Investor, in making Investor's investment
decision to subscribe for the Investment Agreement hereunder,
represents that (a) Investor has received and had an opportunity to
review (i) the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, (ii) the Company's quarterly report on Form
10-QSB for the quarters ended June 30, 1999, and September 30, 1998,
(iii) the Risk Factors, attached as Exhibit J, (the "Risk Factors")
(iv) the Capitalization Schedule, attached as Exhibit K, (the
"Capitalization Schedule") and (v) the Use of Proceeds Schedule,
attached as Exhibit L, (the "Use of Proceeds Schedule"); (b) Investor
has read, reviewed, and relied solely on the documents described in (a)
above, the Company's representations and warranties and other
information in this Agreement, including the exhibits, documents
prepared by the Company which have been specifically provided to
Investor in connection with this Offering (the documents described in
this Section 3.2.4 (a) and (b) are collectively referred to as the
"Disclosure Documents"), and an independent investigation made by
Investor and Investor's representatives, if any; (c) Investor has,
prior to the date of this Agreement, been given an opportunity to
review material contracts and documents of the Company which have been
filed as exhibits to the Company's filings under the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
has had an opportunity to ask questions of and receive answers from the
Company's officers and directors; and (d) is not relying on any oral
representation of the Company or any other person, nor any written
representation or assurance from the Company other than those contained
in the Disclosure Documents or incorporated herein or therein. The
foregoing, however, does not limit or modify Investor's right to rely
upon covenants, representations and warranties of the Company in
Sections 5 and 6 of this Agreement. Investor acknowledges and agrees
that the Company has no responsibility for, does not ratify, and is
under no responsibility whatsoever to comment upon or correct any
reports, analyses or other comments made about the Company by any third
parties, including, but not limited to, analysts' research reports or
comments (collectively, "Third Party Reports"), and Investor has not
relied upon any Third Party Reports in making the decision to invest.
3.2.5 Investment Experience; Fend for Self. Investor has substantial
experience in investing in securities and it has made investments in
securities other than those of the Company. Investor acknowledges that
Investor is able to fend for Investor's self in the transaction
contemplated by this Agreement, that Investor has the ability to bear
the economic risk of Investor's investment pursuant to this Agreement
and that Investor is an "Accredited Investor" by virtue of the fact
that Investor meets the investor qualification standards set forth in
Section 3.1 above. Investor has not been organized for the purpose of
investing in securities of the Company, although such investment is
consistent with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 No General Solicitation. The Investment Agreement was not
offered to Investor through, and Investor is not aware of, any form of
general solicitation or general advertising, including, without
limitation, (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, and (ii) any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising.
3.3.2 Restricted Securities. Investor understands that the Investment
Agreement is, the Common Stock and Warrants issued at each Put Closing
will be, and the Warrant Shares will be, characterized as "restricted
securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction exempt from the
registration requirements of the federal securities laws and that under
such laws and applicable regulations such securities may not be
transferred or resold without registration under the Act or pursuant to
an exemption therefrom. In this connection, Investor represents that
Investor is familiar with Rule 144 under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by
the Act.
<PAGE>73
3.3.3 Disposition. Without in any way limiting the representations
set forth above, Investor agrees that until the Securities are sold
pursuant to an effective Registration Statement or an exemption from
registration, they will remain in the name of Investor and will not be
transferred to or assigned to any broker, dealer or depositary.
Investor further agrees not to sell, transfer, assign, or pledge the
Securities (except for any bona fide pledge arrangement to the extent
that such pledge does not require registration under the Act or unless
an exemption from such registration is available and provided further
that if such pledge is realized upon, any transfer to the pledgee shall
comply with the requirements set forth herein), or to otherwise dispose
of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the Act
and any applicable state securities laws covering such proposed
disposition and such disposition is made in accordance with such
registration statement and in compliance with applicable prospectus
delivery requirements; or
(b) (i) Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition to the extent
relevant for determination of the availability of an exemption from
registration, and (ii) if reasonably requested by the Company, Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Securities under the Act or state securities laws.
It is agreed that the Company will not require the Investor to provide
opinions of counsel for transactions made pursuant to Rule 144 provided
that Investor and Investor's broker, if necessary, provide the Company
with the necessary representations for counsel to the Company to issue
an opinion with respect to such transaction.
The Investor is entering into this Agreement for its own account 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 does not agree to hold the Common Stock for any
minimum or other specific term and reserves the right to dispose of the
Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Investment Agreement, if
executing this Agreement in a representative or fiduciary capacity, has
full power and authority to execute and deliver this Agreement and each
other document included herein for which a signature is required in
such capacity and on behalf of the subscribing individual, partnership,
trust, estate, corporation or other entity for whom or which Investor
is executing this Agreement. Investor has reached the age of majority
(if an individual) according to the laws of the state in which he or
she resides.
3.4.2 Due Authorization. Investor is duly and validly organized,
validly existing and in good standing as a limited liability company
under the laws of Georgia with full power and authority to purchase the
Securities to be purchased by Investor and to execute and deliver this
Agreement.
