| To: ChainSaw who started this subject | 7/3/2001 11:38:33 PM | | From: jmhollen | | | | <PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment - Property and equipment is stated at cost.
Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation and amortization are provided using the straight-line method over
the estimated useful lives of the related assets. Ranges of useful lives are as
follows:
Years
-----
Computer software................................ 3
Office and computer equipment.................... 3-5
Furniture and fixtures........................... 7
Leasehold improvements........................... 1-5
Vehicles......................................... 5
Intangible Assets - Intangible assets are recorded at cost and are
amortized on a straight-line basis over their estimated useful lives (generally
five years).
Impairment of Long-Lived Assets - Recoverability of intangible and other
long-lived assets is determined periodically by comparing the forecasted,
undiscounted net cash flows of the operations to which the assets relate to
their carrying amounts.
Adoption of New Accounting Pronouncements - In June 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The Company adopted SFAS No. 133 on January 1, 2001 as required. The adoption of
this accounting standard did not have an effect on the Company's financial
position or the results of its operations.
On December 3, 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements." SAB No. 101 provides
guidance on the recognition, presentation and disclosure of revenues in
financial statements filed with the SEC. The Company adopted SAB No. 101 in the
fourth quarter of 2000. The adoption of this bulletin did not have an effect on
the Company's financial position and its results of operations.
Reclassifications - Certain reclassifications have been made to the 1999
amounts to conform to the 2000 presentation.
51
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Supplemental Cash Flow Information - The following table sets forth certain
supplemental cash flow information for the year ended December 31, 2000, the
five months ended December 31, 1999 and the year ended July 31, 1999:
<TABLE>
<CAPTION>
Five Months
Year Ended Ended Year Ended
December December July 31,
31, 2000 31, 1999 1999
----------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the period for interest ................................... $ 37,591 $ 16,548 $ 53,721
Non-Cash Financing Activities
Conversion of related-party loans and accrued interest into preferred
stock ............................................................... $ 3,216,171 $ -- $ --
Acquisition of technology and related patent application through the
issuance of common stock ............................................ 993,103 -- --
Conversion of related party loans, notes payable, advances and related
accrued interest into common stock .................................. 2,024,537 500,000 --
Property and equipment acquired through the issuance of debt and trade
credit .............................................................. 2,696,004 488,393 --
Customer list acquired through the issuance of debt and common
stock ............................................................... 900,000 -- --
Dividends on convertible preferred stock, Series A payable in
shares of common stock .............................................. 195,736 -- --
Warrants granted in connection with the issuance of convertible notes
payable to related-parties .......................................... 83,317 -- --
Beneficial conversion feature of convertible notes payable to
related parties .................................................... 101,276 -- --
Liabilities to the former officers of Ebony & Gold Ventures, Inc.
forgiven in conjunction with the reverse merger ..................... 17,564 -- --
Conversion of accounts payable into long-term debt ...................... -- -- 406,514
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31,
-----------------------------
2000 1999
----------- -----------
Computer software .............................. $ 2,676,766 $ 314,491
Office and computer equipment .................. 1,272,830 263,241
Furniture and fixtures ......................... 229,642 149,934
Leasehold improvements ......................... 80,962 80,632
Vehicles ....................................... 66,916 --
----------- -----------
Total property and equipment .............. 4,327,116 808,298
Less accumulated depreciation .................. (613,621) (73,928)
----------- -----------
Property and equipment, net ................ $ 3,713,495 $ 734,370
=========== ===========
52
<PAGE>
4. PROPERTY AND EQUIPMENT (Continued)
The cost and related accumulated depreciation of leased office and computer
equipment which have been capitalized aggregate $1,041,000 and $144,000 at
December 31, 2000 and $109,000 and $1,000 at December 31, 1999,
respectively.
5. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 2000:
Acquired technology and patent application............ $ 993,103
Acquired customer list................................ 1,029,969
-----------
2,023,072
Less accumulated amortization......................... (85,831)
-----------
Intangible assets, net............................. $ 1,937,241
===========
Acquired Technology and Patent Application - In conjunction with the
Merger, the Company purchased technology and a related patent application from
Virtuosity Press LLC in exchange for 1,379,310 shares of common stock. The U.S.
patent office has not awarded the patent to the Company at December 31, 2000.
Accordingly, no amortization of the asset has been recorded in the accompanying
consolidated financial statements as of December 31, 2000. When approval of the
patent is received, the Company will determine the useful life of the patent,
and begin amortization of the purchase cost on a straight-line basis over the
estimated useful life.
Acquired Customer List. - On August 2, 2000, the Company entered into an
Asset Purchase Agreement (the "Agreement") with Copytron, an unrelated entity,
to purchase a customer list for a maximum aggregate purchase price of up to
$1,300,000. The terms of the agreement required aggregate cash payments of
$300,000, $100,000 at closing and $200,000 payable in three installments with
the last $100,000 due on October 9, 2000, and the $1.0 million balance of the
purchase price to be paid through the issuance of three tranches of the
Company's common stock. The Company paid the $100,000 at closing and one
additional $100,000 installment during 2000. However, given the Company's
financial position, the Company only paid $50,000 as of December 31, 2000
against the last installment and the balance of $50,000 owing on the last
installment remains unpaid as of June 25, 2001. Accordingly, the Company is in
default under the terms of this promissory note. On August 2, 2000, the Company
issued 238,298 shares of common stock with an aggregate value of $700,000 as
payment of the first tranche under the Agreement. On the one year anniversary of
the Agreement, and in the event that the fair value of the Company's common
stock is less than the fair market value, as defined in the Agreement, the
Company is obligated to pay, either in cash or in common stock at the
discretion of the Company, an amount, which when combined with the value of the
original issuance of the Company common stock has an aggregate value of
$700,000. The Company intends to satisfy this requirement by issuing additional
shares of common stock. As calculated using the April 23, 2001 fair market value
of the Company's common stock, the Company would be obligated to issue an
additional 720,000 shares. In addition, the Company will issue additional shares
of common stock on August 2, 2001 and 2002, if annual sales from customers
previously served by Copytron exceed $700,000, with each issuance having a then
current fair market value of up to $150,000. The customer list is being
amortized on a straight-line basis over an estimated life of 5 years.
6. NOTES PAYABLE AND OTHER DEBT (INCLUDING RELATED-PARTY FINANCINGS)
Notes payable and other debt consist of the following:
December 31,
--------------------------
2000 1999
----------- -----------
Capital lease obligations ......................... $ 883,105 $ 108,051
Ford Motor Credit Company ......................... 17,067 --
Notes payable to Verus Investments Holdings, Ltd. . 1,139,261 500,000
Note payable to Copytron, Inc. .................... 50,000 --
Notes payable to stockholders ..................... -- 2,953,759
Equipment supplier promissory note ................ -- 231,254
Advance under line of credit ...................... -- 95,539
Small Business Administration loans ............... -- 94,818
----------- -----------
Sub-total ..................................... 2,089,433 3,983,421
Less: Unamortized debt discount ............... (176,161) --
----------- -----------
Total Debt .................................... 1,913,272 3,983,421
Less: Amounts due to related parties .......... (1,013,100) (2,953,759)
Current portion of long-term debt ....... (888,587) (437,838)
----------- -----------
Long-term debt ................................. $ 11,585 $ 591,824
=========== ===========
53
<PAGE>
6. NOTES PAYABLE AND OTHER DEBT (INCLUDING RELATED PARTY FINANCINGS)
(Continued)
Capital lease obligations - The Company leases computer hardware and
software and certain office equipment under noncancelable leases expiring at
various dates through 2004. The Company has not complied with the payment
provisions within these leases and accordingly is in default at December 31,
2000. The Company has classified these leases within the current portion of
long- term debt in the accompanying consolidated balance sheet at December 31,
2000.
Scheduled future minimum lease payments, without giving effect to the event
of default, at December 31, 2000 are as follows:
Year Ending December 31,
-----------------------
2001 $ 748,606(1)
2002 183,212
2003 38,546
2004 19,249
----------
Total 989,613
Less amounts representing interest 106,508
----------
Present value of minimum lease payments $ 883,105
----------
(1) Includes $218,900 of payments in arrears
Ford Motor Credit Company - On March 2, 2000, the Company financed the
purchase of a motor vehicle. The loan is due in 48 monthly installments of $435,
including interest at an annual rate of 0.9%, with a final maturity on April 15,
2004. Approximately $5,482 is due within the next twelve (12) months and
included within the current portion of long-term debt in the accompanying
consolidated balance sheet at December 31, 2000. The balance of $11,585 is
included in long-term-debt.
Notes Payable to Verus Investments Holdings, Inc. - Subsequent to the
Merger, Verus Investments Holdings, Inc. ("Verus"), a stockholder and a British
Virgin Islands corporation controlled by a director of the Company, provided
$939,261 through a promissory note and $200,000 through convertible notes to
fund the Company's working capital needs. The notes are unsecured, carry
interest at a rate of 8% and 10%, respectively, per annum and mature December
31, 2001 and November 22, 2001, respectively. The $200,000 convertible notes are
convertible, at the option of the holder, into shares of common stock on the
earlier of 1) November 22, 2001 at a conversion rate of $2.35 per share or 2) at
anytime at a conversion rate of $2.94 per share when the average price, as
defined in the convertible note agreement, exceeds $3.675.
Since the fair market value of the Company's common stock was $2.56 on the
date the $200,000 convertible notes payable were issued and the notes could
ultimately be converted at a lower per share value, the convertible notes
contained a beneficial conversion feature. In accordance with Emerging Issues
Task Force Issue No. 00-27 "Application of Issue No. 98-5 to Certain Convertible
Instruments", the Company allocated $101,276 of the proceeds received to the
beneficial conversion feature which was recorded as a discount on the issuance
of the convertible notes and an increase to additional paid-in capital. The
discount will be amortized and recognized through a charge to interest expense
over the twelve month period ended November 22, 2001. None of the convertible
notes have been converted through December 31, 2000.
In addition, Verus was granted warrants to purchase 50,000 shares of common
stock at $2.94 per share in connection with the financing transactions. The fair
value of the warrants of $83,317 was recorded as a discount on the issuance of
the convertible notes and an increase in additional paid-in capital. The
discount will be amortized and recognized through a charge to interest expense
using the effective interest method through the convertible notes' maturity
date. The fair value of the warrants was determined using the Black-Scholes
option pricing model
54
<PAGE>
6. NOTES PAYABLE AND OTHER DEBT (INCLUDING RELATED PARTY FINANCINGS)
(continued)
based on a quoted market price of the common stock of $2.56 on the issuance
date; a risk-free interest rate of 6.5%; an expected warrant life of 3 years; no
dividends; and a volatility of 106%.
During 1999, the Company obtained two promissory notes from Verus in the
amount of $250,000 each, bearing an annual interest rate of 8%. The notes
payable, advances and accrued interest were converted into the Company's common
stock on March 31, 2000 in conjunction with the Merger.
Note Payable to Copytron, Inc. - In connection with the customer list
acquired from Copytron, the Company issued a $200,000 in promissory note payable
in three monthly installments through October 9, 2000. The Company did not pay
$50,000 against the last $100,000 installment of the promissory note as of
December 31, 2000 and, accordingly, the Company is in default under the terms of
the promissory note.
Note payable to Stockholders - The Company has been financed principally by
loans from its stockholders. At December 31, 1999, the outstanding notes payable
to stockholders aggregated $2,953,759, at an annual interest rate ranging from
8% to 8.25%, and were due at various dates through June 2000. In connection with
the Merger, the $2,953,759 in principal plus accrued interest was converted into
2,135,301 shares of the Company's Series A Preferred Stock.
Equipment Supplier Promissory Note - On April 15, 1999, the Company
converted $406,514 of amounts due to an equipment supplier into a promissory
note due December 15, 1999. At December 31, 1999, the Company was in default of
the promissory note. Accordingly, the note was classified and included within
current long-term debt at December 31, 1999. In April 2000, the Company repaid
the note, including the related accrued interest, with the proceeds from the
sale of common stock issued in conjunction with the Merger.
Line of Credit - The Company had a line of credit which allowed borrowings
up to $100,000. In April 2000, the Company repaid the line in full, including
the related accrued interest, with the proceeds from the sale of the common
stock issued in conjunction with the Merger, and the line of credit was
cancelled.
Small Business Administration Loans - In April 2000, the Company repaid the
loans in full, including the related accrued interest, with the proceeds from
the sale of common stock issued in conjunction with the Merger.
7. EQUITY
Stock Option and Restricted Stock Grants Under 2000 Stock Option Plan
The Company has a 2000 Stock Option Plan (the "Plan") pursuant to which
employees, officers, directors, consultants and advisors of the Company are
eligible to receive stock options, restricted stock, and other stock-based
awards, including stock appreciation rights. The maximum number of shares of
common stock that may be issued under the Plan is 5,000,000. The Plan is
administered by the Board of Directors, which has the authority to designate the
nature of the award, the number of shares and the vesting period, among other
terms. The stock options expire no later than ten years from the date of grant.
As of December 31, 2000, there were 2,883,853 shares of common stock available
for future issuance under the Plan.
During the year ended December 31, 2000, the Company granted options to
purchase 1,429,738 shares of its common stock at a weighted average exercise
price of $.66 to its employees. In addition, in connection with the Merger, the
Company adjusted the number and exercise price of certain unexercised options.
These adjustments were accounted for in accordance EIFT Issue No. 90-9, "Changes
to Fixed Employee Stock Option Plans as a Result of Equity Restructuring".
