UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 29, 1999
LMKI INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-26578 33-0662114
(Commission File Number) (I.R.S. Employer Identification No.)
1720 East Garry, Suite 201, Santa Ana, California 92705
(Address of principal executive offices, including Zip Code)
(949) 475-4500
(Registrant's telephone number, including Area Code)
Item 5. Other Events.
We issued the following press release:
SANTA ANA, Calif., December 1, 1999 -- LMKI
LMKI Inc. (OTCBB: LMKI), a leading broadband communications solutions
provider announced today that it has secured a $35 million investment
agreement from Swartz Private Equity, LLC, of Roswell, Georgia.
The investment agreement calls for Swartz to provide a private equity line
for the purchase of common stock, subject to registration and certain other
conditions, and limited to a percentage of dollar trading volume in the
stock. Based upon the availability of these funds, LMKI intends to use this
funding for working capital, and to aggressively pursue the acquisition of
the existing DSL subscriber base of local and regional Internet Service
Providers partnered with Covad Communications (NASDAQ:COVD) in order to
integrate them into LMKI's national network. This funding bolsters LMKI's
ability to accelerate its market penetration in the rapidly growing business
class broadband Internet connectivity market.
This news release is published for informational purposes only and is not to
be deemed to offer any securities for sale. Any offering will be made only
by means of a prospectus.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: Except for historical information, the matters discussed in this news
release may be considered forward-looking statements and could be subject to
certain risks and uncertainties that could cause the actual results to differ
materially from those projected. These include uncertainties in the market,
competition, legal, success of marketing efforts and other risks detailed
from time to time in the company's SEC reports. The company assumes no
obligation to update the information in this release.
Item 8. (c) Exhibits.
EXHIBIT 4.1 INVESTMENT AGREEMENT
EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT
EXHIBIT 4.3 WARRANT TO PURCHASE COMMON STOCK OF LMKI INC.
EXHIBIT 4.4 COMMITMENT WARRANT
EXHIBIT 4.5 AGREEMENT (WITH RESPECT TO COMMITMENT WARRANTS)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LMKI INC.
By:/s/_______________________________
William J. Kettle
Chairman and Chief Executive Officer
Dated: 12-02-99
8-K#5,8- 990929; LMKI; SWARTZ FINANCING
LMKI INC.
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 ____ day of October, 1999, by and between LMKI
Inc., 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-Five Million Dollars ($35,000,000) (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).
"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 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 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 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 LMKI Inc., a corporation duly organized and
existing under the laws of the State of Nevada.
"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.
"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-Five Million Dollars
($35,000,000).
"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.
"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.
"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.
"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. Notwithstanding the above, if
no Registration Statement has been declared effective by the date that is one
(1) year after the date of this Agreement, the Termination Date shall be the
date that is one (1) year after the date of this Agreement.
"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.
"Transaction Documents" shall have the meaning set forth in Section 9.
"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;
(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"
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 shall 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 .92.
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) 92% 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 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.
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;
(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;
(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 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 Late Payment Amount that shall become due and payable hereunder
exceed the maximum amount permissible under applicable law.
In the event that the Investor has not made full payment for any Put
Shares within five (5) business days of the applicable Payment Due Date, and
the Investor has failed to make such payment within fifteen (15) Business
Days after receipt of written notification from the Company (which
notification may be given anytime after the fifth (5th) Business Day
following the applicable Payment Due Date) that it plans to terminate this
Investment Agreement for non-payment, the Company may terminate this
Agreement without being required to pay a Termination Fee.
In the event that the Company terminates this Agreement for non-payment in
conjunction with the terms of this Section, the Warrants shall become null
and void, to the extent that that they have not yet been exercised as of the
Payment Due Date for such late payment, and the Investor shall immediately
return the unexercised portion(s) of the Warrants to the Company.
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 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.
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 partial consideration hereof,
following the execution of the Letter of Agreement dated on or about
September 29, 1999 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 490,000 shares of
Common Stock. The Commitment Warrants shall be exerciseable at a price (the
"Commitment Warrant Exercise Price") which shall initially equal the average
Closing Bid Price for the five (5) Business Days immediately preceding
September 29, 1999 ("Initial Exercise Price"), 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. Concurrently with the issuance and delivery of the
Commitment Opinion to the Investor, or on the date that is six (6) months
after the date of this Agreement, whichever is sooner, the Company shall
deliver to the Investor a Commitment Warrant Opinion of Counsel (signed by
the Company's independent counsel), in the form of Exhibit P attached hereto.
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 number of Put Shares
issued to Investor in 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 on the Pricing Period End Date, 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 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,
(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 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 August 31,
1998, (ii) the Company's quarterly report on Form 10-QSB for the quarters
ended November 30, 1998, February 28, 1999 and May 31, 1999, (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.
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.
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 registered 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, 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. Except as otherwise set
forth on Exhibit O, 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 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 August 31, 1998. 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
October 21, 1999, 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. The Company has valid, unrestricted
and exclusive ownership of or rights to use the patents, trademarks,
trademark registrations, trade names, copyrights, know-how, technology and
other intellectual property necessary to the conduct of its business.
Exhibit M lists all patents, trademarks, trademark registrations, trade names
and copyrights of the Company. The Company has granted such licenses or has
assigned or otherwise transferred a portion of (or all of) such valid,
unrestricted and exclusive patents, trademarks, trademark registrations,
trade names, copyrights, know-how, technology and other intellectual property
necessary to the conduct of its business as set forth in Exhibit M. The
Company has been granted licenses, know-how, technology and/or other
intellectual property necessary to the conduct of its business as set forth
in Exhibit M. To the best of the Company's knowledge after due inquiry, the
Company is not infringing on the intellectual property rights of any third
party, nor is any third party infringing on the Company's intellectual
property rights. There are no restrictions in any agreements, licenses,
franchises, or other instruments that preclude the Company from engaging in
its business as presently conducted.
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.
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.
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. Except as set forth on Exhibit O, 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 6,500,000
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 6,500,000 shares of Common Stock for issuance under this
Agreement.
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 six (6) months 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
6.6.1 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.
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 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 further Commitment Fees shall be due.
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.
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 or Santa Ana, California, at the choice of the defendant in
such action. Nevada 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 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):
(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 _____ day of October, 1999.
____________________________________
_________________________________________________
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
______________________________________________
___________________________________________
City, State or Province, Country, Offshore Postal Code City, State or
Country, Offshore Postal Code
Telephone: _____________________________________ Telephone:
_________________________________
Facsimile: ______________________________________ Facsimile:
__________________________________
Facsimile: ______________________________________ Facsimile:
__________________________________
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM
OFFERING AMOUNT ON THE ____ DAY OF OCTOBER, 1999.