3.4.3 Partnerships. If Investor is a partnership, the
representations, warranties, agreements and understandings set forth
above are true with respect to all partners of Investor (and if any
such partner is itself a partnership, all persons holding an interest
in such partnership, directly or indirectly, including through one or
more partnerships), and the person executing this Agreement has made
due inquiry to determine the truthfulness of the representations and
warranties made hereby.
3.4.4 Representatives. If Investor is purchasing in a representative
or fiduciary capacity, the representations and warranties shall be
deemed to have been made on behalf of the person or persons for whom
Investor is so purchasing.
<PAGE>74
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an investment in
the Company involves substantial risks, including the potential loss of
Investor's entire investment herein. Investor recognizes that the
Disclosure Documents, this Agreement and the exhibits hereto do not
purport to contain all the information, which would be contained in a
registration statement under the Act;
4.2 No Government Approval. No federal or state agency has passed
upon the Securities, recommended or endorsed the Offering, or made any
finding or determination as to the fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of the date of this
Agreement, the Securities and any component thereof have not been
registered under the Act or any applicable state securities laws by
reason of exemptions from the registration requirements of the Act and
such laws, and may not be sold, pledged (except for any limited pledge
in connection with a margin account of Investor to the extent that such
pledge does not require registration under the Act or unless an
exemption from such registration is available and provided further that
if such pledge is realized upon, any transfer to the pledgee shall
comply with the requirements set forth herein), assigned or otherwise
disposed of in the absence of an effective registration of the
Securities and any component thereof under the Act or unless an
exemption from such registration is available;
4.4 Restrictions on Transfer. Investor may not attempt to sell,
transfer, assign, pledge or otherwise dispose of all or any portion of
the Securities or any component thereof in the absence of either an
effective registration statement or an exemption from the registration
requirements of the Act and applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance that any
registration statement will become effective at the scheduled time, or
ever, or remain effective when required, and Investor acknowledges
that it may be required to bear the economic risk of Investor's
investment for an indefinite period of time;
4.6 Exempt Transaction. Investor understands that the Securities are
being offered and sold in reliance on specific exemptions from the
registration requirements of federal and state law and that the
representations, warranties, agreements, acknowledgments and
understandings set forth herein are being relied upon by the Company in
determining the applicability of such exemptions and the suitability of
Investor to acquire such Securities.
4.7 Legends. The certificates representing the Put Shares shall not
bear a Restrictive Legend. The certificates representing the Warrant
Shares shall not bear a Restrictive Legend unless they are issued at a
time when the Registration Statement is not effective for resale. It
is understood that the certificates evidencing any Warrant Shares
issued at a time when the Registration Statement is not effective for
resale, subject to legend removal under the terms of Section 6.8 below,
shall bear the following legend (the "Legend"):
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities
laws, nor the securities laws of any other jurisdiction. They may not
be sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom."
5. Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to Investor
(which shall be true at the signing of this Agreement, and as of any
such later date as contemplated hereunder) and agrees with Investor
that, except as set forth in the "Schedule of Exceptions" attached
hereto as Exhibit C:
5.1 Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Nevada, USA and has all requisite corporate
power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on the
business or properties of the Company and its subsidiaries taken as a
whole. The Company is not the subject of any pending, threatened or,
<PAGE>75
to its knowledge, contemplated investigation or administrative or legal
proceeding (a "Proceeding") by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the Securities and
Exchange Commission, The National Association of Securities Dealer,
Inc., The Nasdaq Stock Market, Inc. or any state securities commission,
or any other governmental entity, which have not been disclosed in the
Disclosure Documents. None of the disclosed Proceedings, if any, will
have a material adverse effect upon the Company or the market for the
Common Stock. The Company has the following subsidiaries:
5.2 Corporate Condition. The Company's condition is, in all material
respects, as described in the Disclosure Documents (as further set
forth in any subsequently filed Disclosure Documents, if applicable),
except for changes in the ordinary course of business and normal year-
end adjustments that are not, in the aggregate, materially adverse to
the Company. Except for continuing losses, there have been no material
adverse changes to the Company's business, financial condition, or
prospects since the dates of such Disclosure Documents. The financial
statements as contained in the 10-KSB and 10-QSB have been prepared in
accordance with generally accepted accounting principles, consistently
applied (except as otherwise permitted by Regulation S-X of the
Exchange Act), subject, in the case of unaudited interim financial
statements, to customary year end adjustments and the absence of
certain footnotes, and fairly present the financial condition of the
Company as of the dates of the balance sheets included therein and the
consolidated results of its operations and cash flows for the periods
then ended,. Without limiting the foregoing, there are no material
liabilities, contingent or actual, that are not disclosed in the
Disclosure Documents (other than liabilities incurred by the Company in
the ordinary course of its business, consistent with its past practice,
after the period covered by the Disclosure Documents). The Company has
paid all material taxes that are due, except for taxes that it
reasonably disputes. There is no material claim, litigation, or
administrative proceeding pending or, to the best of the Company's
knowledge, threatened against the Company, except as disclosed in the
Disclosure Documents. This Agreement and the Disclosure Documents do
not contain any untrue statement of a material fact and do not omit to
state any material fact required to be stated therein or herein
necessary to make the statements contained therein or herein not
misleading in the light of the circumstances under which they were
made. No event or circumstance exists relating to the Company which,
under applicable law, requires public disclosure but which has not been
so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part of the Company by
its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the
authorization, issuance and delivery of the Common Stock being sold
hereunder and the issuance (and/or the reservation for issuance) of the
Warrants and the Warrant Shares have been taken, and this Agreement and
the Registration Rights Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their terms,
except insofar as the enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting
creditors' rights generally or by principles governing the availability
of equitable remedies. The Company has obtained all consents and
approvals required for it to execute, deliver and perform each
agreement referenced in the previous sentence.