Certain options granted during 2000 include a cashless exercise feature allowing
the grantee to exercise the option and to utilize the appreciation in the value
of the common stock as payment for the shares received.
55
<PAGE>
7. EQUITY (Continued)
The Company accounts for stock options granted to employees and
non-employee directors in accordance with APB No. 25. Under APB No. 25,
compensation expense is recorded when fixed award options are granted with
exercise prices at less than the fair value of the common stock on the date of
grant. Options with a cashless exercise feature are accounted for as variable
award options. Variable award options are subject to remeasurement criteria and
could result in additional future compensation expense until such time as the
options are either exercised, forfeited or expire without exercise. For unvested
options, deferred compensation is recorded and amortized as stock-based
compensation expense over the future vesting period.
The Company recorded stock-based compensation expense of $390,602 relating
to the employee stock option grants in 2000. Additional stock-based compensation
expense will be recorded in the future as the deferred compensation of $16,115
at December 31, 2000 is amortized over the remaining three-year vesting period.
In 2000, the Company also awarded 341,581 shares of common stock under the
Plan at a weighted average exercise price of $.89 to certain employees and a
former employee. The Company recorded stock-based compensation expense of
$172,200 during the year ended December 31, 2000 in connection with these awards
based on the fair value of the shares at the dates of grant.
Stock option activity for the year ended December 31, 2000, the five months
ended December 31, 1999 and the year ended July 31, 1999 was as follows:
Weighted
Number of Average
Shares Exercise Price
--------- --------------
Outstanding at August 1, 1998 .................. -- $ --
Granted ..................................... 344,828 .29
Exercised ................................... -- --
Cancelled ................................... -- --
---------
Outstanding at July 31, 1999 ................... 344,828 .29
Granted ..................................... 517,242 .58
Exercised ................................... -- --
Cancelled ................................... -- --
---------
Outstanding at December 31, 1999 ............... 862,070 .46
Granted ..................................... 1,429,738 .66
Exercised ................................... -- --
Cancelled ................................... (517,242) (.39)
---------
Outstanding at December 31, 2000 ............... 1,774,566 .64
=========
Exercisable at December 31, 2000 ............... 1,273,565
Exercisable at December 31, 1999 ............... 344,828
Exercisable at July 31, 1999 ................... --
The weighted average fair value of options granted during the year ended
December 31, 2000, the five months ended December 31, 1999 and the year ended
July 31, 1999 was $.47, $.12, and $.16 respectively.
56
<PAGE>
7. EQUITY (continued)
The following table sets forth additional information regarding options
outstanding at December 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- --------------------------------
Exercise Number of Weighted Average Weighted Average Number of Weighted Average
Prices Shares Exercise Price Remaining Life - Years Shares Exercise Price
-------- --------- ---------------- ---------------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
$ .29 344,828 $ .29 8.50 344,828 $ .29
$ .58 862,070 $ .58 9.28 862,070 $ .58
$ .66 330,334 $ .66 9.17
$ 1.25 166,667 $ 1.25 9.00 -- --
$ 1.50 66,667 $ 1.50 9.25 66,667 $ 1.50
$ 2.88 4,000 $ 2.88 9.41 -- --
</TABLE>
Pro Forma Disclosure - The Company uses the intrinsic value method to
measure compensation expense associated with grants of employee stock options.
SFAS No. 123 requires the disclosure of pro forma information as if the Company
adopted the fair value method of accounting for grants to employees. For
purposes of the pro forma disclosures, the fair value of the options on their
grant date was measured using the Black-Scholes option pricing model.
Forfeitures are recognized as they occur.
Had compensation expense on the employee options been determined based on
the fair value method of accounting in accordance SFAS No. 123, the Company's
net loss and net loss per common share would have been as follows:
<TABLE>
<CAPTION>
Year Ended Five Months Ended Year Ended
December 31, 2000 December 31, 1999 July 31, 1999
----------------- ----------------- -------------
<S> <C> <C> <C>
As Reported:
-------------
Net loss attributable to common stockholders ... $ (8,194,279) $ (1,060,646) $ (2,182,431)
------------ ------------ ------------
Net loss per common share - basic and
diluted .................................... (.51) (.15) (.36)
------------ ------------ ------------
Pro Forma:
-------------
Net loss attributable to common stockholders ... $ (8,564,388) $ (1,102,717) $ (2,190,833)
------------ ------------ ------------
Net loss per common share - basic and
diluted .................................... (.53) (.16) (.36)
------------ ------------ ------------
</TABLE>
Key assumptions used to apply the Black-Scholes option-pricing model are as
follows:
<TABLE>
<CAPTION>
Year Ended Five Months Ended Year Ended
December 31, 2000 December 31, 1999 July 31, 1999
----------------- ----------------- -------------
<S> <C> <C> <C>
Risk-free interest rate............................ 6.0% 5.5% 5.5%
Expected life of the options....................... 1-3 Years 3 Years 3 Years
Expected volatility of underlying stock............ 100% 40.7% 40.7%
Dividends.......................................... None None None
</TABLE>
57 |
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| To: ChainSaw who started this subject | 7/3/2001 11:40:34 PM | | From: jmhollen | | | | <PAGE>
7. EQUITY (continued)
Common Stock Warrants
On March 31, 2000 in connection with the Merger, the Company issued
warrants to purchase 833,333 shares of the Company's common stock to certain
investors.
On August 31, 2000, the Company engaged an outside financial advisor. In
addition to a retainer of $15,000, the Company granted warrants to the financial
advisor to purchase 200,000 of the Company's common stock for $3.75 per share.
The Company recorded stock-based compensation expense of $402,143 representing
the fair value of the stock warrants at the date of grant. The fair value of the
stock warrants was measured using the Black-Scholes option pricing model, based
on a quoted market price of the common stock of $3.75 at the date of grant; a
risk-free interest rate of 5.84%; an expected warrant life of 2.5 years; no
dividends; and a volatility of 85%.
In November 2000, the Company issued warrants to purchase 50,000 shares of
common stock for $2.94 per share in conjunction with the issuance of convertible
debt (See Note 6).
At December 31, 2000, the weighted average exercise price of all
outstanding warrants issued was $1.98 per share.
8. WRITE-DOWN OF ACQUISITION DEPOSIT
During 2000, the Company entered into an agreement to acquire On Demand
Machine Company ("ODMC"). In connection with the proposed acquisition, the
Company deposited $300,000 with ODMC which was refundable in the event the
acquisition was not completed. The acquisition was not consummated and ODMC has
indicated to the Company that any return of the deposit will be in ODMC common
stock. Given the illiquid nature of ODMC's common stock, the Company provided
for a full valuation allowance against the common stock. A member of the
Company's management is a greater than 5% stockholder in ODMC.
9. COMMITMENTS AND CONTINGENCIES
Operating Leases - The Company leases office facilities and certain
equipment under noncancelable operating leases expiring at various dates through
October 2005. The leases are generally renewable at the option of the Company
for an additional five years. Total rent expense under these leases was
$161,956, $52,700 and $75,600 for the year ended December 31, 2000, the five
months ended December 31, 1999 and the year ended July 31, 1999, respectively.
At December 31, 2000, future minimum lease payments under these leases are as
follows:
Year Ending December 31,
-----------------------
2001 $ 170,486
2002 166,323
2003 161,268
2004 157,104
2005 124,374
---------
Total $ 779,555
=========
58
<PAGE>
9. COMMITMENTS AND CONTINGENCIES (continued)
Purchase of Copytron, Inc. Customer List - In connection with the purchase
of a customer list on August 2, 2000, the Company may be required to issue
additional shares of common stock (See Note 5).
Consulting Agreements -In connection with the Merger, the Company entered
into a consulting arrangement with an affiliate of Verus. The consulting
agreement provided for consulting fees of $15,000 per month for a two-year
period commencing March 31, 2000. The agreement was terminated effective
September 30, 2000. The Company paid $30,000 under this agreement, and the
balance owed of $60,000 is included in accounts payable at December 31, 2000.
Services Agreement - In March 1999, the Company entered into an agreement
with Xerox Corporation ("Xerox") to provide reproduction services. The term of
the agreement is 60 months and initially included base payment increases over
the term of the agreement. The agreement was renegotiated in May 2000. The total
amount of the initial base service payments is being charged to expense using
the straight-line method over the term of the agreement. The Company has
recorded a deferred credit to reflect the excess of the services expense over
cash payments since the inception of the agreement. Deferred lease credits of
$45,000 and $33,750 are reported within other accrued expenses and $101,250 and
$146,250 are reflected in deferred lease obligation within the accompanying
balance sheets at December 31, 2000 and 1999, respectively. One member of the
Company's Board of Directors serves in an executive capacity at Xerox. Future
scheduled minimum payments under the service agreement are as follows:
Year Ending December 31,
------------------------
2001 $ 894,276
2002 894,276
2003 894,276
2004 223,569
----------
Total $2,906,397
==========
At December 31, 2000, included in accounts payable are past due amounts on prior
service payments aggregating $455,627. On January 10, 2001, the Company
refinanced this amount into a promissory note (See Note 13). A stockholder has
personally guaranteed the Company's performance under the note.
Litigation - The Company was previously in litigation with Advizex, Inc.
for which a settlement was reached on June 5, 2001. The Company intends to enter
into a Consent Judgement which will require the Company to pay $120,000 in cash
beginning in July 2001 in equal installments over a twelve month period. In
addition, the Company will be required to issue common stock to Advizex with a
value of $120,000 based on the June 5, 2001 market price per share of $.73. The
Company has provided for the cost of this settlement at December 31, 2000.
The Company is party in various legal proceedings and potential claims
arising in the normal course of business. While the ultimate outcome of these
claims cannot be predicted, and assuming the Company raises adequate funding,
management does not believe, after consultation with counsel, the settlement of
these claims, if any, will have a material effect on the Company's financial
position or the results of its operations.
59
<PAGE>
10. INCOME TAXES
Significant components of the Company's deferred tax assets (liabilities)
are as follows:
December 31,
----------------------------
2000 1999
----------- -----------
Deferred tax assets (liabilities):
Net operating loss carryforwards .............. $ 5,017,000 $ 2,019,000
Allowance for sales returns ................... 31,000 37,000
Depreciation and amortization ................. (7,000) (8,000)
Accrued vacation .............................. 23,000 14,000
Accrued interest .............................. 7,000 146,000
Deferred credit ............................... 59,000 72,000
Amortization of the customer list ............ 23,000 --
----------- -----------
5,153,000 2,280,000
Less valuation allowance ........................ (5,153,000) (2,280,000)
----------- -----------
Net deferred tax assets ...................... $ -- $ --
=========== ===========
The increase in the Company's valuation allowance for the periods presented
results principally from the increase in the Company's deferred tax assets
related to the operating losses. The Company has established a valuation
allowance at December 31, 2000 and 1999 because of uncertainties regarding its
ability to generate sufficient taxable income in the applicable tax jurisdiction
to utilize the net operating loss carryforwards during the carryforward period
and to realize the full benefit from future tax deductions.
The Company has federal and state tax net operating loss carryforwards
available for future periods of approximately $12,542,000. The federal tax net
operating loss carryforwards expire beginning in 2011 through 2020 and state tax
net operating loss carryforwards expire beginning in 2002 through 2005. As a
result of the changes in the ownership of the Company, the Company's net
operating loss carryovers and certain other tax attributes may be limited under
Section 382 of the International Revenue Code.
A reconciliation of the applicable U.S. statutory tax rate to the effective
tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended Five Months Ended Year Ended
December 31, 2000 December 31, 1999 July 31, 1999
----------------- ------------------ -------------
<S> <C> <C> <C>
Federal statutory rate............................ 34% 34% 34%
State tax, net of federal impact.................. 6 6 6
Stock-based compensation expense ................. (9) -- --
Increase in valuation allowance .................. (31) (40) (40)
---- ---- ----
Effective tax rate................................ -- % -- % -- %
==== ==== ====
</TABLE>
60
<PAGE>
11. STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred Stock
At December 31, 2000, the Company had authorized 5,000,000 shares of
preferred stock, issuable in one or more series. Of the total shares issued at
December 31, 2000, 2,135,301 have been designated as convertible preferred
stock, Series A ("Series A") and 1,100,000 have been designated as convertible
preferred stock, Series B ("Series B").
Holders of the Series A are entitled to one vote for every three and one
half shares held on all matters submitted to a vote of the stockholders, except
that holders of a majority of the shares of Series A must approve changes to the
Certificate of Designation for the Series A and issuances of securities with
rights senior to the Series A. Dividends accrue daily at a rate of 8% of the
original issue price per annum and are settled by the issuance of shares of
common stock on January 1 of each succeeding year. In the event of liquidation,
the holders of the Series A shall receive, before any payments to the common
stock holders and the holders of the Series B, the original issue price per
share plus any accrued but unsettled dividends. Holders of the Series A may
convert the shares into common stock at any time at a rate of three and one half
shares of Series A for one share of common stock. On January 1, 2001, the
Company issued 113,608 shares for stock dividends.
Holders of the Series B are entitled to six votes for every one share held
on all matters submitted to a vote of the stockholders, except that holders of a
majority of the Series B must approve changes to the Certificate of Designation
for the Series B and issuances of securities with rights senior to the Series B.