LMKI INC.
By:
William Kettle, CEO
ADDRESS: 1720 E. Garry Ave. Suite 201
Santa Ana, CA 92705
Telephone (949) 475-4500
Facsimile (949) 475-4511
ADVANCE PUT NOTICE
LMKI INC. (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 October 21, 1999.
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):
________________________________________.
LMKI INC.
By:
William Kettle, CEO
ADDRESS: 1720 E. Garry Ave. Suite 201
Santa Ana, CA 92705
Telephone (949) 475-4500
Facsimile (949) 475-4511
EXHIBIT E
CONFIRMATION of ADVANCE PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
LMKI INC.'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 October 21, 1999.
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
PUT NOTICE
LMKI INC. (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 October 21,
1999.
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.
LMKI INC.
By:
William Kettle, CEO
ADDRESS: 1720 E. Garry Ave. Suite 201
Santa Ana, CA 92705
Telephone (949) 475-4500
Facsimile (949) 475-4511
EXHIBIT G
CONFIRMATION of PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
LMKI Inc. (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 October 21, 1999.
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
By: _________________________________
(Signature)
Address: ____________________________________
____________________________________
____________________________________
Telephone No.: ___________________________________
Facsimile No.: ____________________________________
EXHIBIT H
PUT CANCELLATION NOTICE
LMKI INC. (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 October 21,
1999, 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.
LMKI INC.
By:
William Kettle, CEO
ADDRESS: 1720 E. Garry Ave. Suite 201
Santa Ana, CA 92705
Telephone (949) 475-4500
Facsimile (949) 475-4511
EXHIBIT Q
PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the
"Investment Agreement") by and between the LMKI Inc.'s, and Swartz Private
Equity, LLC dated on or about October 21, 1999, hereby confirms receipt of
LMKI Inc.'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
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of October __, 1999, by and among, a corporation duly incorporated and
existing under the laws of the State of Nevada (the "Company") and the
subscriber as named on the signature page hereto (hereinafter referred to as
"Subscriber").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Offering") of up to
Thirty-Five Million Dollars ($35,000,000), excluding any funds paid upon
exercise of the Warrants, of Common Stock of the Company pursuant to that
certain Investment Agreement of even date herewith (the "Investment
Agreement") between the Company and the Subscriber, the Company has agreed to
sell and the Subscriber has agreed to purchase, from time to time as provided
in the Investment Agreement, shares of the Company's Common Stock for a
maximum aggregate offering amount of Thirty-Five Million Dollars
($35,000,000);
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has agreed to issue to the Subscriber, from time to time, Commitment Warrants
and Purchase Warrants, each as defined in the Investment Agreement, to
purchase a number of shares of Common Stock, exercisable for five (5) years
from their respective dates of issuance (collectively, the "Subscriber
Warrants" or the "Warrants"); and
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has agreed to provide the Subscriber with certain registration rights with
respect to the Common Stock to be issued in the Offering and the Common Stock
issuable upon exercise of the Subscriber Warrants as set forth in this
Registration Rights Agreement.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, 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 singular and plural forms of the
terms defined):
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Additional Registration Statement" shall have the meaning set
forth in Section 3(b).
"Amended Registration Statement" shall have the meaning set forth
in Section 3(b).
"Business Day" shall have the meaning set forth in the Investment
Agreement.
"Closing Bid Price" shall have the meaning set forth in the
Investment Agreement.
"Common Stock" shall mean the common stock, par value $0.01, of
the Company.
"Due Date" shall mean the date that is one hundred twenty (120)
days after the date of this Agreement.
"Effective Date" shall have the meaning set forth in Section 2.4.
"Filing Date" shall mean the date that is forty-five (45) days
after the date of this Agreement.
"Holder" shall mean Subscriber, and any other person or entity
owning or having the right to acquire Registrable Securities or any permitted
assignee thereof;
"Piggyback Registration" and "Piggyback Registration Statement"
shall have the meaning set forth in Section 4.
"Put" shall have the meaning as set forth in the Investment
Agreement.
"Register," "Registered," and "Registration" shall mean and refer
to a registration effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act of 1933, as amended
(the "Act"), and pursuant to Rule 415 under the Act or any successor rule,
and the declaration or ordering of effectiveness of such registration
statement or document.
"Registrable Securities" shall have the meaning set forth in
Section 2.1.
"Registration Statement" shall have the meaning set forth in
Section 2.2.
"Rule 144" shall mean Rule 144, as amended, promulgated under the
Act.
"Subscriber" shall have the meaning set forth in the preamble to
this Agreement.
"Subscriber Warrants" shall have the meaning set forth in the
above Recitals.
"Investment Agreement" shall have the meaning set forth in the
Recitals hereto.
"Supplemental Registration Statement" shall have the meaning set
forth in Section 3(b).
"Warrants" shall have the meaning set forth in the above
Recitals.
"Warrant Shares" shall mean shares of Common Stock issuable upon
exercise of any Warrant.
2. Required Registration.
2.1 Registrable Securities. "Registrable Securities" shall
mean those shares of the Common Stock of the Company together with any
capital stock issued in replacement of, in exchange for or otherwise in
respect of such Common Stock, that are: (i) issuable or issued to the
Subscriber pursuant to the Investment Agreement or in this Agreement, and
(ii) issuable or issued upon exercise of the Subscriber Warrants; provided,
however, that notwithstanding the above, the following shall not be
considered Registrable Securities:
(a) any Common Stock which would otherwise be deemed to be
Registrable Securities, if and to the extent that those shares of Common
Stock may be resold in a public transaction without volume limitations or
other material restrictions without registration under the Act, including
without limitation, pursuant to Rule 144 under the Act; and
(b) any shares of Common Stock which have been sold in a
private transaction in which the transferor's rights under this Agreement are
not assigned.
2.2 Filing of Initial Registration Statement. The Company
shall, by the Filing Date, file a registration statement ("Registration
Statement") on Form SB-2 (or other suitable form, at the Company's
discretion, but subject to the reasonable approval of Subscriber), covering
the resale of a number of shares of Common Stock as Registrable Securities
equal to at least Six Million Five Hundred Thousand (6,500,000) shares of
Common Stock and shall cover, to the extent allowed by applicable law, such
indeterminate number of additional shares of Common Stock that may be issued
or become issuable as Registrable Securities by the Company pursuant to Rule
416 of the Act.
2.3 [Intentionally Left Blank].
2.4 Registration Effective Date. The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC
(the date of such effectiveness is referred to herein as the "Effective
Date") by the Due Date.
2.5 [Intentionally Left Blank].
2.6 [Intentionally Left Blank].