5.4 Valid Issuance of Common Stock. The Common Stock and the
Warrants, when issued, sold and delivered in accordance with the terms
hereof, for the consideration expressed herein, will be validly issued,
fully paid and nonassessable and, based in part upon the
representations of Investor in this Agreement, will be issued in
compliance with all applicable U.S. federal and state securities laws.
The Warrant Shares, when issued in accordance with the terms of the
Warrants, shall be duly and validly issued and outstanding, fully paid
and nonassessable, and based in part on the representations and
warranties of Investor, will be issued in compliance with all
applicable U.S. federal and state securities laws. The Put Shares, the
Warrants and the Warrant Shares will be issued free of any preemptive
rights.
5.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of
Incorporation or Bylaws, each as amended and in effect on and as of the
date of the Agreement, or of any material provision of any material
<PAGE>76
instrument or material contract to which it is a party or by which it
is bound or of any provision of any federal or state judgment, writ,
decree, order, statute, rule or governmental regulation applicable to
the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its
obligations under this Agreement or the Registration Rights Agreement.
The execution, delivery and performance of this Agreement and the other
agreements entered into in conjunction with the Offering and the
consummation of the transactions contemplated hereby and thereby will
not (a) result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument or contract or an
event which results in the creation of any lien, charge or encumbrance
upon any assets of the Company, which would have a material adverse
effect on the Company's business or prospects, or on the performance of
its obligations under this Agreement, the Registration Rights
Agreement, (b) violate the Company's Certificate of Incorporation or
By-Laws or (c) violate any statute, rule or governmental regulation
applicable to the Company which violation would have a material adverse
effect on the Company's business or prospects.
5.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports
required by the Exchange Act since the date the Company first became
subject to such reporting obligations. The Company undertakes to
furnish Investor with copies of such reports as may be reasonably
requested by Investor prior to consummation of this Offering and
thereafter, to make such reports available, for the full term of this
Agreement, including any extensions thereof, and for as long as
Investor holds the Securities. The Common Stock is duly listed on the
O.T.C. Bulletin Board. The Company is not in violation of the listing
requirements of the O.T.C. Bulletin Board and does not reasonably
anticipate that the Common Stock will be delisted by the O.T.C.
Bulletin Board for the foreseeable future. The Company has filed all
reports required under the Exchange Act. The Company has not furnished
to the Investor any material nonpublic information concerning the
Company.
5.7 Capitalization. The capitalization of the Company as of the date
hereof is, and the capitalization as of the Closing, subject to
exercise of any outstanding warrants and/or exercise of any outstanding
stock options, after taking into account the offering of the Securities
contemplated by this Agreement and all other share issuances occurring
prior to this Offering, will be, as set forth in the Capitalization
Schedule as set forth in Exhibit K. There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities. Except as disclosed in
the Capitalization Schedule, as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe
for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable or exchangeable
for, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there
are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their
securities under the Act (except the Registration Rights Agreement).
5.8 Intellectual Property. We do not presently hold any patents,
trademarks, licenses, franchises, or concessions. We do not feel that
any patents or trademarks we may hold or may apply for in the future
will affect materially our ability to create information or distribute
that information to the marketplace. We feel that the success of our
business is dependent on the kind of information we distribute and not
the technology used to distribute it. We believe that factors such as
the technological and creative skills of our personnel, new product
developments, frequent product enhancements, name recognition, and
reliable product maintenance are more essential to establishing and
maintaining a technology leadership position.
5.9 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses) for the
purposes and in the approximate amounts set forth on the Use of
Proceeds Schedule set forth as Exhibit L hereto. These purposes and
amounts are estimates and are subject to change without notice to any
Investor.
<PAGE>77
5.10 No Rights of Participation. No person or entity, including, but
not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the financing contemplated by this Agreement
which has not been waived.
5.11 Company Acknowledgment. The Company hereby acknowledges that
Investor may elect to hold the Securities for various periods of time,
as permitted by the terms of this Agreement, the Warrants, and other
agreements contemplated hereby, and the Company further acknowledges
that Investor has made no representations or warranties, either written
or oral, as to how long the Securities will be held by Investor or
regarding Investor's trading history or investment strategies.
5.12 No Advance Regulatory Approval. The Company acknowledges that
this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby have not been approved by
the SEC, or any other regulatory body and there is no guarantee that
this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby will ever be approved by the
SEC or any other regulatory body. The Company is relying on its own
analysis and is not relying on any representation by Investor that
either this Investment Agreement, the transaction contemplated hereby
or the Registration Statement contemplated hereby has been or will be
approved by the SEC or other appropriate regulatory body.
5.13 Underwriter's Fees and Rights of First Refusal. The Company is
not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or
other representative other than the Investor in connection with this
Offering.