No dividends are payable on the Series B. In the event of liquidation, the
holders of the Series B shall receive, before any payments to the common stock
holders, the original issue price per share, as determined by the Company's
Board of Directors. Holders of the Series B were permitted to convert the shares
into shares of common stock at any time. All shares of Series B were converted
into shares of common stock on March 31, 2001 in accordance with Series B
agreement. The conversion rate is one share of Series B for one share of common
stock.
Treasury Stock
In conjunction with the Merger, the Company's outstanding treasury stock
was retired.
12. TRANSACTIONS WITH RELATED PARTIES
The Company's transactions with Verus and its affiliates, Xerox, members of
management and significant stockholders described in these notes to the
financial statements are related party transactions in accordance with SFAS No.
57, "Related Party Disclosures".
13. SUBSEQUENT EVENTS
On January 1, 2001, the Company issued 113,608 common stock shares to
settle the $195,736 stock dividend accrued at December 31, 2000.
On January 5, 2001, the Company borrowed $55,000 from two of its officers.
These promissory notes are unsecured, bear interest at 5% per annum and were due
February 5, 2001. As of June 25, 2001, $46,000 has been repaid.
61
<PAGE>
13. SUBSEQUENT EVENTS (continued)
On January 10, 2001, the Company refinanced $455,627 of accounts payable
due to Xerox under the services agreement described in Note 9 with a promissory
note. The note is payable in monthly installments of $41,339, including interest
at a rate of 16% per annum, beginning on February 15, 2001. The final payment
will be due on January 10, 2002, unless the Company defaults under the terms of
the note, in which case, the note becomes fully due and payable. The Company has
not made the required payments under the promissory note in 2001 and,
accordingly, the Company is in default of the note. A stockholder has personally
guaranteed the Company's performance under this note.
On January 19, 2001 the Company borrowed $40,000 from two additional
officers. These promissory notes are unsecured, are due February 19, 2001, and
are payable with interest at a rate of 5% per annum. The notes have not been
repaid.
On February 8, 2001, the Company sold 40,000 shares of its common stock to
an accredited investor for $20,000.
On February 13, 2001 the Company borrowed $100,000 from a stockholder and
officer of the Company due and payable on June 30, 2001 with interest at 8% per
annum. This borrowing is unsecured.
On March 15, 2001, the Company offered to issue 500,000 shares of its
common stock to Dutchess Advisors, Ltd. ("Dutchess") as consideration for their
advisory services in connection with the Company's current efforts to secure
additional financing through a private placement. The shares would be issued
pursuant to Regulation D under the Securities Act, as amended. Of the total
shares that could be issued, 100,000 shares contain piggyback registration
rights. The Company rescinded the offer on June 22, 2001 and no shares have been
offered to Dutchess. An additional finder's fee may be paid in cash to Dutchess
upon completion of a private placement transaction.
On March 17, 2001, the Company entered into a factoring agreement covering
the majority of the Company's trade accounts receivable. Fees for these services
are expected to average 6% of amounts factored.
On March 22, 2001, the Company entered into an equity line of credit with a
private investor. Under the terms of the agreement, upon the effective
registration of the Company's common stock or from other available free trading
shares, the investor will purchase up to $10 million of such common stock over
the course of 36 months from the date of the agreement at an amount equal to 91%
of the market price as defined therein. The amount of shares to be put to the
investor by the Company is subject to certain average daily trading volumes for
the Company's common stock in the U.S. financial markets. In connection with
this agreement, the Company will issue 250,000 shares of common stock for no
consideration, to an affiliate of this investor.
14. NET LOSS PER SHARE
A reconciliation of net loss and weighted-average common shares outstanding
for purposes of calculating basic and diluted net income per share is as
follows:
<TABLE>
<CAPTION>
Five Months
Year Ended Ended
December 31, December 31, Year Ended
2000 1999 July 31, 1999
------------ ------------ -------------
<S> <C> <C> <C>
NUMERATOR:
Net loss ............................................. $ (7,998,543) $ (1,060,646) $ (2,182,431)
Preferred stock dividends ............................ (195,736) -- --
------------ ------------ ------------
Net loss attributable to common stockholders ......... $ (8,194,279) $ (1,060,646) $ (2,182,431)
DENOMINATOR:
Weighted average number of common shares outstanding:
Common Stock ....................................... 16,282,674 6,921,001 6,016,552
Effect of potentially dilutive common shares........ -- -- --
------------ ------------ ------------
Total ........................................... 16,282,674 6,921,001 6,016,552
------------ ------------ ------------
</TABLE>
62
</TEXT>
</DOCUMENT>
NUMBER SHARES
BTC 0338 booktech.com, inc. SPECIMEN
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
54,523,810 SHARES COMMON STOCK AUTHORIZED, $.00042 PAR VALUE
CUSIP 098583 10 7
SEE REVERSE FOR
CERTAIN DEFINITIONS
This certifies that
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
============================== booktech.com, inc. ==============================
transferable only on the books of the Corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are subject to the laws of the
State of Nevada, and to the Certificate of Incorporation and Bylaws of the
Corporation, as now or hereafter amended. This certificate is not valid unless
countersigned by the Transfer Agent.
Dated
/s/ illegible booktech.com, inc. /S/ TED J. BERNHARDT
------------------ CORPORATE SEAL -----------------------
PRESIDENT NEVADA SECRETARY
Copyright S.C.B. Co.
Copyright SECURITY-COLUMBIAN UNITED STATES BANKNOTE CORPORATION
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, NJ)
TRANSFER AGENT AND REGISTRAR
By SPECIMEN
AUTHORIZED OFFICER |
| | booktech.com BTC - AMEX | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last Read |
|
| To: ChainSaw who started this subject | 7/3/2001 11:41:55 PM | | From: jmhollen | | | | <PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with the right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ........Custodian...........
(Cust) (Minor)
Act ................
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------
---------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________ , Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________
X ______________________________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions.)
</TEXT>
</DOCUMENT>
CUMMINGS PROPERTIES 7990453-AWT-A
STANDARD FORM
COMMERCIAL LEASE
In consideration of the covenants herein contained, Cummings Properties/LLC
hereinafter called LESSOR, does hereby lease to Book Tech. Inc. (a MA corp.),
605 Main Street, Winchester, MA 01890 hereinafter called LESSEE, the following
described premises, hereinafter called the leased premises: approximately 10,685
square feet at 42 and 43 Cummings Park, Woburn, MA 01801.
TO HAVE AND HOLD the leased premises for a term of five (5) years
commencing at noon on September 15, 1999 and ending at noon on September 14,
2004 unless sooner terminated as herein provided. LESSOR and LESSEE now covenant
and agree that the following terms and conditions shall govern this lease during
the term hereof and for such further time as LESSEE shall hold the leased
premises.
1. RENT. LESSEE shall pay to LESSOR base rent at the rate of one hundred
thirty three thousand three hundred forty eight (133,348) U.S. dollars per year,
drawn on a U.S. bank, payable in advance in monthly installments of $11,112.33
on the first day in each calendar month in advance, the first monthly payment to
be made upon LESSEE's execution of this lease, including payment in advance of
appropriate fractions of a monthly payment for any portion of a month at the
commencement or end of said lease term. All payments shall be made to LESSOR or
agent at 200 West Cummings Park, Woburn, Massachusetts 01801, or at such other
place as LESSOR shall from time to time in writing designate. If the "Cost of
Living" has increased as shown by the Consumer Price Index (Boston,
Massachusetts, all items, all urban consumers), U.S. Bureau of Labor Statistics,
the amount of base rent due during each calendar year of this lease and any
extensions thereof shall be annually adjusted in proportion to any increase in
the Index. All such adjustments shall take place with the rent due on January 1
of each year during the lease term with the first such adjustment on January 1,
2001. The base month from which to determine the amount of each increase in the
Index shall be January 1999, which figure shall be compared with the figure for
November 2000, and each November thereafter to determine the percentage increase
(if any) in the base rent to be paid during the following calendar year. In the
event that the Consumer Price Index as presently computed is discontinued as a
measure of "Cost of Living" changes, any adjustment shall then be made on the
basis of a comparable index then in general use.
2. SECURITY DEPOSIT. LESSEE shall pay to LESSOR a security deposit in the
amount of twenty two thousand (22,000) U.S. dollars upon the execution of this
lease by LESSEE, which shall be held as security for LESSEE's performance as
herein provided and refunded to LESSEE without interest at the end of this
lease, subject to LESSEE's satisfactory compliance with the conditions hereof.
LESSEE may not apply the security deposit to payment of the last month's rent.
In the event of any default or breach of this lease by LESSEE, LESSOR may
immediately apply the security deposit first to any unamortized improvements
completed for LESSEE's occupancy, then to offset any outstanding invoice or
other payment due to LESSOR, with the balance applied to outstanding rent. If
all or any portion of the security deposit is applied to cure a default or
breach during the term of the lease, LESSEE shall be responsible for restoring
said deposit forthwith, and failure to do so shall be considered a substantial
default under the lease. LESSEE's failure to remit the full security deposit or
any portion thereof when due shall also constitute a substantial lease default.
Until such time as LESSEE pays the security deposit and first month's rent,
LESSOR may declare this lease null and void for failure of consideration.
3. USE OF PREMISES. LESSEE shall use the leased premises only for the
purpose of executive and administrative offices and business printing, and all
other lawful uses necessary and incidental to the operation of LESSEE's
business.
4. ADDITIONAL RENT. LESSEE shall pay to LESSOR as additional rent a
proportionate share (based on square footage leased by LESSEE as compared with
the total leaseable square footage of the building of which the leased premises
are a part) of any increase in the real estate taxes levied against the land and
building of which the leased premises are a part (hereinafter called the
building), whether such increase is caused by an increase in the tax rate, or
the assessment on the property, or a change in the method of determining real
estate taxes. LESSEE shall make payment within thirty (30) days of written
notice from LESSOR that such increased taxes are payable, and any additional
rent shall be prorated should the lease terminate before the end of any tax
year. The base from which to determine the amount of any increase in taxes shall
be the rate and the assessment in effect as of July 1,1999.
5. UTILITIES. LESSOR shall provide equipment per LESSOR's building standard
specifications to heat the leased premises in season and to cool all areas
[Insert addendum 5a] between May 1 and November 1 [insert addendum 5b]. LESSEE
shall pay all charges for utilities used on the leased premises, including
electricity, gas, oil, water and sewer. LESSEE shall pay the utility provider or
LESSOR, as applicable, for all such utility charges as determined by separate
meters serving the leased premises and/or as a proportionate share of the
utility charges for the building if not separately metered. LESSEE shall also
pay LESSOR a proportionate share of any [insert addendum 5c] fees and charges
relating in any way to utility use at the building. No plumbing, construction or
electrical work of any type shall be done without LESSOR's prior written
approval [insert addendum 5d] and LESSEE obtaining the appropriate municipal
permit.
<PAGE>
6. COMPLIANCE WITH LAWS. LESSEE acknowledges that no trade, occupation,
activity or work shall be conducted in the leased premises or use made thereof
which may be unlawful, improper, noisy, offensive, or contrary to any applicable
statute, regulation, ordinance or bylaw. LESSEE shall keep all employees working
in the leased premises covered by Worker's Compensation Insurance and shall
obtain any licenses and permits necessary for LESSEE's occupancy. LESSEE shall
be responsible for causing the leased premises and any alterations by LESSEE
which are allowed hereunder to be in full compliance with any applicable
statute, regulation, ordinance or bylaw.
7. FIRE, CASUALTY, EMINENT DOMAIN. Should a substantial portion of the
leased premises, or of the property of which they are a part, be substantially
damaged by fire or other casualty, or be taken by eminent domain, LESSOR may
elect to terminate this lease. When such fire, casualty, or taking renders the
leased premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and LESSEE may elect to terminate
this lease if: (a) LESSOR fails to give written notice within thirty (30) days
of intention to restore the leased premises, or (b) LESSOR fails to restore the
leased premises to a condition substantially suitable for their intended use
within ninety (90) days of said fire, casualty or taking. LESSOR reserves all
rights for damages or injury to the leased premises for any taking by eminent
domain, except for damage to LESSEE's property or equipment [insert addendum
7a].
8. FIRE INSURANCE. LESSEE shall not permit any use of the leased premises
which will adversely affect or make voidable any insurance on the property of
which the leased premises are a part, or on the contents of said property, or
which shall be contrary to any law or regulation from time to time established
by the Insurance Services Office (or successor), local Fire Department, LESSOR's
insurer, or any similar body. LESSEE shall on demand reimburse LESSOR, and all
other tenants, all extra insurance premiums caused by LESSEE's use of the leased
premises. LESSEE shall not vacate the leased premises or permit same to be
unoccupied other than during LESSEE's customary non-business days or hours
[insert addendum 8a].