2.7 Shelf Registration. The Registration Statement shall be
prepared as a "shelf" registration statement under Rule 415, and shall be
maintained effective until all Registrable Securities are resold pursuant to
such Registration Statement.
2.8 Supplemental Registration Statement. Anytime the
Registration Statement does not cover a sufficient number of shares of Common
Stock to cover all outstanding Registrable Securities, the Company shall
promptly prepare and file with the SEC such Supplemental Registration
Statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the Act with
respect to the disposition of all such Registrable Securities and shall use
its best efforts to cause such Supplemental Registration Statement to be
declared effective as soon as possible.
3. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the
Company shall, as expeditiously and reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission
("SEC") a Registration Statement with respect to such Registrable Securities
and use its best efforts to cause such Registration Statement to become
effective and to remain effective until all Registrable Securities are resold
pursuant to such Registration Statement.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement ("Amended Registration
Statement") or prepare and file any additional registration statement
("Additional Registration Statement," together with the Amended Registration
Statement, "Supplemental Registration Statements") as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such Supplemental Registration Statements or such prior
registration statement and to cover the resale of all Registrable Securities.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or Blue
Sky laws of the jurisdictions in which the Holders are located, of such other
jurisdictions as shall be reasonably requested by the Holders of the
Registrable Securities covered by such Registration Statement and of all
other jurisdictions where legally required, provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions.
(e) [Intentionally Omitted].
(f) As promptly as practicable after becoming aware of such
event, notify each Holder of Registrable Securities of the happening of any
event of which the Company has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a number
of copies of such supplement or amendment to each Holder as such Holder may
reasonably request.
(g) Provide Holders with notice of the date that a Registration
Statement or any Supplemental Registration Statement registering the resale
of the Registrable Securities is declared effective by the SEC, and the date
or dates when the Registration Statement is no longer effective.
(h) Provide Holders and their representatives the opportunity
and a reasonable amount of time, based upon reasonable notice delivered by
the Company, to conduct a reasonable due diligence inquiry of Company's
pertinent financial and other records and make available its officers and
directors for questions regarding such information as it relates to
information contained in the Registration Statement.
(i) Provide Holders and their representatives the opportunity to
review the Registration Statement and all amendments or supplements thereto
prior to their filing with the SEC by giving the Holder at least ten (10)
business days advance written prior to such filing.
(j) Provide each Holder with prompt notice of the issuance by
the SEC or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceeding for such purpose. The Company shall use its best efforts
to prevent the issuance of any stop order and, if any is issued, to obtain
the removal thereof at the earliest possible date.
(k) Use its best efforts to list the Registrable Securities
covered by the Registration Statement with all securities exchanges or
markets on which the Common Stock is then listed and prepare and file any
required filing with the NASD, American Stock Exchange, NYSE and any other
exchange or market on which the Common Stock is listed.
4. Piggyback Registration. If anytime prior to the date that the
Registration Statement is declared effective or during any Ineffective Period
(as defined in the Investment Agreement) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its Common Stock under the Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely for the sale of securities to
participants in a Company stock plan or a registration on Form S-4
promulgated under the Act or any successor or similar form registering stock
issuable upon a reclassification, upon a business combination involving an
exchange of securities or upon an exchange offer for securities of the issuer
or another entity), the Company shall, at such time, promptly give each
Holder written notice of such registration (a "Piggyback Registration
Statement"). Upon the written request of each Holder given by fax within ten
(10) days after mailing of such notice by the Company, the Company shall
cause to be included in such registration statement under the Act all of the
Registrable Securities that each such Holder has requested to be registered
("Piggyback Registration") to the extent such inclusion does not violate the
registration rights of any other security holder of the company granted prior
to the date hereof; provided, however, that nothing herein shall prevent the
Company from withdrawing or abandoning such registration statement prior to
its effectiveness.
5. [Intentionally Left Blank].
6. Dispute as to Registrable Securities. In the event the Company
believes that shares sought to be registered under Section 2 or Section 4 by
Holders do not constitute "Registrable Securities" by virtue of Section 2.1
of this Agreement, and the status of those shares as Registrable Securities
is disputed, the Company shall provide, at its expense, an Opinion of
Counsel, reasonably acceptable to the Holders of the Securities at issue (and
satisfactory to the Company's transfer agent to permit the sale and
transfer), that those securities may be sold immediately, without volume
limitation or other material restrictions, without registration under the
Act, by virtue of Rule 144 or similar provisions.
7. Furnish Information. At the Company's request, each Holder shall
furnish to the Company such information regarding Holder, the Registrable
Securities held by it, and the intended method of disposition of such
securities to the extent required to effect the registration of its
Registrable Securities or to determine that registration is not required
pursuant to Rule 144 or other applicable provision of the Act. The Company
shall include all information provided by such Holder pursuant hereto in the
Registration Statement, substantially in the form supplied, except to the
extent such information is not permitted by law.
8. Expenses. All expenses, other than commissions and fees and
expenses of counsel to the selling Holders, incurred in connection with
registrations, filings or qualifications pursuant hereto, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company, shall be
borne by the Company.
9. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the officers, directors, partners, legal
counsel, and accountants of each Holder, any underwriter (as defined in the
Act, or as deemed by the Securities Exchange Commission, or as indicated in a
registration statement) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of Section 15 of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements or omissions: (i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, and the Company will reimburse
each such Holder, officer or director, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out of
or is based upon a violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, officer, director, underwriter or
controlling person; provided however, that the above shall not relieve the
Company from any other liabilities which it might otherwise have.
(b) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 9,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume, the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
reasonably incurred fees and expenses of one such counsel to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential conflicting interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 9, but the omission so
to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 9.
(c) In the event that the indemnity provided in paragraph (a)
of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and each Holder agree to
contribute to the aggregate claims, losses, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the Holders may be subject in such proportion as is
appropriate to reflect the relative fault of the Company and the Holders in
connection with the statements or omissions which resulted in such Losses.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Company or by
the Holders. The Company and the Holders agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person who controls
a Holder of Registrable Securities within the meaning of either the
Securities Act or the Exchange Act and each director, officer, partner,
employee and agent of a Holder shall have the same rights to contribution as
such holder, and each person who controls the Company within the meaning of
either the Act or the Exchange Act and each director and officer of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (c).
(d) The obligations of the Company and Holders under this
Section 9 shall survive the resale, if any, of the Common Stock, the
completion of any offering of Registrable Securities in a Registration
Statement under this Agreement, and otherwise.
10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144; and
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the Act
and the 1934 Act.
11. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the written
consent of each Holder affected thereby. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder, each future
Holder, and the Company.