5.14 Availability of Suitable Form for Registration. The Company is
currently eligible and agrees to maintain its eligibility to register
the resale of its Common Stock on a registration statement on a
suitable form under the Act.
5.15 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales of any of the Company's
securities or solicited any offers to buy any security under
circumstances that would prevent the parties hereto from consummating
the transactions contemplated hereby pursuant to an exemption from
registration under Regulation D of the Act or would require the
issuance of any other securities to be integrated with this Offering
under the Rules of Nasdaq. The Company has not engaged in any form of
general solicitation or advertising in connection with the offering of
the Common Stock or the Warrants.
5.16 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any subsidiary has, in the
course of its actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct
or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation
of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government
official or employee.
5.17 Key Employees. Each "Key Employee" (as defined in Exhibit N) is
currently serving the Company in the capacity disclosed in Exhibit N.
No Key Employee, to the best knowledge of the Company and its
subsidiaries, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure
or proprietary information agreement, non-competition agreement, or any
other contract or agreement or any restrictive covenant, and the
continued employment of each Key Employee does not subject the Company
or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the
Company and its subsidiaries, any intention to terminate his employment
with, or services to, the Company or any of its subsidiaries.
<PAGE>78
5.18 Representations Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all
material respects, and shall survive any Put Closing and the issuance
of the shares of Common Stock thereby.
5.19 Tax Status. The Company has made or filed all federal and state
income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent
that the Company has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and as set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
5.20 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of
the Company is presently a party to any transaction with the Company
(other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which
any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
5.21 Application of Takeover Protections. The Company and its board
of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination
or other similar anti-takeover provision under Nevada law which is or
could become applicable to the Investor as a result of the transactions
contemplated by this Agreement, including, without limitation, the
issuance of the Common Stock, any exercise of the Warrants and
ownership of the Common Shares and Warrant Shares. The Company has
not adopted and will not adopt any "poison pill" provision that will be
applicable to Investor as a result of transactions contemplated by this
Agreement.
5.22 Other Agreements. The Company has not, directly or indirectly,
made any agreements with the Investor under a subscription in the form
of this Agreement for the purchase of Common Stock, relating to the
terms or conditions of the transactions contemplated hereby or thereby
except as expressly set forth herein, respectively, or in exhibits
hereto or thereto.
5.23 Major Transactions. There are no other Major Transactions
currently pending or contemplated by the Company.
5.24 Financings. There are no other financings currently pending or
contemplated by the Company.
5.25 Shareholder Authorization. The Company shall, at its next
annual shareholder meeting following its listing on either the Nasdaq
Small Cap Market or the Nasdaq National Market, or at a special meeting
to be held as soon as practicable thereafter, use its best efforts to
obtain approval of its shareholders to (i) authorize the issuance of
the full number of shares of Common Stock which would be issuable under
this Agreement and eliminate any prohibitions under applicable law or
the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the
Company or any of its securities with respect to the Company's ability
to issue shares of Common Stock in excess of the Cap Amount (such
approvals being the "20% Approval") and (ii) the increase in the number
of authorized shares of Common Stock of the Company (the "Share
Authorization Increase Approval") such that at least 10,000,000 shares
can be reserved for this Offering. In connection with such shareholder
vote, the Company shall use its best efforts to cause all officers and
directors of the Company to promptly enter into irrevocable agreements
to vote all of their shares in favor of eliminating such prohibitions.
As soon as practicable after the 20% Approval and the Share
Authorization Increase Approval, the Company agrees to use its best
efforts to reserve 10,000,000 shares of Common Stock for issuance under
this Agreement.
<PAGE>79
5.26 Acknowledgment of Limitations on Put Amounts. The Company
understands and acknowledges that the amounts available under this
Investment Agreement are limited, among other things, based upon the
liquidity of the Company's Common Stock traded on its Principal Market.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least the
Termination Date, maintain as its independent auditors an accounting
firm authorized to practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at least
the Termination Date, maintain its corporate existence in good standing
and, once it becomes a "Reporting Issuer" (defined as a Company which
files periodic reports under the Exchange Act), remain a Reporting
Issuer (provided, however, that the foregoing covenant shall not
prevent the Company from entering into any merger or corporate
reorganization as long as the surviving entity in such transaction, if
not the Company, assumes the Company's obligations with respect to the
Common Stock and has Common Stock listed for trading on a stock
exchange or on Nasdaq and is a Reporting Issuer) and shall pay all its
taxes when due except for taxes which the Company disputes.
6.3 Registration Rights. The Company will enter into a registration
rights agreement covering the resale of the Common Shares and the
Warrant Shares substantially in the form of the Registration Rights
Agreement attached as Exhibit A.
6.4 Asset Transfers. The Company shall not (i) transfer, sell, convey
or otherwise dispose of any of its material assets to any Subsidiary
except for a cash or cash equivalent consideration and for a proper
business purpose or (ii) transfer, sell, convey or otherwise dispose of
any of its material assets to any Affiliate, as defined below, during
the Term of this Agreement. For purposes hereof, "Affiliate" shall
mean any officer of the Company, director of the Company or owner of
twenty percent (20%) or more of the Common Stock or other securities of
the Company.