9. MAINTENANCE OF PREMISES. LESSOR will be responsible for all structural
maintenance of the leased premises [insert addendum 9a] and for the normal
daytime maintenance of all space heating and cooling equipment, sprinklers,
doors, locks, plumbing, and electrical wiring, but specifically excluding damage
caused by the careless, malicious, willful, or negligent acts of LESSEE or
[insert addendum 9b], chemical, water or corrosion damage from any source
[insert addendum 9c], and maintenance of any non "building standard" leasehold
improvements. LESSEE agrees to maintain at its expense all other aspects of the
leased premises in the same condition as they are at the commencement of the
term or as they may be put in during the term of this lease, normal wear and
tear [insert addendum 9d], other taking by eminent domain and damage by fire or
casualty only excepted, and whenever necessary, to replace light bulbs, plate
glass and other glass therein, acknowledging that the leased premises are now in
good order and the light bulbs and glass whole [insert addendum 9e]. LESSEE will
properly control or vent all solvents, degreasers, smoke, odors, etc. and shall
not cause e the area surrounding the leased premises to be in anything other
than a neat and clean condition, depositing all waste in appropriate
receptacles. LESSEE shall be solely responsible for any damage to plumbing
equipment, sanitary lines, or any other portion of the building which results
from the discharge or use of any acid or corrosive substance by LESSEE. LESSEE
shall not permit the leased premises to be overloaded, damaged, stripped or
defaced, nor suffer any waste, and will not keep animals within the leased
premises. If the leased premises include any wooden mezzanine type space, the
floor capacity of such space is suitable only for office use, light storage or
assembly work. LESSEE will protect any carpet with plastic or masonite chair
pads under any rolling chairs. Unless heat is provided at LESSOR's expense,
LESSEE shall maintain sufficient heat to prevent freezing of pipes or other
damage. Any increase in air conditioning equipment or electrical capacity or any
installation or maintenance of equipment which is necessitated by some specific
aspect of LESSEE's use of the leased premises shall be LESSEE's sole
responsibility, at LESSEE's expense and subject to LESSOR's prior written
consent. All maintenance provided by LESSOR shall be during LESSOR's normal
business hours [insert addendum 9f].
10. ALTERATIONS. LESSEE shall not make structural alterations or additions
of any kind to the leased premises, but may make nonstructural alterations
provided LESSOR consents thereto in writing [insert addendum 10a]. All such
allowed alterations shall be at LESSEE's expense and shall conform with LESSOR's
[insert addendum 10b] construction specifications. If LESSOR or LESSOR's agent
provides any services or maintenance for LESSEE in connection with such
alterations or otherwise under this lease, any just invoice will be promptly
paid. LESSEE shall not permit any mechanics' liens, or similar liens, to remain
upon the leased premises in connection with work of any character performed or
claimed to have been performed at the direction of LESSEE and shall cause any
such lien to released [insert addendum 10c] or removed forthwith without cost to
LESSOR. Any alterations or additions shall become part of the leased premises
and the property of LESSOR. Any alterations completed by LESSOR or LESSEE shall
be LESSOR's "building standard" unless noted otherwise. LESSOR shall have the
right at any time to change the arrangement of parking areas, stairs, walkways
or other common areas of the building [insert addendum 10d].
11. ASSIGNMENT OR SUBLEASING. LESSEE shall not assign this lease or sublet
or allow any other firm or individual to occupy the whole or any part of the
leased premises without LESSOR's prior written consent [insert addendum 11a].
Notwithstanding such assignment or subleasing, LESSEE shall remain liable to
LESSOR for the
<PAGE>
payment of all rent and for the full performance of the covenants and conditions
of this lease. LESSEE shall pay LESSOR promptly for legal and administrative
expenses incurred by LESSOR in connection with any consent requested hereunder
by LESSEE [insert addendum 11b].
12. SUBORDINATION. This lease shall be subject and subordinate to any and
all mortgages and other instruments in the nature of a mortgage, now or at any
time hereafter, and LESSEE shall, when requested, promptly execute and deliver
such written instruments as shall be necessary to show the subordination of this
lease to said mortgages or other such instruments in the nature of a mortgage
[insert addendum 12a].
13. LESSOR'S ACCESS. LESSOR or agents of LESSOR may at any reasonable time
enter to view the leased premises, to make repairs and alterations as LESSOR
should elect to do for the leased premises, the common areas or any other
portions of the building, to make repairs which LESSEE is required but has
failed to do, and to show the leased premises to others. [insert addendum 13a].
14. SNOW REMOVAL. The plowing of snow from all roadways and unobstructed
parking areas shall be at the sole expense of LESSOR. The control of snow and
ice on all walkways, steps and loading areas serving the leased premises and all
other areas not readily accessible to plows shall be the sole responsibility of
LESSEE. Notwithstanding the foregoing, however, LESSEE shall hold LESSOR and
OWNER harmless from any and all claims by LESSEE's agents, representatives,
employees, callers or invitees for damage or personal injury resulting in any
way from snow or ice on any area serving the leased premises [insert addendum
14a].
15. ACCESS AND PARKING. LESSEE shall have the right without additional
charge to use parking facilities provided for the leased premises in common with
others entitled to the use thereof. Said parking areas plus any stairs,
corridors, walkways, elevators or other common areas (hereinafter collectively
called the common areas) shall in all cases be considered a part of the leased
premises when they are used by LESSEE or LESSEE's employees, agents, or
invitees. LESSEE will not obstruct in any manner any portion of the building or
the walkways or approaches to the building, and will conform to all rules and
regulations now or hereafter made by LESSOR for parking, and for the care, use,
or alteration of the building, its facilities and approaches. LESSEE further
warrants that LESSEE will not permit any employee to violate this or any other
covenant or obligation of LESSEE. No unattended parking will be permitted
between 7:00 PM and 7:00 AM without LESSOR's prior written approval, and from
December 1 through March 31 annually, such parking shall be permitted only in
those areas specifically designated for assigned overnight parking. Unregistered
or disabled vehicles, or storage trailers of any type, may not be parked at any
time. LESSOR may tow, at LESSEE's sole risk and expense, any misparked vehicle
belonging to LESSEE or LESSEE's agents, employees, invitees or callers, at any
time. LESSOR shall not be responsible for providing any security services for
the leased premises.
16. LIABILITY. LESSEE shall be solely responsible as between LESSOR and
LESSEE for deaths or personal injuries to all persons whomsoever occurring in or
on the leased premises (including any common areas that are [insert addendum
16c] considered part of the leased premises hereunder) and damage to property to
whomsoever belonging arising out of the use, control, condition or occupation of
the leased premises by LESSEE; and LESSEE agrees to indemnify and save harmless
LESSOR and OWNER from any and all liability, including but not limited to costs,
expenses, damages, causes of action, claims, judgments and attorney's fees
caused by or in any way growing out of any matters aforesaid, except for death,
personal injuries or property damage [insert addendum 16a] resulting from the
negligence [insert addendum 16b] LESSOR.
17. INSURANCE. LESSEE will secure and carry at its own expense a commercial
general liability policy insuring LESSEE, LESSOR and OWNER against any claims
based on bodily injury (including death) or property damage arising out of the
condition of the leased premises (including any common areas that are considered
part of the leased premises hereunder) or their use by LESSEE, such policy to
insure LESSEE, LESSOR and OWNER against any claim up to One Million (1,000,000)
Dollars in the case of any one accident involving bodily injury (including
death), and up to One Million (1,000,000) Dollars against any claim for damage
to property. LESSOR and OWNER shall be included in each such policy as
additional insureds using ISO Form CG 20 26 11 85 or some other form approved by
LESSOR. LESSEE will file with LESSOR prior to occupancy certificates and any
applicable riders or endorsements showing that such insurance is in force, and
thereafter will file renewal certificates prior to the expiration of any such
policies. All such insurance certificates shall provide that such policies shall
not be cancelled without at least ten (10) days prior written notice to each
insured. In the event LESSEE shall fail to provide or maintain such insurance at
any time during the term of this lease, then LESSOR may elect to contract for
such insurance at LESSEE's expense.
18. SIGNS. LESSOR authorizes, and LESSEE at LESSEE's expense agrees to
erect promptly upon commencement of this lease, signage for the leased premises
in accordance with LESSOR's building standards for style, size, location, etc.
LESSEE shall obtain the prior written consent of LESSOR before erecting any sign
on the leased premises, which consent shall include approval as to size,
wording, design and location, [insert addendum 18a]. LESSOR may remove and
dispose of any sign not approved, erected or displayed in conformance with this
lease.
19. BROKERAGE. LESSEE warrants and represents to LESSOR that LESSEE has
dealt with no broker or third person with respect to this lease, [insert
addendum 19a], and LESSEE agrees to indemnify LESSOR against any
<PAGE>
brokerage claims arising by virtue of this lease. LESSOR warrants and represents
to LESSEE that LESSOR has employed no exclusive broker or agent in connection
with the letting of the leased premises [insert addendum 19b].
20. DEFAULT AND ACCELERATION OF RENT. In the event that: (a) any assignment
for the benefit of creditors, trust mortgage, receivership or other insolvency
proceeding shall be made or instituted with respect to LESSEE or LESSEE's
property [insert addendum 20a]; (b) LESSEE shall default in the observance or
performance a of any of LESSEE's covenants, agreements, or obligations
hereunder, other than substantial monetary payments as provided below, and such
default shall not be corrected within [insert addendum 20b] after written notice
thereof [insert addendum 20c]; or (c) LESSEE vacates the leased premises [insert
addendum 20d], then LESSOR shall have the right thereafter, while such default
continues and without demand or further notice, to re-enter and take possession
of the leased premises, to declare the term of this lease ended, and to remove
LESSEE's effects, without being guilty of any manner of trespass, and without
prejudice to any remedies which might be otherwise used for arrears of rent or
other default or breach of the lease. If LESSEE shall default in the payment of
the security deposit, rent, taxes, substantial invoice from LESSOR or LESSOR's
agent for goods and/or services or other sum herein specified, and such default
shall continue for ten (10) days after written notice thereof, and, because both
parties agree that nonpayment of said sums when due is a substantial breach of
the lease, and, because the payment of rent in monthly installments is for the
sole benefit and convenience of LESSEE, then in addition to the foregoing
remedies the entire balance of rent which is due hereunder shall become
immediately due and payable as liquidated damages. LESSOR, without being under
any obligation to do so and without thereby waiving any default, may remedy same
for the account and at the expense of LESSEE [insert addendum 20e]. If LESSOR
pays or incurs any obligations for the payment of money in connection therewith,
such sums paid or obligations incurred plus interest and costs, shall be paid to
LESSOR by LESSEE as additional rent. Any sums received by LESSOR from or on
behalf of LESSEE at any time shall be applied first to any unamortized
improvements completed for LESSEE's occupancy, then to offset any outstanding
invoice or other payment due to LESSOR, with the balance applied to outstanding
rent. LESSEE agrees to pay reasonable attorney's fees and/or administrative
costs incurred by LESSOR in enforcing any or all obligations of LESSEE under
this lease at any time. LESSEE shall pay LESSOR interest at the rate of eighteen
(18) percent per annum on any payment from LESSEE to LESSOR which is past due.
21. NOTICE. Any notice from LESSOR to LESSEE relating to the leased
premises or to the occupancy thereof shall be deemed duly served when served by
constable, or sent to the leased premises by certified mail, return receipt
requested, postage prepaid, addressed to LESSEE. Any notice from LESSEE to
LESSOR relating to the leased premises or to the occupancy thereof shall be
deemed duly served when served by constable, or delivered to LESSOR by certified
mail, return receipt requested, postage prepaid, addressed to LESSOR at 200 West
Cummings Park, Woburn, MA 01801 or at LESSOR's last designated address. No oral
notice or representation shall have any force or effect. Time is of the essence
in the service of any notice.
22. OCCUPANCY. In the event that LESSEE takes possession of said leased
premises prior to the start of the lease term, LESSEE will perform and observe
all of LESSEE's covenants from the date upon which LESSEE takes possession
except the obligation for the payment of extra rent for any period of less than
one month. In the event that LESSEE continues to occupy or control all or any
part of the leased premises after the agreed [insert addendum 22a] of this lease
without the written permission of LESSOR, then LESSEE shall be liable to LESSOR
for any and all loss, damages or expenses incurred by LESSOR, and all other
terms of this lease shall continue to apply except that rent shall be due in
full monthly installments at a rate of one hundred fifty (150) percent of that
which would otherwise be due under this lease, it being understood between the
parties that such extended occupancy is as a tenant at sufferance and is solely
for the benefit and convenience of LESSEE and as such has greater rental value.
LESSEE's control or occupancy of all or any part of the leased premises beyond
noon on the last day of any monthly rental period shall constitute LESSEE's
occupancy for an entire additional month, and increased rent as provided in this
section shall be due and payable immediately in advance. LESSOR's acceptance of
any payments from LESSEE during such extended occupancy shall not alter LESSEE's
status as a tenant at sufferance.
23. FIRE PREVENTION. LESSEE agrees to use every reasonable precaution
against fire and agrees to provide and maintain approved, labeled fire
extinguishers, emergency lighting equipment, and exit signs and complete any
other modifications within the leased premises as required or recommended by the
Insurance Services Office (or successor organization), OSHA, the local Fire
Department, or any similar body.
24. OUTSIDE AREA. Any goods, equipment, or things of any type or
description held or stored in any common area without LESSOR's prior written
consent shall be deemed abandoned and may be removed by LESSOR at LESSEE's
expense without notice. LESSEE shall maintain a building standard size dumpster
in a location approved by LESSOR, which dumpster shall be provided and serviced
at LESSEE's expense by whichever disposal firm may from time to time be
designated by LESSOR. Alternatively, if a shared dumpster or compactor is
provided by LESSOR, LESSEE shall pay its proportionate share of any costs
associated therewith.