12. Notices. All notices required or permitted under this Agreement
shall be made in writing signed by the party making the same, shall specify
the section under this Agreement pursuant to which it is given, and shall be
addressed if to (i) the Company at: LMKI Inc., Attn: William Kettle, CEO,
1720 East Garry Avenue, Suite 201, Santa Ana, CA 92705, Telephone, (949) 475-
4500, Facsimile, (949) 475-4511 (or at such other location as directed by the
Company in writing) and (ii) the Holders at their respective last address as
the party as shown on the records of the Company. Any notice, except as
otherwise provided in this Agreement, shall be made by fax and shall be
deemed given at the time of transmission of the fax.
13. Termination. This Agreement shall terminate on the date all
Registrable Securities cease to exist (as that term is defined in Section 2.1
hereof); but without prejudice to (i) the parties' rights and obligations
arising from breaches of this Agreement occurring prior to such termination
(ii) other indemnification obligations under this Agreement.
14. Assignment. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this
Agreement by the Company or any Holder, respectively, shall be made without
the prior written consent of the majority in interest of the Holders or the
Company, respectively; provided that the rights of a Holder may be
transferred to a subsequent holder of the Holder's Registrable Securities
(provided such transferee shall provide to the Company, together with or
prior to such transferee's request to have such Registrable Securities
included in a Registration, a writing executed by such transferee agreeing to
be bound as a Holder by the terms of this Agreement), and the Company hereby
agrees to file an amended registration statement including such transferee or
a selling security holder thereunder; and provided further that the Company
may transfer its rights and obligations under this Agreement to a purchaser
of all or a substantial portion of its business if the obligations of the
Company under this Agreement are assumed in connection with such transfer,
either by merger or other operation of law (which may include without
limitation a transaction whereby the Registrable Securities are converted
into securities of the successor in interest) or by specific assumption
executed by the transferee.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada applicable to agreements
made in and wholly to be performed in that jurisdiction, except for matters
arising under the Act or the Securities Exchange Act of 1934, which matters
shall be construed and interpreted in accordance with such laws.
16. 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.
17. Specific Performance. The Holder shall be entitled to the remedy
of specific performance in the event of the Company's breach of this
Agreement, the parties agreeing that a remedy at law would be inadequate.
18. Indemnity. Each party shall indemnify each other party against
any and all claims, damages (including reasonable attorney's fees), and
expenses arising out of the first party's breach of any of the terms of this
Agreement.
19. Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Investment Agreement, the Common
Stock certificates, 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 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.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this ___ day of October, 1999.
LMKI Inc.
By:
________________________________
William Kettle, CEO
Address: Attn: William Kettle, CEO
1720 East Garry Avenue, Suite #201
Santa Ana, CA 92705
Telephone (949) 475-4500
Facsimile (949) 475-4511
SUBSCRIBER:
SWARTZ PRIVATE EQUITY, LLC.
By:
________________________________
Eric S. Swartz, Manager
Address: 1080 Holcomb Bridge Road
Bldg. 200, Suite 285
Roswell, GA 30076
Telephone: (770) 640-8130
Facsimile: (770) 640-7150
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED. SEE THE RISK FACTORS SET FORTH UNDER THAT CERTAIN INVESTMENT
AGREEMENT BY AND BETWEEN THE COMPANY AND HOLDER REFERENCED THEREIN AS EXHIBIT
J.
Warrant to Purchase
"N" shares Warrant Number ____
Warrant to Purchase Common Stock
of
LMKI Inc.
THIS CERTIFIES that Swartz Private Equity, LLC or any subsequent holder
hereof ("Holder"), has the right to purchase from LMKI, a Nevada corporation
(the "Company"), up to "N" fully paid and nonassessable shares, wherein "N"
is defined below, of the Company's common stock, $.001 par value per share
("Common Stock"), subject to adjustment as provided herein, at a price equal
to the Exercise Price as defined in Section 3 below, at any time beginning on
the Date of Issuance (defined below) and ending at 5:00 p.m., New York, New
York time the date that is five (5) years after the Date of Issuance (the
"Exercise Period"); provided, that, with respect to each "Put," as that term
is defined in that certain Investment Agreement (the "Investment Agreement")
by and between the initial Holder and Company, dated on or about October ,
1999, "N" shall equal ten percent (10%) of the number of shares of Common
Stock purchased by the Holder in that Put.
Holder agrees with the Company that this Warrant to Purchase Common
Stock of the Company (this "Warrant") is issued and all rights hereunder
shall be held subject to all of the conditions, limitations and provisions
set forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on October___, 1999 ("Date of
Issuance"). The term of this Warrant is five (5) years from the Date of
Issuance.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby
Exhibit D
(the "Warrant Shares") upon surrender of this Warrant, with the Exercise Form
attached
hereto as Exhibit A (the "Exercise Form") duly completed and executed,
together with the full Exercise Price (as defined below) for each share of
Common Stock as to which this Warrant is exercised, at the office of the
Company, Attention: William Kettle, CEO,1720 East Garry Avenue, Suite 201,
Santa Ana, CA 92705; Telephone: (949) 475-4500, Facsimile: (949) 475-4511, or
at such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Exercise Form sent to the Company
and its Transfer Agent by facsimile (such surrender and payment of the
Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company as soon as practicable
thereafter. Alternatively, the Date of Exercise shall be defined as the date
the original Exercise Form is received by the Company, if Holder has not sent
advance notice by facsimile. The Company shall not be required to deliver
the shares of Common Stock to the Holder until the requirements of Section
2(a) above are satisfied.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the number of
shares purchased upon such Exercise of this Warrant, and if this Warrant is
not exercised in full, Holder shall be entitled to receive a new Warrant
(containing terms identical to this Warrant) representing any unexercised
portion of this Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder
of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of the Common Stock purchased upon the
Exercise of this Warrant. Nothing in this Warrant shall be construed as
conferring upon Holder any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price ("Exercise Price"), shall initially equal $Y per
share ("Initial Exercise Price"), where "Y" shall equal 110% of the Market
Price ending on the Purchase Period End Date (as both are defined in the
Investment Agreement) for the applicable Put or, if the Date of Exercise is
more than six (6) months after the Date of Issuance, the lesser of (i) the
Initial Exercise Price or (ii) the "Lowest Reset Price," as that term is
defined below. The Company shall calculate a "Reset Price" on each six-month
anniversary date of the Date of Issuance which shall equal one hundred and
ten percent (110%) of the Market Price ending on such six-month anniversary
date of the Date of Issuance. The "Lowest Reset Price" shall equal the
lowest Reset Price determined on any six-month anniversary date of the Date
of Issuance preceding the Date of Exercise, taking into account, as
appropriate, any adjustments made pursuant to Section 5 hereof.