6.5 Rights of First Refusal.
6.5.1 Capital Raising Limitations. During the period from the date
of this Agreement until the date that is one year after the Termination
Date, the Company shall not issue or sell, or agree to issue or sell
Equity Securities (as defined below), for cash in private capital
raising transactions without obtaining the prior written approval of
the Investor of the Offering (the limitations referred to in this
subsection 6.5.1 are collectively referred to as the "Capital Raising
Limitations"). For purposes hereof, the following shall be
collectively referred to herein as, the "Equity Securities": (i) Common
Stock or any other equity securities, (ii) any debt or equity
securities which are convertible into, exercisable or exchangeable for,
or carry the right to receive additional shares of Common Stock or
other equity securities, or (iii) any securities of the Company
pursuant to an equity line structure or format similar in nature to
this Offering.
6.5.2 Investor's Right of First Refusal. For any private capital
raising transactions of Equity Securities which close after the date
hereof and on or prior to the date that is one (1) year after the
Termination Date of this Agreement, not including any warrants issued
in conjunction with this Investment Agreement, the Company agrees to
deliver to Investor, at least ten (10) days prior to the closing of
such transaction, written notice describing the proposed transaction,
including the terms and conditions thereof, and providing the Investor
and its affiliates an option during the ten (10) day period following
delivery of such notice to purchase the securities being offered in
such transaction on the same terms as contemplated by such transaction.
6.5.3 Exceptions to Rights of First Refusal. Notwithstanding the
above, the Rights of First Refusal shall not apply to any transaction
involving issuances of securities in connection with a merger,
consolidation, acquisition or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is
not to raise equity capital), or in connection with the disposition or
acquisition of a business, product or license by the Company or
exercise of options by employees, consultants or directors, or a
primary underwritten offering of the Company's Common Stock, or the
transactions set forth on Schedule 6.5.1. The Capital Raising
<PAGE>80
Limitations also shall not apply to (a) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof, (b) the grant
of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan for
the benefit of the Company's employees, directors or consultants, or
(c) the issuance of debt securities, with no equity feature, incurred
solely for working capital purposes. If the Investor, at any time, is
more than five (5) business days late in paying any Put Dollar Amounts
that are then due, the Investor shall not be entitled to the benefits
of Sections 6.5.1 and 6.5.2 above until the date that the Investor has
paid all Put Dollar Amounts that are then due.
6.6 Financial 10-KSB Statements, Etc. and Current Reports on Form 8-K.
The Company shall deliver to the Investor copies of its annual reports
on Form 10-KSB, and quarterly reports on Form 10-QSB and shall deliver
to the Investor current reports on Form 8-K within two (2) days of
filing for the Term of this Agreement.
6.7 Opinion of Counsel. Investor shall, concurrent with the
Investment Commitment Closing, receive an opinion letter from the
Company's legal counsel, in the form attached as Exhibit B, or in such
form as agreed upon by the parties, and shall, concurrent with each Put
Date, receive an opinion letter from the Company's legal counsel, in
the form attached as Exhibit I or in such form as agreed upon by the
parties.
6.8 Removal of Legend. If the certificates representing any
Securities are issued with a restrictive Legend in accordance with the
terms of this Agreement, the Legend shall be removed and the Company
shall issue a certificate without such Legend to the holder of any
Security upon which it is stamped, and a certificate for a security
shall be originally issued without the Legend, if (a) the sale of such
Security is registered under the Act, or (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions (the
reasonable cost of which shall be borne by the Investor), to the effect
that a public sale or transfer of such Security may be made without
registration under the Act, or (c) such holder provides the Company
with reasonable assurances that such Security can be sold pursuant to
Rule 144. Each Investor agrees to sell all Securities, including those
represented by a certificate(s) from which the Legend has been removed,
or which were originally issued without the Legend, pursuant to an
effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.9 Listing. Subject to the remainder of this Section 6.9, the
Company shall ensure that its shares of Common Stock (including all
Warrant Shares and Put Shares) are listed and available for trading on
the O.T.C. Bulletin Board. Thereafter, the Company shall (i) use its
best efforts to continue the listing and trading of its Common Stock on
the O.T.C. Bulletin Board or to become eligible for and listed and
available for trading on the Nasdaq Small Cap Market, the NMS, or the
New York Stock Exchange ("NYSE"); and (ii) comply in all material
respects with the Company's reporting, filing and other obligations
under the By-Laws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable.
6.10 The Company's Instructions to Transfer Agent. The Company will
instruct the Transfer Agent of the Common Stock, by delivering
instructions in the form of Exhibit T hereto, to issue certificates,
registered in the name of each Investor or its nominee, for the Put
Shares and Warrant Shares in such amounts as specified from time to
time by the Company upon any exercise by the Company of a Put and/or
exercise of the Warrants by the holder thereof. Such certificates
shall not bear a Legend unless issuance with a Legend is permitted by
the terms of this Agreement and Legend removal is not permitted by
Section 6.8 hereof and the Company shall cause the Transfer Agent to
issue such certificates without a Legend. Nothing in this Section
shall affect in any way Investor's obligations and agreement set forth
in Sections 3.3.2 or 3.3.3 hereof to resell the Securities pursuant to
an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of applicable securities laws. If (a) an
Investor provides the Company with an opinion of counsel, which opinion
of counsel shall be in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that the
<PAGE>81
Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) an Investor transfers
Securities, pursuant to Rule 144, to a transferee which is an
accredited investor, the Company shall permit the transfer, and, in the
case of Put Shares and Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such
denomination as specified by such Investor. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable
harm to an Investor by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this
Section 6.10 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section
6.10, that an Investor shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being
required.