25. ENVIRONMENT. LESSEE will so conduct and operate the leased premises as
not to interfere in any way with the use and enjoyment of other portions of the
same or neighboring buildings by others by reason of odors, smoke, exhaust,
smells, noise, pets, accumulation of garbage or trash, vermin or other pests, or
otherwise, and will at its expense employ a professional pest control service if
necessary. LESSEE agrees to maintain efficient and effective devices for
preventing damage to heating equipment from solvents, degreasers, cutting oils,
propellants, etc. which |
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may be present at the leased premises. No hazardous materials or wastes shall be
stored, disposed of, or allowed to remain at the leased premises at any time,
and LESSEE shall be solely responsible for any and all corrosion or other damage
associated with the use, storage and/or disposal of same by LESSEE.
26. RESPONSIBILITY. [insert addendum 26a] Neither LESSOR nor OWNER shall be
held liable to anyone for loss or damage caused in any way by the use, leakage,
seepage or a escape of water from any source, or for the cessation of any
service rendered customarily to said premises or buildings, or agreed to by the
terms of this lease, due to any accident, the making of repairs, alterations or
improvements, labor difficulties, weather conditions, mechanical breakdowns,
trouble or scarcity in obtaining fuel, electricity, service or supplies from the
sources from which they are usually obtained for said building, or any cause
beyond LESSOR's immediate control.
27. SURRENDER. LESSEE shall at the termination of this lease remove all of
LESSEE's goods and effects from the leased premises. LESSEE shall deliver to
LESSOR the leased premises and all keys and locks thereto, all fixtures and
equipment connected therewith, and all alterations, additions and improvements
made to or upon the leased premises, whether completed by LESSEE, LESSOR or
others, including but not limited to any offices, [insert addendum 27a]
partitions, window blinds, floor coverings (including computer floors), plumbing
and plumbing fixtures, air conditioning equipment and ductwork of any type,
exhaust fans or heaters, water coolers, burglar alarms, telephone wiring, air or
gas distribution piping, compressors, overhead cranes, hoists, trolleys or
conveyors, counters, all electrical work, including but not limited to lighting
fixtures of any type, wiring, conduit, EMT, transformers, distribution panels,
bus ducts, raceways, outlets and disconnects, and furnishings or equipment which
have been bolted, welded, nailed, screwed, glued or otherwise attached to any
wall, floor, ceiling, roof, pavement or ground, or which have been directly
wired to any portion of the electrical system or which have been plumbed to the
water supply, drainage or venting systems serving the leased premises. LESSEE
shall deliver the leased premises sanitized from any chemicals or other
contaminants, and broom clean and in the same condition as they were at the
commencement of this lease or any prior lease between the parties for the leased
premises, or as they were modified during said term with LESSOR's written
consent reasonable wear and tear, [insert addendum 27b] and damage by fire or
other casualty only excepted. In the event of LESSEE's failure to remove any of
LESSEE's property from the leased premises upon termination of the lease, LESSOR
is hereby authorized, without liability to LESSEE for loss or damage thereto,
and at the sole risk of LESSEE, to remove and store any such property at
LESSEE'S expense, or to retain same under LESSOR's control, or to sell at public
or private sale (without notice), any or all of the property not so removed and
to apply the net proceeds of such sale to the payment of any sum due hereunder,
or to destroy such abandoned property. In no case shall the leased premises be
deemed surrendered to LESSOR until the termination date provided herein or such
other date as may be specified in a written agreement between the parties,
notwithstanding the delivery of any keys to LESSOR.
28. GENERAL. (a) The invalidity or unenforceability of any provision of
this lease shall not affect or render invalid or unenforceable any other
provision hereof. (b) The obligations of this lease shall run with the land, and
this lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that LESSOR and OWNER shall
be liable only for obligations occurring while lessor, owner or master lessee of
the premises. (c) Any action or proceeding arising out of the subject matter of
this lease shall be brought by LESSEE within [insert addendum 28a] after the
cause of action has occurred and only in a court of the Commonwealth of
Massachusetts. (d) If LESSOR is acting under or as agent for any trust or
corporation, the obligations of LESSOR shall be binding upon the trust or
corporation, but not upon any trustee, officer, director, shareholder, or
beneficiary of the trust or corporation individually. (e) If LESSOR is not the
owner (OWNER) of the leased premises, LESSOR represents that said OWNER has
agreed to be bound by the terms of this lease unless LESSEE is in default
hereof. (f) This lease is made and delivered in the Commonwealth of
Massachusetts, and shall be interpreted, construed, and enforced in accordance
with the laws thereof. (g) This lease was the result of negotiations between
parties of equal bargaining strength, and when executed by both parties shall
constitute the entire agreement between the parties, superseding all prior oral
and written agreements, representations, statements and negotiations relating in
any way to the subject matter herein. This lease may not be extended or amended
except by written agreement signed by both parties or as otherwise provided
herein, and no other subsequent oral or written representation shall have any
effect hereon. (h) Notwithstanding any other statements herein, LESSOR makes no
warranty, express or implied, concerning the suitability of the leased premises
for LESSEE's intended use. (i) LESSEE agrees that if LESSOR does not deliver
possession of the leased premises as herein provided for any reason, LESSOR
shall not be liable for any damages to LESSEE for such failure, but LESSOR
agrees to use reasonable efforts to deliver possession to LESSEE at the earliest
possible date. A [insert addendum 28b] abatement of rent, excluding the cost of
any amortized improvements to the leased premises, for such time as b LESSEE may
be deprived of possession of the leased premises, except where a delay in
delivery is caused in any way by LESSEE, shall be LESSEE's sole remedy. (j)
Neither the submission of this lease form, nor the prospective acceptance of the
security deposit and/or rent shall constitute a reservation of or option for the
leased premises, or an offer to lease, it being expressly understood and agreed
that this lease shall not bind either party in any manner whatsoever until it
has been executed by both parties. (k) LESSEE shall not be entitled to exercise
any option contained herein if LESSEE is at that time in default of any terms or
conditions hereof, [insert addendum 28c]. (I) Except as otherwise provided
herein, LESSOR, OWNER and LESSEE shall not be liable for any special, c
incidental, indirect or consequential damages, including but not limited to lost
profits or loss of business,
<PAGE>
arising out of or in any manner connected with performance or nonperformance
under this lease, even if any party has knowledge of the possibility of such
damages. (m) The headings in this lease are for convenience only and shall not
be considered part of the terms hereof. (n) No endorsement by LESSEE on any
check shall bind LESSOR in any way. (o) LESSOR and LESSEE hereby waive any and
all rights to a jury trial in any proceeding in any way arising out of this
lease.
29. SECURITY AGREEMENT. THIS PARAGRAPH DOES NOT APPLY.
30. WAIVERS, ETC. No consent or waiver, express or implied, by LESSOR, to
or of any breach of any covenant, condition or duty of LESSEE shall be construed
as a consent or waiver to or of any other breach of the same or any other
covenant, condition or duty. If LESSEE is several persons, several corporations
or a partnership, LESSEE's obligations are joint or partnership and also
several. Unless repugnant to the context, "LESSOR" and "LESSEE" mean the person
or persons, natural or corporate, named above as LESSOR and as LESSEE
respectively, and their respective heirs, executors, administrators, successors
and assigns.
31. AUTOMATIC FIVE-YEAR EXTENSIONS. THIS PARAGRAPH DOES NOT APPLY.
32. ADDITIONAL PROVISIONS. (Continued on attached rider(s) if necessary.)
- SEE ATTACHED RIDER -
IN WITNESS WHEREOF, LESSOR and LESSEE have hereunto set their hands and
common seals and intend to be legally bound hereby this 10th day of August,
1999.
LESSOR: CUMMINGS PROPERTIES, LLC LESSEE: BOOK TECH, INC.
By: /s/ illegible signature By: /S/ MORRIS A. SHEPARD
-------------------------- ----------------------------
Executive Vice President
GUARANTY
IN CONSIDERATION of the making of the above lease by Cummings Properties
LLC, with Book Tech, Inc.
--------------------------------------------------------------------------------
at the request of the undersigned and in reliance on this guaranty, the
undersigned (GUARANTOR) hereby personally guarantees the prompt payment of rent
by LESSEE and the performance by LESSEE of all terms, conditions, covenants and
agreements of the lease, any amendments thereto and any extensions or
assignments thereof, and the undersigned promises to pay all expenses, including
reasonable attorney's fees, incurred by LESSOR in enforcing all obligations of
LESSEE under the lease or incurred by LESSOR in enforcing this guaranty.
LESSOR's consent to any assignments, subleases, amendments and extensions by
LESSEE or to any compromise or release of LESSEE's liability hereunder, with or
without notice to the undersigned, or LESSOR's failure to notify the undersigned
of any default and/or reinstatement of the lease by LESSEE, shall not relieve
the undersigned from liability as GUARANTOR.
IN WITNESS WHEREOF, the undersigned GUARANTOR has hereunto set his/her/its
hand and common seal intending to be legally bound hereby as of this 10th day of
August, ______.
/S/ MORRIS A. SHEPARD
------------------------
<PAGE>
ADDENDUM TO LEASE
BOOK TECH, INC.
5. a. at 42 Cummings Park
b. and all areas at 43 Cummings Park, year-round
c. municipal
d. which approval shall not be unreasonably withheld, delayed or
conditioned
7. a. and LESSEE's cost of relocation.
8. a. except due to fire or other casualty or to any cause beyond LESSEE's
control.
9. a. the roof, foundation and all common areas of the building of which the
leased premises are a part, driveways, parking areas and landscaping,
b. its agents or employees
c. except damage caused by LESSOR
d. taking by eminent domain
e. except for latent or hidden conditions.
f. and shall be performed by LESSOR in a manner that will not
unreasonably interfere with LESSEE's use of or access to the leased
premises.
10. a. which consent shall not be unreasonably withheld, delayed or
conditioned.
b. reasonable
c. bonded,
d. provided that any such changes do not unreasonably interfere with
LESSEE's use of, or access to, the leased premises.
11. a. which consent shall not be unreasonably withheld, delayed or
conditioned.
b. which shall not exceed $500.00.
12. a. provided LESSOR obtains and delivers to LESSEE, when requested, a
standard non-disturbance agreement from such mortgagee(s).
13. a. Except for emergencies, such access shall be on reasonable advance
notice, and to the extent possible, conducted in a manner so as not to
unreasonably interfere with LESSEE's use of the leased premises.
14. a. except those claims based on LESSOR's sole negligence.
16. a. to the extent
<PAGE>
b. misconduct or material breach of this lease by
c. in use by LESSEE or LESSEE's employees, agents or invitees and so are
18. a. such consent not to be unreasonably withheld, delayed or conditioned.
19. a. except for Phillip Burgess or Burgess Properties,
b. and that LESSOR shall be responsible for any fees due to Phillip
Burgess.
20. a. and if involuntary, is not dismissed within sixty (60) days after
commencement
b. thirty (30)
c. or such longer period of time as shall be reasonably necessary to cure
any such default provided LESSEE commences to cure default within
thirty (30) days and thereafter diligently prosecutes the same
d. other than due to fire or other casualty or any other cause completely
beyond LESSEE's control
e. if LESSEE fails to cure such default within ten (10) days after
written notice thereof.
22. a. expiration
26. a. Subject to Sections 16 and 17 above,
27. a. non-portable
b. taking by eminent domain
28. a. two years
b. per diem
c. beyond any applicable grace period
<PAGE>
CUMMINGS PROPERTIES, LLC
STANDARD FORM 7990453-AWT-3
RIDER TO LEASE
The following additional provisions are incorporated into and made a part
of the attached lease:
A. * LESSOR, at LESSOR's cost, shall modify the leased premises according to a
mutually agreed upon plan attached hereto before or about the time LESSEE
takes possession of the leased premises.
B. LESSEE acknowledges and agrees that the electric service upgrade to 800A,
120/208V that LESSEE has requested may not be completed by Boston Edison as
of the commencement date of the lease. Notwithstanding any such delay,
LESSEE's obligation to pay monthly rent shall commence as of the
commencement date of the lease without any abatement.
C. Upon completion of the modifications provided for herein, LESSOR shall
carefully remeasure the entire leased premises using LESSOR's standard
methodology, and if the size does not equal the total number of square feet
set forth in the initial paragraph of this lease, LESSOR shall notify
LESSEE in writing of the actual revised square footage and the
corresponding increase or decrease in rent, based on the same rate per
square foot used in this lease.
D. * Provided LESSEE is not then in default of this lease or in arrears of any
rent or invoice payment, LESSEE shall have the right to extend this lease,
including all terms, conditions, escalations, etc., for one additional
period of five (5) years ("the extended lease term") by serving LESSOR with
written notice of its desire to so extend the lease. The time for serving
such written notice shall be not more than 12 months or less than 6 months
prior to the expiration of the initial lease term. Time is of the essence.
E. * Notwithstanding the provisions of Section 1, annual base rent during the
extended lease term shall be recalculated at LESSOR's published annual
rental rate as of the commencement of the extended lease term for similar
space, and the base month from which to determine the amount of each "Cost
of Living" adjustment during the extended lease term shall then be changed
to January 2004. The "comparison" month shall be changed to November 2004,
and the first adjustment during the extended lease term shall take place
with the rent due on January 1, 2005. Section 1 shall continue to apply in
all other respects during the extended lease term.
F. * Prior to the termination date of this lease, LESSEE may remove the
telephone system, copying machines, electronic, copying, computer and
similar data equipment and lines supplied and installed by LESSEE if LESSEE
has satisfactorily complied with all other conditions of this lease and if
LESSEE repairs any and all damage resulting from such removal and restores
the leased premises to their condition prior to the installation of said
equipment, all on a timely basis prior to the end of the lease term. Time
is of the essence.