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: subject to the last sentence of this Section
3, surrender of this Warrant at the principal office of the Company together
with notice of cashless election, in which event the Company shall issue
Holder a number of shares of Common
Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of this
Section 3(ii), the "Market Price" shall be defined as the average Closing Bid
Price of the Common Stock for the five (5) trading days prior to the Date of
Exercise of this Warrant (the "Average Closing Price"), as reported by the
O.T.C. Bulletin Board, National Association of Securities Dealers Automated
Quotation System ("Nasdaq") Small Cap Market, or if the Common Stock is not
traded on the Nasdaq Small Cap Market, the Average Closing Price in any other
over-the-counter market; provided, however, that if the Common Stock is
listed on a stock exchange, the Market Price shall be the Average Closing
Price on such exchange for the five (5) trading days prior to the date of
exercise of the Warrants. If the Common Stock is/was not traded during the
five (5) trading days prior to the Date of Exercise, then the closing price
for the last publicly traded day shall be deemed to be the closing price for
any and all (if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the O.T.C. Bulletin Board, the National Market System
("NMS"), the New York Stock Exchange, the Nasdaq Small Cap Market, or if no
longer traded on the O.T.C. Bulletin Board, the NMS, the New York Stock
Exchange, the Nasdaq Small Cap Market, the "Closing Bid Price" shall equal
the closing price on the principal national securities exchange or the over-
the-counter system on which the Common Stock is so traded and, if not
available, the mean of the high and low prices on the principal national
securities exchange on which the Common Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that the Common Stock issuable upon
exercise of this Warrant in a cashless exercise transaction shall be deemed
to have been acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise
transaction shall be deemed to have commenced on the date this Warrant was
issued.
Notwithstanding anything to the contrary contained herein, this Warrant
may not be exercised in a cashless exercise transaction if, on the Date of
Exercise, the shares of Common Stock to be issued upon exercise of this
Warrant would upon such issuance be then registered pursuant to an effective
registration statement filed pursuant to that certain Registration Rights
Agreement dated on or about October , 1999 by and among the Company and
certain investors, or otherwise be registered under the Securities Act of
1933, as amended.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in
whole or in part, in person or by attorney, upon surrender of this Warrant
properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such
transfer is made shall be entitled to receive a new Warrant or Warrants as to
the portion of this Warrant transferred, and Holder shall be entitled to
receive a new Warrant as to the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the
exercise of this Warrant constitutes "Registrable Securities" under that
certain Registration Rights Agreement dated on or about October___, 1999
between the Company and certain investors and, accordingly, has the benefit
of the registration rights pursuant to that agreement.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then Holder, upon Exercise of
this Warrant after the record date for the determination of holders of Common
Stock entitled to receive such dividend, shall be entitled to receive upon
Exercise of this Warrant, in addition to the number of shares of Common Stock
as to which this Warrant is exercised, such additional shares of Common Stock
as such Holder would have received had this Warrant been exercised
immediately prior to such record date and the Exercise Price will be
proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at
any time effect a recapitalization, reclassification or other similar
transaction of such character that the shares of Common Stock shall be
changed into or become exchangeable for a larger or smaller number of shares,
then upon the effective date thereof, the number of shares of Common Stock
which Holder shall be entitled to purchase upon Exercise of this Warrant
shall be increased or decreased, as the case may be, in direct proportion to
the increase or decrease in the number of shares of Common Stock by reason of
such recapitalization, reclassification or similar transaction, and the
Exercise Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of
shares, proportionally increased. The Company shall give Holder the same
notice it provides to holders of Common Stock of any transaction described in
this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for
no consideration to holders of Common Stock cash, evidences of indebtedness
or other securities or assets (other than cash dividends or distributions
payable out of earned surplus or net profits for the current or preceding
years) then, in any such case, Holder shall be entitled to receive, upon
Exercise of this Warrant, with respect to each share of Common Stock issuable
upon such exercise, the amount of cash or evidences of indebtedness or other
securities or assets which Holder would have been entitled to receive with
respect to each such share of Common Stock as a result of the happening of
such event had this Warrant been exercised immediately prior to the record
date or other date fixing shareholders to be affected by such event (the
"Determination Date") or, in lieu thereof, if the Board of Directors of the
Company should so determine at the time of such distribution, a reduced
Exercise Price determined by multiplying the Exercise Price on the
Determination Date by a fraction, the numerator of which is the result of
such Exercise Price reduced by the value of such distribution applicable to
one share of Common Stock (such value to be determined by the Board of
Directors of the Company in its discretion) and the denominator of which is
such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed
into the same or a different number of shares of the same or another class or
classes of stock or securities or other assets of the Company or another
entity or there is a sale of all or substantially all the Company's assets (a
"Corporate Change"), then this Warrant shall be exerciseable into such class
and type of securities or other assets as Holder would have received had
Holder exercised this Warrant immediately prior to such Corporate Change;
provided, however, that Company may not affect any Corporate Change unless it
first shall have given thirty (30) days notice to Holder hereof of any
Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section
3 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this Section 5, and thereafter shall mean said price as
adjusted from time to time in accordance with the provisions of said
subsection. No such adjustment under this Section 5 shall be made unless
such adjustment would change the Exercise Price at the time by $.01 or more;
provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the Exercise Price at the time
by $.01 or more. No adjustment made pursuant to any provision of this Section
5 shall have the net effect of increasing the Exercise Price in relation to
the split adjusted and distribution adjusted price of the Common Stock. The
number of shares of Common Stock subject hereto shall increase
proportionately with each decrease in the Exercise Price.
(f) Adjustments: Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 5, Holder shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock)
then, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other securities
or assets; and thereafter the number of such shares and/or other securities
or assets shall be subject to adjustment from time to time in a manner and
upon terms as nearly equivalent as practicable to the provisions of this
Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock.
If, on Exercise of this Warrant, Holder would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon exercise shall be the next higher number of
shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number
of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to preemptive rights, rights of
first refusal or similar rights of any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act
by virtue of Regulation D and exempt from state registration under applicable
state laws. The Warrant and the Common Stock issuable upon the Exercise of
this Warrant may not be pledged, transferred, sold or assigned except
pursuant to an effective registration statement or an exemption to the
registration requirements of the Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part.
Holder shall deliver a written notice to Company, substantially in the form
of the Assignment attached hereto as Exhibit B, indicating the person or
persons to whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall effect the
assignment within ten (10) days, and shall deliver to the assignee(s)
designated by Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Nevada,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to
or on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed,
until another address is designated in writing by the Company, to the
Attention: William Kettle, CEO, 1720 East Garry Avenue, Suite 201, Santa Ana,
CA 92705; Telephone: (949) 475-4500, Facsimile: (949) 475-4511. Notices or
demands pursuant to this Warrant to be given or made by the Company to or on
Holder shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, to the
address of Holder set forth in the Company's records, until another address
is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
______ day of October 1999.
__________________________
LMKI INC.