6.11 Stockholder 20% Approval. Prior to the closing of any Put that
would cause the Aggregate Issued Shares to exceed the Cap Amount, if
required by the rules of NASDAQ because the Company's Common Stock is
listed on NASDAQ, the Company shall obtain approval of its stockholders
to authorize (i) the issuance of the full number of shares of Common
Stock which would be issuable pursuant to this Agreement but for the
Cap Amount and eliminate any prohibitions under applicable law or the
rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the
Company or any of its securities with respect to the Company's ability
to issue shares of Common Stock in excess of the Cap Amount (such
approvals being the "Stockholder 20% Approval").
6.12 Press Release. The Company agrees that the Investor shall have
the right to review and comment upon any press release issued by the
Company in connection with the Offering which approval shall not be
unreasonably withheld by Investor.
6.13 Change in Law or Policy. In the event of a change in law, or
policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be
unable to perform its obligations hereunder, this Agreement shall be
automatically terminated and no Termination Fee shall be due, provided
that notwithstanding any termination under this section 6.13, the
Investor shall retain full ownership of the Commitment Warrant as
consideration for its commitment and its consulting, legal and other
services rendered hereunder.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing; Severability.
Investor's and the Company's representations and warranties shall
survive the Investment Date and any Put Closing contemplated by this
Agreement notwithstanding any due diligence investigation made by or on
behalf of the party seeking to rely thereon. 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, or is
altered by a term required by the Securities Exchange Commission to be
included in the Registration Statement, this Agreement shall continue
in full force and effect without said provision; provided that if the
removal of such provision materially changes the economic benefit of
this Agreement to the Investor, this Agreement shall terminate.
7.2 Successors and Assigns. This Agreement shall not be assignable
without the Company's written consent, If assigned, the terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. Investor may assign Investor's rights
hereunder, in connection with any private sale of the Common Stock of
such Investor, so long as, as a condition precedent to such transfer,
the transferee executes an acknowledgment agreeing to be bound by the
applicable provisions of this Agreement in a form acceptable to the
Company and provides an original copy of such acknowledgment to the
Company.
<PAGE>82
7.3 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. 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. The use in
this Agreement of a masculine, feminine or neither pronoun shall be
deemed to include a reference to the others.
7.5 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or Investor pursuant to the terms
of this Agreement shall be in writing and shall be deemed given when
delivered personally, or by facsimile or upon receipt if by overnight
or two (2) day courier, addressed to the parties at the addresses
and/or facsimile telephone number of the parties set forth at the end
of this Agreement or such other address as a party may request by
notifying the other in writing; provided, however, that in order for
any notice to be effective as to the Investor such notice shall be
delivered and sent, as specified herein, to all the addresses and
facsimile telephone numbers of the Investor set forth at the end of
this Agreement or such other address and/or facsimile telephone number
as Investor may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights
Agreement, each of the Company and Investor shall pay all costs and
expenses that it respectively incurs, with respect to the negotiation,
execution, delivery and performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Common Stock certificates,
the Warrants, the Registration Rights Agreement, and the other
documents 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, whether oral, written, or otherwise except as specifically
set forth herein or therein. Except as expressly provided herein,
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.
7.8 Actions at Law or Equity; Jurisdiction and Venue. The parties
acknowledge that any and all actions, whether at law or at equity, and
whether or not said actions are based upon this Agreement between the
parties hereto, shall be filed in any state or federal court sitting in
Atlanta, Georgia. Georgia law shall govern both the proceeding as well
as the interpretation and construction of the Transaction Documents and
the transaction as a whole. In any litigation between the parties
hereto, the prevailing party, as found by the court, shall be entitled
to an award of all attorney's fees and costs of court. Should the
court refuse to find a prevailing party, each party shall bear its own
legal fees and costs.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
(a) Wire transfer of Subscription Funds. Investor shall deliver
Put Dollar Amounts (as payment towards any Put Share Price) by wire
transfer, to the Company pursuant to a wire instruction letter to be
provided by the Company, and signed by the Company.
(b) Irrevocable Subscription. Investor hereby acknowledges and
agrees, subject to the provisions of any applicable laws providing for
the refund of subscription amounts submitted by Investor, that this
Agreement is irrevocable and that Investor is not entitled to cancel,
terminate or revoke this Agreement or any other agreements executed by
such Investor and delivered pursuant hereto, and that this Agreement
and such other agreements shall survive the death or disability of such
Investor and shall be binding upon and inure to the benefit of the
parties and their heirs, executors, administrators, successors, legal
representatives and assigns. If the Securities subscribed for are to
be owned by more than one person, the obligations of all such owners
<PAGE>83
under this Agreement shall be joint and several, and the agreements,
representations, warranties and acknowledgments herein contained shall
be deemed to be made by and be binding upon each such person and his
heirs, executors, administrators, successors, legal representatives and
assigns.