G. * LESSOR hereby represents that, to the best of its knowledge and belief,
the use of the leased premises for the purposes set forth in Section 3 is
permitted under the Massachusetts General Laws and the Wobum Zoning
Ordinance. In the event, however, that the City of Wobum issues a citation
to LESSEE prohibiting the use of the leased premises for said purposes and
said citation is adjudged valid after LESSEE has exhausted all applicable
appeals, then LESSEE may cancel this lease by serving LESSOR with 30 days
prior written notice to that effect, and neither party shall have any
further obligation to the other. Cancellation of the lease shall be
LESSEE's exclusive remedy for any breach by LESSOR of this representation
or otherwise in connection with such municipal action.
H. * In the event that the entire balance of rent is accelerated pursuant to
Section 20 above on account of the nonpayment of any sums due under this
lease, provided LESSEE then fully cures such nonpayment and pays any other
sums that are then due (including LESSOR's legal fees and costs) prior to
the entry of a final judgment for the full accelerated rent, LESSOR agrees
to reinstate the lease in full and to waive the acceleration of the rent
(without waiving any rights which may arise with respect to any subsequent
default). Time is of the essence.
LESSOR: CUMMINGS PROPERTIES, LLC LESSEE: BOOK TECH, INC.
By: /s/ illegible signature By: /S/ MORRIS A. SHEPARD
-------------------------- -------------------------
Executive Vice President
Date: 8/10/99
-------------------------- |
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CUMMINGS PROPERTIES
STANDARD FORM 8990525-AWT
AMENDMENT TO LEASE # 1
In consideration with a lease currently in effect between the parties at 42
and 43 Cummings Park, Woburn, Massachusetts, executed on August 10, 1999 and
terminating September 14, 2004, and in consideration of the mutual benefits to
be derived herefrom, Cummings Properties, LLC Lessor, and Book Tech, Inc.,
LESSEE, hereby agree to amend said lease as follows:
1. *LESSOR, at LESSEE's sole expense, shall complete alterations and
improvements within the leased premises in accordance with the mutually
agreed upon plan attached hereto. LESSOR shall amortize the agreed charge
of $42,455, plus interest at the rate of 9.75%, for said construction as
additional rent as provided below.
2. * The Security Deposit is hereby increased by $2,000 from $22,000 to a new
total of $24,000. LESSEE shall pay this increase upon LESSEE's execution of
this amendment.
This amendment shall not bind either party in any manner until it has been
executed by both parties. All other terms, conditions and covenants of the
present lease shall continue to apply except that adjusted base rent shall be
increased by $10,761.96 annually, from a total of $133,348.00 to a new annual
total of $144,109.96 or $12,009.16 per month. Annual base rent for purposes of
computing any future escalations thereon shall be $144,109.96. This amendment
shall be effective September 15th 1999 and shall continue through the balance of
the lease and any extensions thereof unless further modified by written
amendment(s).
In Witness Whereof, LESSOR and LESSEE have hereunto set their hands and
common seals this _________________ day of __________________, 1999.
LESSOR: CUMMINGS PROPERTIES, LLC LESSEE: BOOK TECH, INC.
By: By: /S/ MORRIS A. SHEPARD
---------------------------- -----------------------------
Executive Vice President
<PAGE>
CUMMINGS PROPERTIES
STANDARD FORM 12990809-JTH-B
AMENDMENT TO LEASE # 2
In consideration with a lease currently in effect between the parties at 42
and 43 Cummings Park, Woburn, Massachusetts, executed on August 10, 1999 and
terminating September 14, 2004, and in consideration of the mutual benefits to
be derived herefrom, Cummings Properties, LLC Lessor, and Book Tech, Inc.,
LESSEE, hereby agree to amend said lease as follows:
3. *LESSOR, at LESSEE's sole expense, shall complete alterations and
improvements within the leased premises in accordance with the mutually
agreed upon plan Additional Work Authorization dated December 8, 1999
attached hereto. LESSOR shall amortize the agree charge of $3,895, plus
interest at the rate of 9.75%, for said construction as additional rent as
provided below.
This amendment shall not bind either party in any manner until it has been
executed by both parties. All other terms, conditions and covenants of the
present lease shall continue to apply except that adjusted base rent shall be
increased by $1,058.08 annually, from a total of $144,946.92 to a new annual
total of $146,005.00 or $12,167.08 per month. Annual base rent for purposes of
computing any future escalations thereon shall be $146,005.00. This amendment
shall be effective January 1, 2000 and shall continue through the balance of the
lease and any extensions thereof unless further modified by written
amendment(s).
In Witness Whereof, LESSOR and LESSEE have hereunto set their hands and
common seals this 26th day of January, 2000.
LESSOR: CUMMINGS PROPERTIES, LLC LESSEE: BOOK TECH, INC.
By: /s/ illegible signature By: /S/ TED BERNHARDT
----------------------------- --------------------------------
Executive Vice President Duly Authorized
Print Name:
--------------------
<PAGE>
ADDITIONAL WORK AUTHORIZATION
ATLANTIC BOSTON CONSTRUCTION, INC.
200 WEST CUMMINGS PARK, WOBURN, MA 01801
781-935-8000 -- fax 781-935-1990
--------------------------------------------------------------------------------
CUSTOMER NAME DATE ORIGINATOR
Book Tech, Inc. 12/8/99 AWT/JW
--------------------------------------------------------------------------------
STREET CITY CITY Zip Code
42 & 43 Cummings Park Woburn MA 01801
--------------------------------------------------------------------------------
ATTENTION PHONE FAX
Morris A. Shepherd, Ph.D. 718-729-6250
--------------------------------------------------------------------------------
PROVIDE LABOR AND MATERIALS TO EXECUTE THE FOLLOWING SCOPE OF WORK:
1. Install CPL standard 2-ton, A/C only (no heat) roof top Unit (R.T.U.)
dedicated to Server Room. Work includes: removal of ceiling system, as
required; capping of existing ductwork leading from existing HVA/C unit
into Server Room; reactivation of existing ductwork to adjacent Office and
Break Room from existing HVA/C unit; supply and installation of 2-Ton
capacity R.T.U. on existing roof curb, associated branch ductwork and low
ambient temperature kit; extension and flashing of freon and electrical
lines from suite to R.T.U.; and reinstallation of ceiling system.
PRICE: $5,101.00
Credit: $1,116.00
---------
TOTAL PRICE: $3,985.00
---------
o No representation is made as to the suitability of above work for
Customer's use or occupancy.
o Customer to remove furniture end equipment from the work area.
o Customer acknowledges that the above work or revisions from previously
approved plans may cause a delay beyond any prior scheduled completion
date.
o This quote is valid for 30 days from the date of Issue. If space Is
unoccupied on date of Issue, prices may increase after occupancy, Above
work Is to be accomplished during normal working hours or during
prearranged overtime at additional expense. Contract price includes sales
tax.
o Payment is due upon the Customer's execution of this authorization.
o Customer acknowledges that the work described herein shall be considered
nonbuilding standard under the terms of the lease and shall be maintained
by Customer following installation, unless otherwise noted.
ACCEPTED BY: /S/ TED BERNHARDT DATE: 12/8/99
-------------------------------- -----------------------
PRINTED NAME: TITLE:
------------------- -----------------------
--------------------------------------------------------------------------------
FOR OFFICE ONLY Design/Construction Supervisor LESSEE Cert of Insurance
Approval Approval and Endorsement on file
--------------------------------------------------------------------------------
</TEXT>
</DOCUMENT>
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of March 22, 2001 by
and among BOOKTECH.COM, INC., a Nevada corporation with offices located at 42
Cummings Park, Woburn, MA 01801 (the "COMPANY"), and Cornell Capital Partners,
L.P., a New York limited partnership (the "INVESTOR").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to $10,000,000 to
purchase the Company's common stock, $.00042 par value per share (the "COMMON
STOCK");
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) under the Securities Act of 1933, as may be amended (the "1933
ACT"), Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the 1933
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act, and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings specified or indicated, and such meanings shall be
equally applicable to the singular and plural forms of the defined terms.
"1933 ACT" shall mean the Securities Act of 1933, as may be amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as may be amended.
"AFFILIATE" shall have the meaning specified in Section 5(h).
"AGREED UPON PROECEDURES REPORT" shall have the meaning specified in Section
2(l).
"AGREEMENT" shall mean this Investment Agreement.
"BUY-IN" shall have the meaning specified in Section 6.
"BUY-IN ADJUSTMENT AMOUNT" shall have the meaning specified in Section 6.
1
<PAGE>
"CLOSING" shall have the meaning specified in Section 2(g).
"CLOSING DATE" shall mean, as defined in Section 2(g), the date which is three
(3) Trading Days following the expiration of the related Purchase Period (or
such other time or later date as is mutually agreed to by the Company and the
Investor).
"COMMON STOCK" shall mean the Common Stock of the Company.
"CONTROL" or "CONTROLS" shall have the meaning specified in Section 5(h).
"COVERING SHARES" shall have the meaning specified in Section 6.
"DOLLAR AMOUNT" shall mean the Dollar Amount of shares of common stock the
Company requests Investor to purchase.
"EFFECTIVE DATE" shall mean the date the SEC declares effective the Registration
Statement covering the transactions described in the Agreement.
"ENVIRONMENTAL LAWS" shall have the meaning specified in Section 4(o).
"ESCROW AGENT" shall mean Butler Gonzalez LLP and First Union National Bank
"ESCROW AGREEMENT" shall mean the Escrow Agreement entered into among the
Company, the Investor and the Escrow Agent in the form attached hereto as
Exhibit "B".
"EXECUTION DATE" shall mean the date all Transaction Documents are executed by
the Company and Investor.
"FLOOR PRICE" shall mean the price that is the lowest price at which the
Investor shall be permitted to sell Shares during an applicable Purchase Period
and shall be equal to 75% of the lowest closing bid price of the Common Stock
during the fifteen (15) trading days immediately preceding the date upon which
the Put Notice is delivered by the Company.
"INDEMNITEES" shall have the meaning specified in Section 10.
"INDEMNIFIED LIABILITIES" shall have the meaning specified in Section 10.
"INEFFECTIVE PERIOD" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (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
2
<PAGE>
Registration Rights Agreement.
"MAJOR TRANSACTION" shall have the meaning specified in Section 2(f).
"MATERIAL ADVERSE EFFECT" shall have the meaning specified in Section 4(a).
"MATERIAL FACTS" shall have the meaning specified in Section 2(k).
"MAXIMUM COMMON STOCK ISSUANCE" shall have the meaning specified in Section
2(h).
"MAXIMUM PUT AMOUNT" shall mean the maximum Dollar Amount of a Put Notice
calculated by multiplying the average of the Volume Weighted Average Price for
the forty (40) Trading Days immediately preceding a Put Notice Date, by one and
one-half (1.5).
"OPEN PERIOD" shall mean the period beginning on and including the Trading Day
immediately following the Effective Date and ending on the earlier of (i) the
date which is thirty-six (36) months from the Effective Date and (ii)
termination of the Agreement in accordance with Section 9.
"PAYMENT AMOUNT" shall have the meaning specified in Section 2(m).
"PRINCIPAL MARKET" shall have the meaning specified in Section 2(e).
"PROSPECTUS" shall mean the prospectus, preliminary prospectus and supplemental
prospectus used in connection with the Registration Statement.
"PURCHASE AMOUNT" shall mean the amount being paid by Investor on a particular
Closing Date to purchase the Shares.
"PURCHASE PERIOD" shall mean the period beginning on the Put Notice Date and
ending on and including the date which is ten (10) Trading Days after such Put
Notice Date.
"PURCHASE PRICE" shall mean 91% of the average of the lowest three closing bid
prices of the Company's common stock during the specified Purchase Period.
"PUT NOTICE" shall mean a written notice sent to the Investor by the Company
stating the Dollar Amount of Shares the Company intends to sell to the Investor
pursuant to the terms of the Agreement and stating the current number of the
Company's Shares issued and outstanding on such date.
"PUT NOTICE DATE" shall mean the Trading Day immediately following the day on
which the Investor receives a Put Notice, however a Put Notice shall be deemed
delivered
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on (x) the Trading Day it is received by facsimile or otherwise by the Investor
if such notice is received prior to 12:00 noon Eastern Time (receipt being
deemed to occur if the Company possess a facsimile confirmation showing
completed transmission by such time), or (y) the immediately succeeding Trading
Day if it is received by facsimile or otherwise after 12:00 noon Eastern Time on
a Trading Day (receipt being documented as described in (x) above). No Put
Notice may be deemed delivered on a day that is not a Trading Day.
"REGISTRABLE SECURITIES" shall have the meaning set forth in the Registration
Rights Agreement.
"REGISTRATION OPINION" shall have the meaning specified in Section 2(k).
"REGISTRATION OPINION DEADLINE" shall mean the date that is between three (3)
and five (5) Trading Days prior to each Put Notice Date.
"REGISTRATION PERIOD" shall have the meaning specified in Section 5(c).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Agreement entered into by the
Company with Investor for the registration of this transaction.
"REGISTRATION STATEMENT" means the registration statement of the Company filed
under the 1933 Act covering this transaction.
"RELATED PARTY" shall have the meaning specified in Section 5(h).
"REPURCHASE EVENT" shall have the meaning specified in Section 2(m).
"REPURCHASE OPTION" shall have the meaning specified in Section 2(m).
"RESOLUTION" shall have the meaning specified in Section 8(f).
"SEC" shall mean the Securities & Exchange Commission.