By: William Kettle, CEO
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: LMKI, Inc.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of LMKI,
Inc., a Nevada corporation (the "Company"), evidenced by the attached warrant
(the "Warrant"), and herewith makes payment of the exercise price with
respect to such shares in full, all in accordance with the conditions and
provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be
issued free of any restrictive legend, if appropriate, and a warrant
representing any unexercised portion hereof be issued, pursuant to the
Warrant in the name of the undersigned and delivered to the undersigned at
the address set forth below:
Dated:
________________________________________________________________________
Signature
_______________________________________________________________________
Print Name
________________________________________________________________________
Address
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons
below named the right to purchase _______ shares of the Common Stock of LMKI,
INC., evidenced by the attached Warrant and does hereby irrevocably
constitute and appoint _______________________ attorney to transfer the said
Warrant on the books of the Company, with full power of substitution in the
premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
___________________________________
Name
___________________________________
Address
___________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
490,000 shares
Warrant to Purchase Common Stock
of
LMKI INC.
THIS CERTIFIES that Swartz Private Equity, LLC or any subsequent holder
hereof pursuant to Section 8 hereof ("Holder"), has the right to purchase
from LMKI INC., a Nevada corporation (the "Company"), up to 490,000 fully
paid and nonassessable shares of the Company's common stock, $.001 par value
per share ("Common Stock"), subject to adjustment as provided herein, at a
price equal to the Exercise Price as defined in Section 3 below, at any time
beginning on the Date of Issuance (defined below) and ending at 5:00 p.m.,
New York, New York time the date that is five (5) years after the Date of
Issuance (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common
Stock of the Company(this "Warrant") is issued and all rights hereunder shall
be held subject to all of the conditions, limitations and provisions set
forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on October 4, 1999 ("Date of
Issuance"). The term of this Warrant is five (5) years from the Date of
Issuance.
Of this Warrant to purchase four hundred and ninety thousand (490,000)
shares of Common Stock of the Company, the Warrant is exercisable as to two
hundred and fifty thousand (250,000) shares of Common Stock of the Company
after the ten (10) business day document review period, as the same may be
extended by mutual consent of the Company and the Holder (the "Review
Period") referenced in the Equity Line Letter of Agreement dated on or about
September 29, 1999, between Holder and Company (the "Letter of Agreement")
has ended, shall be further exercisable as to the an additional one hundred
and twenty thousand (120,000) shares of Common Stock of the Company upon the
execution of all Closing Documents (as defined in the Letter of Agreement)
and shall be further exercisable as to the remaining one hundred and twenty
thousand (120,000) shares of Common Stock of the Company upon the
effectiveness of Company's registration statement (the "Registration
Statement") to be filed pursuant to the Closing Documents.
Anything in this Warrant to the contrary notwithstanding, if the
Company delivers written notice to Swartz Private Equity, LLC prior to the
expiration of the Review Period that the legal documents for the transaction
are unacceptable and the Company wishes to terminate the transaction, Holder
shall return this Warrant to the Company and all of Holder's rights under
this Warrant shall be null and void and of no effect.
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this Warrant may
be exercised as to all or any lesser number of full shares of Common Stock
covered hereby (the "Warrant Shares") upon surrender of this Warrant, with
the Exercise Form attached hereto as Exhibit A (the "Exercise Form") duly
completed and executed, together with the full Exercise Price (as defined
below) for each share of Common Stock as to which this Warrant is exercised,
at the office of the Company, Attention: William Kettle or John Diehl, 1720
E. Garry Ave. #201, Santa Ana, CA 92705; (949) 475-4500, Facsimile: (949)
475-4511, or at such other office or agency as the Company may designate in
writing, by overnight mail, with an advance copy of the Exercise Form sent to
the Company and its Transfer Agent by facsimile (such surrender and payment
of the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company as soon as practicable
thereafter. Alternatively, the Date of Exercise shall be defined as the date
the original Exercise Form is received by the Company, if Holder has not sent
advance notice by facsimile.
(c) Cancellation of Warrant. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the number of
shares purchased upon such Exercise of this Warrant, and if this Warrant is
not exercised in full, Holder shall be entitled to receive a new Warrant
(containing terms identical to this Warrant) representing any unexercised
portion of this Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant for shares
of Common Stock is issued shall, for all purposes, be deemed to be the Holder
of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of the Common Stock purchased upon the
Exercise of this Warrant. Nothing in this Warrant shall be construed as
conferring upon Holder any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price per share ("Exercise Price") shall initially equal
(the "Initial Exercise Price") the average Closing Bid Price for the five (5)
trading days immediately preceding September 29 1999. If the average Closing
Bid Price for the Company's Common Stock for the five (5) trading days
immediately preceding the date, if any, that the Company and Swartz Private
Equity, LLC enter into an Investment Agreement ("Investment Agreement")
pursuant to the Letter of Agreement (the "Market Price at Closing") is less
than the Initial Exercise Price, the Exercise Price shall be reset to equal
the Market Price at Closing, or, if the Date of Exercise is more than six (6)
months after the Date of Issuance, the lesser of (i) the Exercise Price then
in effect, or (ii) the "Lowest Reset Price," as that term is defined below.
The Company shall calculate a "Reset Price" on each six-month anniversary
date of the Date of Issuance which shall equal one hundred percent (100%) of
the average Closing Bid Price of the Company's Common Stock for the five (5)
trading days ending on such six-month anniversary date of the Date of
Issuance. The "Lowest Reset Price" shall equal the lowest Reset Price
determined on any six-month anniversary date of the Date of Issuance
preceding the Date of Exercise, taking into account, as appropriate, any
adjustments made pursuant to Section 5 hereof.