8.2 Acceptance of Subscription. Ownership of the number of
securities purchased hereby will pass to Investor upon the Warrant
Closing or any Put Closing.
9. Indemnification.
In consideration of the Investor's execution and delivery of the
Investment Agreement, the Registration Rights Agreement and the
Warrants (the "Transaction Documents") and acquiring the Securities
thereunder and in addition to all of the Company's other obligations
under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless Investor and all of its stockholders,
officers, directors, employees and direct or indirect investors and any
of the foregoing person's agents, members, partners or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including
reasonable attorney's fees and disbursements (the "Indemnified
Liabilities"), incurred by any Indemnitee as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or documents
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document contemplated
hereby or thereby, (c) any cause of action, suit or claim, derivative
or otherwise, by any stockholder of the Company based on a breach or
alleged breach by the Company or any of its officers or directors of
their fiduciary or other obligations to the stockholders of the
Company, or (d) claims made by third parties against any of the
Indemnitees based on a violation of Section 5 of the Securities Act
caused by the integration of the private sale of common stock to the
Investor and the public offering pursuant to the Registration
Statement.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which it would be required to make if such foregoing
undertaking was enforceable which is permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be
sought, such Indemnified Party will, if a claim in respect thereof is
to be made against the other party (hereinafter "Indemnitor") under
this Section 9, deliver to the Indemnitor a written notice of the
commencement thereof and the Indemnitor shall have the right to
participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an
Indemnified Party shall have the right to retain its own counsel, with
the reasonably incurred fees and expenses of such counsel to be paid by
the Indemnitor, if representation of such Indemnified Party by the
counsel retained by the Indemnitor would be inappropriate due to actual
or potential conflicts of interest between such Indemnified Party and
any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the Indemnitor within a reasonable
time of the commencement of any such action, if prejudicial to the
Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the Indemnified Party under this Section
9, but the omission to so deliver written notice to the Indemnitor will
not relieve it of any liability that it may have to any Indemnified
Party other than under this Section 9 to the extent it is prejudicial.
[INTENTIONALLY LEFT BLANK]
10. Accredited Investor. Investor is an "accredited investor"
because (check all applicable boxes):
<PAGE>84
(a) [ ] it is an organization described in Section 501(c)(3) of
the Internal Revenue Code, or a corporation, limited duration company,
limited liability company, business trust, or partnership not formed
for the specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000.
(b) [ ] any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person who has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective
investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner of the
issuer of the securities being offered or sold or a director, executive
officer or general partner of a general partner of that issuer.
[ ] has an individual net worth, or joint net worth with that
person's spouse, at the time of his purchase exceeding $1,000,000.
[ ] had an individual income in excess of $200,000 in each of the
two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year.
(d) [ ] an entity each equity owner of which is an entity
described in a - b above or is an individual who could check one (1) of
the last three (3) boxes under subparagraph (c) above.
(e) [ ] other [specify]
The undersigned hereby subscribes the Maximum Offering Amount and
acknowledges that this Agreement and the subscription represented
hereby shall not be effective unless accepted by the Company as
indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing statements are true and
correct and that Investor by the following signature(s) executed this
Agreement.
Dated this 24th day of April, 2000.
_________________________________________________________________
Your Signature
PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
____________________________________ SECURITY DELIVERY INSTRUCTIONS:
Name: Please Print
Please type or print address where your security is to be delivered
____________________________________ ATTN:
Title/Representative Capacity (if applicable)
___________________________________________________________________
Name of Company You Represent (if applicable) Street Address
___________________________________________________________________
Place of Execution of this Agreement
City, State or Province, Country, Offshore Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
Please print address where any Notice Please print address where
Copy
is to be delivered is to be delivered
ATTN: ________________________ ATTN: ________________________________
_____________________________ ________________________________
Street Address Street Address
<PAGE>85
City, State or Province, Country,
Offshore Postal Code City, State or Country,
Offshore
Postal Code
Telephone: _____________ Telephone: __________________
Facsimile: _____________ Facsimile: ___________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM
OFFERING AMOUNT ON THE 24th DAY OF APRIL, 2000.
GUINNESS TELLI*PHONE CORPORATION
By:
Lawrence A. Guinness, President & CEO
Address:
Attn: Lawrence Guinness
655 Redwood Hwy., Suite 111
Mill Valley, CA 94924
Telephone (415) 389-9442
Facsimile (415) 388-0390
<PAGE>86
ADVANCE PUT NOTICE
GUINNESS TELLI*PHONE CORPORATION (the "Company") hereby intends,
subject to the Individual Put Limit (as defined in the Investment
Agreement), to elect to exercise a Put to sell the number of shares of
Common Stock of the Company specified below, to
_____________________________, the Investor, as of the Intended Put
Date written below, all pursuant to that certain Investment Agreement
(the "Investment Agreement") by and between the Company and Swartz
Private Equity, LLC dated on or about April 24, 2000.