Payment of the Exercise Price may be made by either of the following,
or a combination thereof, at the election of Holder:
(i) Cash Exercise: cash, bank or cashiers check or wire transfer; or
(ii) Cashless Exercise: The Holder, at its option, may exercise this
Warrant in a cashless exercise transaction under this subsection (ii) if and
only if, on the Date of Exercise, there is not then in effect a current
registration statement that covers the resale of the shares of Common Stock
to be issued upon exercise of this Warrant . In order to effect a Cashless
Exercise, the Holder shall surrender of this Warrant at the principal office
of the Company together with notice of cashless election, in which event the
Company shall issue Holder a number of shares of Common Stock computed using
the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is
being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of this
Section 3(ii), the "Market Price" shall be defined as the average Closing Bid
Price of the Common Stock for the five (5) trading days prior to the Date of
Exercise of this Warrant (the "Average Closing Price"), as reported by the
O.T.C. Bulletin Board, National Association of Securities Dealers Automated
Quotation System ("Nasdaq") Small Cap Market, or if the Common Stock is not
traded on the Nasdaq Small Cap Market, the Average Closing Price in any other
over-the-counter market; provided, however, that if the Common Stock is
listed on a stock exchange, the Market Price shall be the Average Closing
Price on such exchange for the five (5) trading days prior to the date of
exercise of the Warrants. If the Common Stock is/was not traded during the
five (5) trading days prior to the Date of Exercise, then the closing price
for the last publicly traded day shall be deemed to be the closing price for
any and all (if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes hereof, the term "Closing Bid Price" shall mean the
closing bid price on the the Nasdaq Small Cap Market, the National Market
System ("NMS"), the New York Stock Exchange, or the O.T.C. Bulletin Board, or
if no longer traded on the Nasdaq Small Cap Market, the National Market
System ("NMS"), the New York Stock Exchange, or the O.T.C. Bulletin Board,
the "Closing Bid Price" shall equal the closing price on the principal
national securities exchange or the over-the-counter system on which the
Common Stock is so traded and, if not available, the mean of the high and low
prices on the principal national securities exchange on which the Common
Stock is so traded.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is
intended, understood and acknowledged that the Common Stock issuable upon
exercise of this Warrant in a cashless exercise transaction shall be deemed
to have been acquired at the time this Warrant was issued. Moreover, it is
intended, understood and acknowledged that the holding period for the Common
Stock issuable upon exercise of this Warrant in a cashless exercise
transaction shall be deemed to have commenced on the date this Warrant was
issued.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in
whole or in part, in person or by attorney, upon surrender of this Warrant
properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such
transfer is made shall be entitled to receive a new Warrant or Warrants as to
the portion of this Warrant transferred, and Holder shall be entitled to
receive a new Warrant as to the portion hereof retained.
(b) Registrable Securities. In addition to any other registration
rights of the Holder, if the Common Stock issuable upon exercise of this
Warrant is not registered for resale at the time the Company proposes to
register (including for this purpose a registration effected by the Company
for stockholders other than the Holders) any of its Common Stock under the
Act (other than a registration relating solely for the sale of securities to
participants in a Company stock plan or a registration on Form S-4
promulgated under the Act or any successor or similar form registering stock
issuable upon a reclassification, upon a business combination involving an
exchange of securities or upon an exchange offer for securities of the issuer
or another entity)(a "Piggyback Registration Statement"), the Company shall
cause to be included in such Piggyback Registration Statement ("Piggyback
Registration") all of the Common Stock issuable upon the exercise of this
Warrant ("Registrable Securities") to the extent such inclusion does not
violate the registration rights of any other securityholder of the Company
granted prior to the date hereof. Nothing herein shall prevent the Company
from withdrawing or abandoning the Piggyback Registration Statement prior to
its effectiveness.
(c) Limitation on Obligations to Register under a Piggyback
Registration. In the case of a Piggyback Registration pursuant to an
underwritten public offering by the Company, if the managing underwriter
determines and advises in writing that the inclusion in the registration
statement of all Registrable Securities proposed to be included would
interfere with the successful marketing of the securities proposed to be
registered by the Company, then the number of such Registrable Securities to
be included in the Piggyback Registration Statement, to the extent such
Registrable Securities may be included in such Piggyback Registration
Statement, shall be allocated among all Holders who had requested Piggyback
Registration pursuant to the terms hereof, in the proportion that the number
of Registrable Securities which each such Holder seeks to register bears to
the total number of Registrable Securities sought to be included by all
Holders. If required by the managing underwriter of such an underwritten
public offering, the Holders shall enter into a reasonable agreement limiting
the number of Registrable Securities to be included in such Piggyback
Registration Statement and the terms, if any, regarding the future sale of
such Registrable Securities.
5. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a
dividend payable in shares of Common Stock, then Holder, upon Exercise of
this Warrant after the record date for the determination of holders of Common
Stock entitled to receive such dividend, shall be entitled to receive upon
Exercise of this Warrant, in addition to the number of shares of Common Stock
as to which this Warrant is exercised, such additional shares of Common Stock
as such Holder would have received had this Warrant been exercised
immediately prior to such record date and the Exercise Price will be
proportionately adjusted.
(b) Recapitalization or Reclassification.
(i) Stock Split. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger number of shares (a "Stock Split"), then upon the
effective date thereof, the number of shares of Common Stock which Holder
shall be entitled to purchase upon Exercise of this Warrant shall be
increased in direct proportion to the increase in the number of shares of
Common Stock by reason of such recapitalization, reclassification or similar
transaction, and the Exercise Price shall be proportionally decreased.
(ii) Reverse Stock Split. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a smaller number of shares (a "Reverse Stock Split"), then
upon the effective date thereof, the number of shares of Common Stock which
Holder shall be entitled to purchase upon Exercise of this Warrant shall be
proportionately decreased and the Exercise Price shall be proportionally
increased. The Company shall give Holder the same notice it provides to
holders of Common Stock of any transaction described in this Section 5(b).
(c) Distributions. If the Company shall at any time distribute for
no consideration to holders of Common Stock cash, evidences of indebtedness
or other securities or assets (other than cash dividends or distributions
payable out of earned surplus or net profits for the current or preceding
years) then, in any such case, Holder shall be entitled to receive, upon
Exercise of this Warrant, with respect to each share of Common Stock issuable
upon such exercise, the amount of cash or evidences of indebtedness or other
securities or assets which Holder would have been entitled to receive with
respect to each such share of Common Stock as a result of the happening of
such event had this Warrant been exercised immediately prior to the record
date or other date fixing shareholders to be affected by such event (the
"Determination Date") or, in lieu thereof, if the Board of Directors of the
Company should so determine at the time of such distribution, a reduced
Exercise Price determined by multiplying the Exercise Price on the
Determination Date by a fraction, the numerator of which is the result of
such Exercise Price reduced by the value of such distribution applicable to
one share of Common Stock (such value to be determined by the Board of
Directors of the Company in its discretion) and the denominator of which is
such Exercise Price.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed
into the same or a different number of shares of the same or another class or
classes of stock or securities or other assets of the Company or another
entity or there is a sale of all or substantially all the Company's assets (a
"Corporate Change"), then this Warrant shall be exerciseable into such class
and type of securities or other assets as Holder would have received had
Holder exercised this Warrant immediately prior to such Corporate Change;
provided, however, that Company may not affect any Corporate Change unless it
first shall have given thirty (30) days notice to Holder hereof of any
Corporate Change.
(e) Exercise Price Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in Section
3 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this Section 5, and thereafter shall mean said price as
adjusted from time to time in accordance with the provisions of said
subsection. No such adjustment under this Section 5 shall be made unless
such adjustment would change the Exercise Price at the time by $.01 or more;
provided, however, that all adjustments not so made shall be deferred and
made when the aggregate thereof would change the Exercise Price at the time
by $.01 or more.
(f) Adjustments: Additional Shares, Securities or Assets. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 5, Holder shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock)
then, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other securities
or assets; and thereafter the number of such shares and/or other securities
or assets shall be subject to adjustment from time to time in a manner and
upon terms as nearly equivalent as practicable to the provisions of this
Section 5.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock.
If, on Exercise of this Warrant, Holder would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon exercise shall be the next higher number of
shares.
7. Reservation of Shares.
The Company shall at all times reserve for issuance such number
of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to preemptive rights, rights of
first refusal or similar rights of any person or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act
by virtue of Regulation D and exempt from state registration under applicable
state laws. The Warrant and the Common Stock issuable upon the Exercise of
this Warrant may not be pledged, transferred, sold or assigned except
pursuant to an effective registration statement or unless the Company has
received an opinion from the Company's counsel to the effect that such
registration is not required, or the Holder has furnished to the Company an
opinion of the Holder's counsel, which counsel shall be reasonably
satisfactory to the Company, to the effect that such registration is not
required; the transfer complies with any applicable state securities laws;
and, if no registration covering the resale of the Warrant Shares is
effective at the time the Warrant Shares are issued, the Holder consents to a
legend being placed on certificates for the Warrant Shares stating that the
securities have not been registered under the Securities Act and referring to
such restrictions on transferability and sale.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part.
Holder shall deliver a written notice to Company, substantially in the form
of the Assignment attached hereto as Exhibit B, indicating the person or
persons to whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall effect the
assignment within ten (10) days, and shall deliver to the assignee(s)
designated by Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Company and Holder any legal or equitable right, remedy
or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and Holder.
10. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of Nevada,
without giving effect to conflict of law provisions thereof.
11. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.
12. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to
or on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed,
until another address is designated in writing by the Company, to the
Attention: William Kettle or John Diehl, 1720 E. Garry Ave. #201, Santa Ana,
CA 92705; (949) 475-4500, Facsimile: (949) 475-4511 Notices or demands
pursuant to this Warrant to be given or made by the Company to or on Holder
shall be sufficiently given or made if sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed, to the address of
Holder set forth in the Company's records, until another address is
designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
4th day of October, 1999.
LMKI INC.
By: ________________________________
William Kettle, CEO
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: LMKI INC.
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of Common Stock (the "Common Stock") of LMKI INC..
a Nevada corporation (the "Company"), evidenced by the attached warrant (the
"Warrant"), and herewith makes payment of the exercise price with respect to
such shares in full, all in accordance with the conditions and provisions of
said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be
issued free of any restrictive legend, if appropriate, and a warrant
representing any unexercised portion hereof be issued, pursuant to the
Warrant in the name of the undersigned and delivered to the undersigned at
the address set forth below:
Dated: _________
________________________________________________________________________
Signature
_______________________________________________________________________
Print Name
________________________________________________________________________
Address
_______________________________________________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons
below named the right to purchase _______ shares of the Common Stock of LMKI
INC., evidenced by the attached Warrant and does hereby irrevocably
constitute and appoint _______________________ attorney to transfer the said
Warrant on the books of the Company, with full power of substitution in the
premises.
Dated: ______________________________
Signature
Fill in for new registration of Warrant:
___________________________________
Name
___________________________________
Address
___________________________________
Please print name and address of assignee
(including zip code number)
_______________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
________________________________________________________________________
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of October 4, 1999,
by and among LMKI INC., a corporation duly organized and existing under the
laws of the State of Nevada (the "Company") and Swartz Private Equity, LLC
(hereinafter referred to as "Swartz").
RECITALS:
WHEREAS, pursuant to the Company's offering ("Equity Line ") of up to
Thirty Five Million Dollars ($35,000,000), excluding any funds paid upon
exercise of the Warrants, of Common Stock of the Company pursuant to that
certain Investment Agreement (the "Investment Agreement") between the Company
and Swartz dated on or about October __, 1999, the Company has agreed to sell
and Swartz has agreed to purchase, from time to time as provided in the
Investment Agreement, shares of the Company's Common Stock for a maximum
aggregate offering amount of Thirty Five Million Dollars ($35,000,000); and
WHEREAS, pursuant to the terms of the Investment Agreement, the Company
has agreed, among other things, to issue to the Subscriber Commitment
Warrants, as defined in the Investment Agreement, to purchase a number of
shares of Common Stock, exercisable for five (5) years from their respective
dates of issuance.
TERMS:
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Issuance of Commitment Warrants. As compensation for entering into the
Equity Line, Swartz received a warrant convertible into 490,000 shares of the
Company's Common Stock, in the form attached hereto as Exhibit A (the
"Commitment Warrants").
2. Issuance of Additional Warrants. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or
become exchangeable for a smaller number of shares (a "Reverse Stock Split"),
then on the date of such Reverse Stock Split, and on each one year
anniversary (each, an "Anniversary Date") of the Reverse Stock Split
thereafter throughout the term of the Commitment Warrants, the Company shall
issue to Swartz additional warrants (the "Additional Warrants"), in the form
of Exhibit A, to purchase a number of shares of Common Stock, if necessary,
such that the sum of the number of Warrants and the number of Additional
Warrants issued to Swartz shall equal at least 1.3% of the number of shares
of Common Stock of the Company that are outstanding immediately following the
Reverse Stock Split or Anniversary Date, as applicable. The Additional
Warrants shall be exerciseable at the same price as the Commitment Warrants
and shall have a 5 year term.
3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada applicable to agreements made
in and wholly to be performed in that jurisdiction, except for matters
arising under the Act or the Securities Exchange Act of 1934, which matters
shall be construed and interpreted in accordance with such laws.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 4th day of October, 1999.
LMKI INC.
By: ________________________________
William Kettle, C.E.O.
1720 E. Garry Ave., Suite #201
Santa Ana, CA 92705
Telephone: (949) 475-4500
Facsimile: (949) 475-4511
SUBSCRIBER:
SWARTZ PRIVATE EQUITY, LLC.
By: ________________________________
Eric S. Swartz, Manager
1080 Holcomb Bridge Road
Bldg. 200, Suite 285
Roswell, GA 30076
Telephone: (770) 640-8130
Facsimile: (770) 640-7150