Date of Advance Put Notice: ___________________
Intended Put Date :___________________________
Intended Put Share Amount: __________________
Company Designation Maximum Put Dollar Amount (Optional):
________________________________________.
Company Designation Minimum Put Share Price (Optional):
________________________________________.
GUINNESS TELLI*PHONE CORPORATION
By:
Lawrence A. Guinness, President & CEO
Address:
Attn: Lawrence Guinness
655 Redwood Hwy., Suite 111
Mill Valley, CA 94924
Telephone (415) 389-9442
Facsimile (415) 388-0390
EXHIBIT E
<PAGE>87
CONFIRMATION of ADVANCE PUT NOTICE
_________________________________, the Investor, hereby confirms
receipt of GUINNESS TELLI*PHONE CORPORATION's (the "Company") Advance
Put Notice on the Advance Put Date written below, and its intention to
elect to exercise a Put to sell shares of common stock ("Intended Put
Share Amount") of the Company to the Investor, as of the intended Put
Date written below, all pursuant to that certain Investment Agreement
(the "Investment Agreement") by and between the Company and Swartz
Private Equity, LLC dated on or about April 24, 2000.
Date of Confirmation: ____________________
Date of Advance Put Notice: _______________
Intended Put Date: ________________________
Intended Put Share Amount: ________________
Company Designation Maximum Put Dollar Amount (Optional):
________________________________________.
Company Designation Minimum Put Share Price (Optional):
________________________________________.
INVESTOR(S)
___________________________________
Investor's Name
By: ________________________________
(Signature)
Address____________________________________
____________________________________
____________________________________
Telephone No.: ___________________
Facsimile No.: __________________-
EXHIBIT F
<PAGE>88
PUT NOTICE
GUINNESS TELLI*PHONE CORPORATION (the "Company") hereby elects to
exercise a Put to sell shares of common stock ("Common Stock") of the
Company to _____________________________, the Investor, as of the Put
Date, at the Put Share Price and for the number of Put Shares written
below, all pursuant to that certain Investment Agreement (the
"Investment Agreement") by and between the Company and Swartz Private
Equity, LLC dated on or about April 24, 2000.
Put Date :_________________
Intended Put Share Amount (from Advance Put Notice):_________________
Common Shares
Company Designation Maximum Put Dollar Amount (Optional):
________________________________________.
Company Designation Minimum Put Share Price (Optional):
________________________________________.
Note: Capitalized terms shall have the meanings ascribed to them in
this Investment Agreement.
GUINNESS TELLI*PHONE CORPORATION
By:
Lawrence A. Guinness, President & CEO
Address:
Attn: Lawrence Guinness
655 Redwood Hwy., Suite 111
Mill Valley, CA 94924
Telephone (415) 389-9442
Facsimile (415) 388-0390
EXHIBIT G
<PAGE>89
CONFIRMATION of PUT NOTICE
_________________________________, the Investor, hereby confirms
receipt of Guinness Telli*Phone Corporation (the "Company") Put Notice
and election to exercise a Put to sell ___________________________
shares of common stock ("Common Stock") of the Company to Investor, as
of the Put Date, all pursuant to that certain Investment Agreement (the
"Investment Agreement") by and between the Company and Swartz Private
Equity, LLC dated on or about April 24, 2000.
Date of this Confirmation: ________________
Put Date :_________________
Number of Put Shares of
Common Stock to be Issued: _____________
Volume Evaluation Period: _____ Business Days
Pricing Period: _____ Business Days
INVESTOR(S)
___________________________________
Investor's Name
: _________________________________
(Signature)
Address: ____________________________________
____________________________________
____________________________________
Telephone No.: ___________________________________
Facsimile No.: ____________________________________
EXHIBIT H
<PAGE>90
PUT CANCELLATION NOTICE
GUINNESS TELLI*PHONE CORPORATION (the "Company") hereby cancels the Put
specified below, pursuant to that certain Investment Agreement (the
"Investment Agreement") by and between the Company and Swartz Private
Equity, LLC dated on or about April 24, 2000, as of the close of
trading on the date specified below (the "Cancellation Date," which
date must be on or after the date that this notice is delivered to the
Investor), provided that such cancellation shall not apply to the
number of shares of Common Stock equal to the Truncated Put Share
Amount (as defined in the Investment Agreement).
Cancellation Date: _____________________
Put Date of Put Being Canceled: __________
Number of Shares Put on Put Date: _________
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective Registration Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give
twenty (20) Business Days advance written notice to the Investor before
effecting the next Put.
GUINNESS TELLI*PHONE CORPORATION
By:
Lawrence A. Guinness, President & CEO
Address:
Attn: Lawrence Guinness
655 Redwood Hwy., Suite 111
Mill Valley, CA 94924
Telephone (415) 389-9442
Facsimile (415) 388-0390
EXHIBIT Q
<PAGE>91
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the
"Investment Agreement"), by and between Guinness Telli*Phone
Corporation and Swartz Private Equity, LLC dated on or about April 24,
2000, hereby confirms receipt of Guinness Telli*Phone Corporation's
(the "Company") Put Cancellation Notice and confirms the following:
Date of this Confirmation: ________________
Put Cancellation Date : ___________________
INVESTOR(S)
___________________________________
Investor's Name
By: _________________________________
(Signature)
Address: ____________________________________
____________________________________
____________________________________
Telephone No.: ___________________________________
Facsimile No.: ____________________________________
EXHIBIT S