"SEC DOCUMENTS" shall have the meaning specified in Section 4(f).
"SECURITIES" shall mean the shares of common stock issued pursuant to the terms
of the Agreement.
"SHARES" shall mean the shares of common stock of the Company having a par value
of $.00042 per share.
"SOLD SHARES" shall have the meaning specified in Section 6.
"SUBSIDIARIES" shall have the meaning specified in Section 4(a).
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<PAGE>
"TRADING DAY" shall mean any day on which the Principal Market for the Company's
common stock is open for trading.
"TRANSACTION DOCUMENTS" shall mean the Agreement, Registration Rights Agreement,
and each of the other agreements entered into by the parties hereto in
connection with the Agreement.
"VALUATION EVENT" shall have the meaning specified in Section 2(k).
"VOLUME WEIGHTED AVERAGE PRICE" shall mean the product of (i) the daily trading
volume and (ii) the average trade price of the Company's common stock on the
Principal Market, which volume and average trade price shall be as reported by
Bloomberg Financial Markets ("BLOOMBERG"), or if not available through Bloomberg
because of delisting, then the average of the bid prices of any market makers
for the Company's Common Stock as reported in the "pink sheets" by the National
Quotation Bureau, Inc.
2. PURCHASE AND SALE OF COMMON STOCK
a. Purchase and Sale of Common Stock. Upon the terms and conditions set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of $10,000,000.
b. Delivery of Put Notices. Subject to the terms and conditions of the
Transaction Documents, and from time to time during the Open Period the Company
may, in its sole discretion, deliver a Put Notice in substantially the same form
as Exhibit "C" attached hereto to the Investor which states the Dollar Amount of
Shares which the Company intends to sell to the Investor during the Purchase
Period. In addition, the Dollar Amount designated by the Company in a Put Notice
shall be in increments of not less than $75,000 and not more $5,000,000 subject
to a waiver of such minimum and maximum amounts in the Investor's sole
discretion. Once the Put Notice is received by the Investor the Put Notice shall
not be, terminated, withdrawn or otherwise revoked by the Company. During the
Open Period, the Company shall not be entitled to submit a Put Notice during the
three (3) Trading Day period following a Closing Date and a Put Notice may not
be given during a Purchase Period. The Company shall not be entitled to issue a
Put Notice to Investor for more than the Maximum Put Amount. The average Volume
Weighted Average Price for the ten (10) Trading Days immediately preceding both
the Put Notice Date and the expiration of a Purchase Period must be at least
$50,000, unless the Investor in its sole discretion reduces such amount. The
Purchase Price shall be 91% of the average of the lowest three (3) closing bid
prices of the Common Stock during the Purchase Period.
The Floor Price shall be stated in each Put Notice. In the event that
the
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<PAGE>
Shares are trading at or below the Floor Price during the Purchase Period
immediately preceding the applicable Closing Date, the Investor, in its sole
discretion, shall have the right to decrease the Dollar Amount set forth in that
Put Notice by a pro rata percentage equal to ten percent (10%) for every day
during the ten (10) Trading Day Purchase Period that the average trading price
as reported by Bloomberg is at or below the Floor Price.
Within ten (10) calendar days after the commencement of each calendar
quarter occurring subsequent to the commencement of the Open Period, the Company
undertakes to notify Investor as to its reasonable expectations as to the Dollar
Amount it intends to raise during such calendar quarter, if any, through the
issuance of Put Notices. Such notification shall constitute only the Company's
good faith estimate with respect to such calendar quarter and shall in no way
obligate the Company to raise such amount during such calendar quarter or
otherwise limit its ability to deliver Put Notices during such calendar quarter.
The failure by the Company to comply with this provision can be cured by the
Company's notifying Investor at any time as to its reasonable expectations with
respect to the current calendar quarter.
c. Stock Payment. On the Execution Date, the Company shall issue to
Yorkeville Advisors Management, LLC ("Yorkeville") 250,000 shares of Common
Stock with the restrictive legend set forth in Section 3(g) hereof; provided
however, that such shares shall be subject to a lock up agreement in the form
attached hereto as Exhibit "D".
d. Investor's Obligation 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 from the
Company during the related Purchase Period that number of Shares having an
aggregate Purchase Price equal to the lesser of (i) the Dollar Amount set forth
in the Put Notice (subject to reduction during the Purchase Period as may be
provided pursuant to the terms of this Agreement), and (ii) 20% of the aggregate
Volume Weighted Average Price during the applicable Purchase Period, but only if
said Shares bear no restrictive legend and are not subject to stop transfer
instructions.
e. Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the Company shall
not be entitled to deliver a Put Notice and require the Investor to purchase any
Shares at a Closing (as defined in Section 2(g)) unless each of the following
conditions are satisfied:
(i) a Registration Statement shall have been declared effective
and shall remain effective and available for the resale of all
the Registrable Securities (as defined in the Registration Rights
Agreement) at all times during the Purchase Period;
(ii) at all times during the period beginning on the related Put
Notice Date and ending on and including the related Closing Date,
the Common Stock shall have been listed on The American Stock
Exchange, Inc. ("AMEX")
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or The New York Stock Exchange, Inc. or designated on the Nasdaq
National Market, The Nasdaq SmallCap Market or the National
Association of Securities Dealer's, Inc. OTC electronic bulletin
board (the "PRINCIPAL MARKET") and shall not have been suspended
from trading thereon for a period of five (5) consecutive Trading
Days during the Open Period and the Company shall not have been
notified of any pending or threatened proceeding or other action
to delist or suspend the Common Stock;
(iii) during the period beginning on the Put Notice Date and
ending on and including the applicable Closing Date, there shall
not have occurred a Major Transaction (as defined in Section
2(f)) or the public announcement of a pending Major Transaction
which has not been abandoned or terminated;
(iv) the Company has complied with its obligations and is
otherwise not in breach of a material provision, or in default
under, this Agreement, the Registration Rights Agreement or any
other agreement executed in connection herewith which has not
been corrected prior to delivery of the Put Notice Date;
(v) no Material Adverse Effect (as defined in Section 4(a)) has
occurred since the Execution Date;
(vi) no injunction shall have been issued, or action commenced by
a governmental authority, prohibiting the purchase or the
issuance of the Common Stock; and
(vii) the issuance of the Common Stock will not violate the
shareholder approval requirements of AMEX.
If any of the events described in clauses (i) through (vii) above
occurs during a Purchase Period, then the Investor shall have no
obligation to purchase the Dollar Amount of Common Stock set
forth in the applicable Put Notice.
f. Major Transaction. For purposes of this Agreement, a "MAJOR
TRANSACTION" shall be deemed to have occurred at the closing of any of the
following events: (i) the consolidation, merger or other business combination of
the Company with or into another person (other than pursuant to a migratory
merger effected solely for the purposes of changing the jurisdiction of
incorporation of the Company) (ii) the sale or transfer of all or substantially
all of the Company's assets; or (iii) the consummation of a purchase, tender or
exchange offer made to, and accepted by, the holders of more than 30% of the
economic interest in, or the combined voting power of all classes of voting
stock of, the Company. Notwithstanding the above, Major Transaction shall not
include
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<PAGE>
the proposed acquisition by the Company of Campus Custom Publishing, Inc.
g. Mechanics of Purchase of Shares by Investor. Subject to the
satisfaction of the conditions set forth in Sections 2(e), 7 and 8, the closing
of the purchase by the Investor of Shares (a "CLOSING") shall occur on the date
which is three (3) Trading Days following the expiration of the related Purchase
Period (or such other time or later date as is mutually agreed to by the Company
and the Investor) (a "CLOSING DATE"). On or before the Trading Day immediately
preceding each Closing Date, (i) the Company shall deliver to the Escrow Agent
pursuant to the Escrow Agreement certificates representing the Shares to be
issued to the Investor on such date and registered in the name of the Investor,
or in street name as may be requested by Investor, or deposit such Shares into
the account(s) (with the Investor receiving confirmation that the Shares are in
such account(s)) designated by the Investor for the benefit of the Investor and
(ii) the Investor shall deliver to the Escrow Agent the Purchase Price to be
paid for such Shares (after receipt of confirmation of delivery of such Shares),
determined as aforesaid, by wire transfer. In the alternative to physical
delivery of certificates for Common Stock to the Investor, if delivery of the
Shares may be effectuated by electronic book-entry through The Depository Trust
Company ("DTC"), then delivery of the Shares pursuant to such purchase shall,
unless requested otherwise by such Investor (or holder of such Shares), settle
by book-entry transfer through DTC on the Closing Date. The parties agree to
coordinate with DTC to accomplish this objective. The Company and the Investor
shall deliver all documents, instruments and writings required to be delivered
by either of them to the Escrow Agent pursuant to this Agreement or the Escrow
Agreement.
h. Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, if the Company is listed on the AMEX, the
number of Shares issuable by the Company and purchasable by the Investor
including the shares of Common Stock issuable pursuant to Section 2(c) hereof,
shall not exceed 19.99% of the shares of Common Stock outstanding as of the date
of the applicable Put Notice, subject to appropriate adjustment for stock
splits, stock dividends, combinations or other similar recapitalization
affecting the Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the
issuance of Shares in excess of the Maximum Common Stock Issuance shall first be
approved by the Company's shareholders in accordance with applicable law and the
By-laws and Articles of Incorporation of the Company, if such issuance of shares
of Common Stock could cause a delisting on the Principal Market. Without
limiting the generality of the foregoing, such shareholders' approval must duly
authorize the issuance by the Company of shares of Common Stock totaling 19.99%
or more of the shares of Common Stock outstanding on the date hereof. The
parties understand and agree that the Company's failure to seek or obtain such
shareholder approval shall in no way adversely affect the validity and due
authorization of the issuance and sale of Shares hereunder or the Investor's
obligation in accordance with the terms and conditions hereof to purchase a
number of Shares in the aggregate up to the Maximum Common Stock Issuance
limitation, and that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section 2(h).
8 |
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| To: ChainSaw who started this subject | 7/3/2001 11:49:36 PM | | From: jmhollen | | | | <PAGE>
i. Valuation Event. For purposes of this Agreement, "VALUATION EVENT"
shall mean an event in which the Company at any time during a "Purchase Period"
takes any of the following actions:
(i) subdivides or combines its Common Stock;
(ii) pays a dividend in Common Stock or makes any other
distribution of its Common Stock, except for dividends paid
with respect to the Preferred Stock;
(iii) issues any options or other rights to subscribe for or
purchase Common Stock and the price per share for which
Common Stock may at any time thereafter be issuable
pursuant to such options or other rights shall be less than
the Bid Price in effect immediately prior to such issuance;
(iv) issues any securities convertible into or exchangeable for
Common Stock and the consideration per share for which
shares of Common Stock may at any time thereafter be
issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(v) issues shares of Common Stock otherwise than as provided in
the foregoing subsections (i) through (iv), at a price per
share less, or for other consideration lower, than the Bid
Price in effect immediately prior to such issuance, or
without consideration;
(vi) makes a distribution of its assets or evidences of
indebtedness to the holders of Common Stock as a dividend
in liquidation or by way of return of capital or other than
as a dividend payable out of earnings or surplus legally
available for dividends under applicable law or any
distribution to such holders made in respect of the sale of
all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing
subsections (i) through (v); or
(vii) takes any action affecting the number of shares of Common
Stock outstanding, other than an action described in any of
the foregoing subsections (i) through (vi) hereof,
inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a
materially adverse effect upon the rights of Investor at
the time of a Put Notice is delivered to Investor.
j. If a Valuation Event occurs during a Purchase Period, the Investor,
at its sole option, may either (i) choose a new Purchase Period beginning on the
Trading Day immediately following the occurrence of such Valuation Event, (ii)
use the Purchase Period during which the Valuation Event occurred or (iii)
decline the Put Notice.
k. Registration Opinion. The Company shall cause its independent
counsel to deliver to the Investor, on each Registration Opinion Deadline, an
opinion, (the
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<PAGE>
"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 Closing Date, the Company acquires knowledge of such Material
Facts or any Ineffective Period occurs, the Company shall promptly notify the
Investor and Investor, at Investor's sole option, shall be entitled to cancel
that entire Put Notice by facsimile notice to the Company on or before the
related Closing Period.
l. 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,
(i) 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 (ii) if the Company disputes
the existence of any such material misstatement or omission, (x) the Company's
independent counsel shall provide the Investor's counsel with a Registration
Opinion and (y) 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.
m. Delisting; Suspension. If at any time during the Open Period or
within thirty (30) calendar days after the end of the Open Period, (i) the
Registration Statement, after it has been declared effective, shall not remain
effective and available for sale of all the Registrable Securities, (ii) the
Common Stock shall not be listed on the Principal Market or shall have been
suspended from trading thereon (excluding suspensions of not more than one
trading day resulting from business announcements by the Company) or the Company
shall have been notified of any pending or threatened proceeding or other action
to delist or suspend the Common Stock, (iii) there shall have occurred a Major
Transaction (as defined in Section 2(f)) or the public announcement of a pending
Major
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<PAGE>
Transaction which has not been abandoned or terminated, or (iv) the Registration
Statement is no longer effective or stale for a period of more than five (5)
Trading Days as a result of the Company to timely file its financials, the
Investor shall have the right (the "REPURCHASE OPTION"), as partial relief for
the damages to the Investor by reason of the occurrence of the events listed in
clauses (i), (ii), (iii) or (iv)above (which remedy shall not be exclusive of
any other remedies available at law or equity), in its sole discretion, which
right shall be exercised within thirty (30) calendar days of such event or
occurrence (a "REPURCHASE EVENT"), to sell to the Company, and the Company
agrees to buy, promptly upon the exercise of such right by the Investor, but in
any event within ten (10) calendar days of the exercise of such right, and
subject to the limitations imposed by applicable federal and state law, all or
any part of the Shares issued to the Investor within the sixty (60) Trading Days
preceding the Investor's exercise of the Repurchase Option and then held by the
Investor at a price per Share equal to the highest closing price during the
period beginning on the date of the Repurchase Event and ending on and including
the date on which the Investor exercises its Repurchase Option (the "PAYMENT
AMOUNT"). If the Company fails to pay to the Investor the full aggregate Payment
Amount within ten (10) calendar days of the Investor's exercise of the
Repurchase Option hereunder, the Company shall pay to the Investor, on the first
Trading Day following such tenth (10th) calendar day, in addition to and not in
lieu of the Payment Amount payable by the Company to the Investor upon exercise
of the Repurchase Option, an amount equal to 2% of the aggregate Payment Amount
then due and payable to the Investor, in cash by wire transfer, plus compounded
annual interest of 8% on such Payment Amount during the period, beginning on the
day following such tenth calendar day, during which such Payment Amount, or any
portion thereof, is outstanding.
3. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
The Investor and Yorkeville jointly and severally represent and warrant
to the Company that:
a. Investment Purpose. Each of the Investor and Yorkeville is acquiring
the Securities for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, the Investor does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status; Sophisticated Investor. Each of the
Investor and Yorkeville is an "accredited investor" as that term is defined in
Rule 501(a) of Regulation D under the 1933 Act. The Investor and Yorkeville have
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities.
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c. Reliance on Exemptions. The Investor and Yorkeville understand that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and the Investor's and Yorkeville's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Investor and Yorkeville set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor and
Yorkeville to acquire such Securities.
d. Information. Each of the Investor and Yorkeville and its advisors,
if any, have been furnished with or have had access to all materials relating to
the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by the Investor
and Yorkeville. The Investor and Yorkeville and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by the Investor, Yorkeville
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor's or Yorkeville's right to rely on the Company's representations
and warranties contained in Section 4 below. The Investor and Yorkeville
understand that its investment in the Securities involves a high degree of risk.
The Investor and Yorkeville have sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.
e. No Governmental Review. The Investor and Yorkeville understand that
no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. The Investor and Yorkeville understand that
except as provided in the Registration Rights Agreement: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered for resale thereunder and sold, assigned or transferred
in accordance with an effective registration statement, (B) the Investor or
Yorkeville, as the case may be, shall have delivered to the Company an opinion
of counsel, in a reasonably acceptable form, to the effect that such Securities
to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) the Investor or
Yorkeville, as the case may be, provides the Company with assurance reasonably
acceptable to the Company that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("RULE 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
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<PAGE>
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Investor and Yorkeville agree that the sale of the
Securities will be in compliance with all applicable state and federal
securities laws, rules and regulations and the rules and regulations of the
Principal Market, if applicable.
g. Legends. The Investor and Yorkeville understand that, until such
time as the Securities have been transferred to a person who may trade the
Shares without restriction under the 1933 Act as contemplated by the
Registration Rights Agreement, the certificates representing the Securities,
except as set forth below and in Section 8(r), shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
FOR RESALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE RESALE OF THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with assurances reasonably acceptable
to the Company that such Securities can be sold pursuant to Rule 144 without any
restriction as to (A) the number of securities acquired as of a particular date
that can then be immediately sold or (B) manner of sale. Each of the Investor
and Yorkeville covenants that, in connection with any transfer of Securities by
it pursuant to an effective registration statement under the 1933 Act, it will
(i) comply with the applicable prospectus delivery requirements of the 1933 Act,
provided that copies of a current prospectus relating to such effective
registration statement are or have been supplied to the Investor and Yorkeville,
and (ii) comply with the "Plan of Distribution" section of the current
prospectus relating to such effective registration statement.
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<PAGE>
h. Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Section 9 of the 1934 Act. During the Open Period, the Investor and
Yorkeville will comply with the provisions of Section 9 of the 1934 Act, and the
rules promulgated thereunder, with respect to transactions involving the Common
Stock.
j. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the Articles of Incorporation or the By-laws or (ii) conflict with,
or constitute a material default (or an event which with notice or lapse of time
or both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract, indenture mortgage, indebtedness or instrument to which the Investor
or any of its Subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree applicable to the Investor or any of
its Subsidiaries or by which any property or asset of the Investor or any of its
Subsidiaries is bound or affected. The business of the Investor and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, statute, ordinance, rule, order or regulation of any governmental
authority or agency, regulatory or self-regulatory agency, or court, except for
possible violations the sanctions for which either individually or in the
aggregate would not have a Material Adverse Effect.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, the Company
represents and warrants to the Investor that:
a. Organization and Qualification. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns a controlling interest) (a complete list of which
is set forth in Schedule 4(a)) are corporations duly organized and validly
existing in good standing under the laws of the State of Nevada, and have the
requisite corporate power and authorization to own their properties and to carry
on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "MATERIAL
ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects of
the Company and its Subsidiaries, if any,
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taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined in Section 1 and 4(b)below).
b. Authorization; Enforcement; Compliance with Other Instruments. (i)
The Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the reservation for issuance and the
issuance of the Shares pursuant to this Agreement, have been duly and validly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors, or its
shareholders, except for any approval required pursuant to the rules and
regulations of the AMEX (iii) the Transaction Documents have been duly and
validly executed and delivered by the Company, and (iv) the Transaction
Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 54,523,810 shares of Common Stock, of which as of
the date hereof, 18,566,667 shares are issued and outstanding, 5,000,000 shares
of Preferred Stock, of which as of the date hereof 3,235,301 shares are issued
and outstanding, and 2,779,737 shares of Common Stock are issuable upon the
exercise of options, Warrants and conversion rights. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 4(c) or in SEC Documents (as
defined in Section 4(f) below), (i) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, (ii) there are no outstanding
debt securities, (iii) there are no outstanding shares of capital stock,
options, Warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings 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 or options, Warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding
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securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement, (vii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement and (viii) there is no dispute as to the class of any
shares of the Company's capital stock. The Company has furnished to the
Investor, or the Investor has had access through EDGAR to, true and correct
copies of the Company's Articles of Incorporation, as in effect on the date
hereof (the "ARTICLES OF INCORPORATION"), and the Company's By-laws, as in
effect on the date hereof (the "BY-LAWS `), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
d. Issuance of Shares. At least 16,000,000 Shares issuable pursuant to
this Agreement have been duly authorized and reserved for issuance (subject to
adjustment pursuant to the Company's covenant set forth in Section 5(f) below)
pursuant to this Agreement, subject to approval by the Company's stockholders.
Upon issuance in accordance with this Agreement, the Securities will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof. In the event the Company cannot register
16,000,000 Shares, due to the remaining number of authorized shares of Common
Stock being insufficient, the Company will use its best efforts to register the
maximum number of shares it can based on the remaining balance of authorized
shares and will use its best efforts to increase the number of its authorized
shares as soon as reasonably practicable.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including United States federal and state securities laws and
regulations and the rules and regulations of the Principal Market or principal
securities exchange or trading market on which the Common Stock is traded or
listed) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 4(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, the Articles
of Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or their
organizational charter or
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by-laws, respectively, or any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations that would not individually or in the aggregate have a Material
Adverse Effect. The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, statute,
ordinance, rule, order or regulation of any governmental authority or agency,
regulatory or self-regulatory agency, or court, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act, the Company is not required to obtain any
consent, authorization, permit or order of, or make any filing or registration
(except the filing of a registration statement) with, any court, governmental
authority or agency, regulatory or self-regulatory agency or other third party
in order for it to execute, deliver or perform any of its obligations under, or
contemplated by, the Transaction Documents in accordance with the terms hereof
or thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal Market as in
effect on the date hereof and on each of the Closing Dates and is not aware of
any facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since February 1999, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1933 Act (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). The Company has delivered to the Investor or its
representatives, or they have had access through EDGAR, true and complete copies
of the SEC Documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1933 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted 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. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
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<PAGE>
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 4(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule 4(g) or
the SEC Documents filed at least five (5) days prior to the date hereof, since
June 1, 2000, there has been no change or development in the business,
properties, assets, operations, financial condition, results of operations or
prospects of the Company or its Subsidiaries which has had or reasonably could
have a Material Adverse Effect. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in Schedule 4(h), there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of Company or any of its
Subsidiaries, threatened against or affecting the Company, the Common Stock or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
i. Acknowledgment Regarding Investor's Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investor's purchase of the Securities. The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or Circumstances.
Except for the proposed acquisition of Campus Custom Publishing, Inc., no event,
liability, development or circumstance has occurred or exists, or to its
knowledge is
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contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, assets, prospects, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. To its knowledge, 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 security or solicited
any offers to buy any security, under circumstances that would require
registration under the 1933 Act of the Company's sale and issuance of the
Securities to the Investor or cause this offering of Shares to the Investor to
be integrated with prior offerings by the Company for purposes of the 1933 Act
or any applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of the Principal Market, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration under the 1933 Act of the Company's sale and issuance of
the Securities to the Investor or cause the offering of the Securities to be
integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its Subsidiaries
is involved in any union labor dispute nor, to the knowledge of the Company or
any of its Subsidiaries, is any such dispute threatened. Neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company's employ or
otherwise terminate such officer's employment with the Company.
n. Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 4(n), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights necessary to conduct its business as now or as proposed to be
conducted have expired or terminated, or are expected to expire or terminate
within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
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<PAGE>
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 4(n), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service mark registrations, trade secret or other infringement;
and the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
o. Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
p. Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 4(p) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
q. Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
r. Regulatory Permits. The Company and its Subsidiaries have in full
force and effect all certificates, approvals, authorizations and permits from
the appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and
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conduct their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, approval, authorization or permit, except
for such certificates, approvals, authorizations or permits which if not
obtained, or such revocations or modifications which, would not have a Material
Adverse Effect.
s. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
t. No Materially Adverse Contracts, Etc. Neither the Company nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
u. Tax Status. The Company and each of its Subsidiaries has made or
filed all United States 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 and each of its Subsidiaries 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 has 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.
v. Certain Transactions. Except as set forth on Schedule 4(v) and in
the SEC Documents filed at least five (5) days prior to the date hereof and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 4(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (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,
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<PAGE>
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.
w. Dilutive Effect. The Company understands and acknowledges that the
number of shares of Common Stock issuable upon purchases pursuant to this
Agreement will increase in certain circumstances. The Company's executive
officers and directors have studied and fully understand the nature of the
transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.
5. COVENANTS OF THE COMPANY
a. Best Efforts. The Company shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Section 8 of
this Agreement.
b. Blue Sky. The Company shall, at its sole cost and expense, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Investor at each of the Closings
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
such states of the United States, as specified by Investor, and shall provide
evidence of any such action so taken to the Investor on or prior to the Closing
Date. The Company shall, at its sole cost and expense, make all filings and
reports relating to the offer and sale of the Securities required under the
applicable securities or "Blue Sky" laws of such states of the United States
following each of the Closing Dates.
c. Reporting Status. Until the earlier of (i) the first date which is
after the date this Agreement is terminated pursuant to Section 9 and on which
the Holders (as that term is defined in the Registration Rights Agreement) may
sell all of the Securities acquired pursuant to this Agreement without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Holders shall have sold all the
Securities issuable hereunder and (B) this Agreement has been terminated
pursuant to Section 9 (the "REGISTRATION PERIOD"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as a reporting company under the 1933
Act.
d. Use of Proceeds. The Company will use the proceeds from the sale of
the Shares (excluding amounts paid by the Company for legal fees, finder's fees
and escrow
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fees) for general corporate and working capital purposes.
e. Financial Information. The Company agrees to make available to the
Investor via EDGAR or other electronic means the following to the Investor
during the Registration Period: (i) within five (5) Trading Days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
Registration Statements or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries, (iii) copies of any notices
and other information made available or given to the shareholders of the Company
generally, contemporaneously with the making available or giving thereof to the
shareholders and (iv) within two (2) calendar days of filing or delivery
thereof, copies of all documents filed with, and all correspondence sent to, the
Principal Market, any securities exchange or market, or the National Association
of Securities Dealers, INC.
f. Reservation of Shares. Subject to the following sentence, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than 16,000,000 shares of Common
Stock to provide for the issuance of the Securities hereunder. In the event that
the Company determines that it does not have a sufficient number of authorized
shares of Common Stock to reserve and keep available for issuance as described
in this Section 5(f), the Company shall use its best efforts to increase the
number of authorized shares of Common Stock by seeking shareholder approval for
the authorization of such additional shares.
g. Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
the Principal Market and each other national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on the Principal Market, unless the Investor and the Company agree
otherwise. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market (excluding suspensions of not more than
one trading day resulting from business announcements by the Company). The
Company shall promptly provide to the Investor copies of any notices it receives
from the Principal Market regarding the continued eligibility of the Common
Stock for listing on such automated quotation system or securities exchange. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 5(g).
h. Transactions With Affiliates. The Company shall not, and shall cause
each of its Subsidiaries not to, enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons
23
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who were officers or directors at any time during the previous two years,
shareholders who beneficially own 5% or more of the Common Stock, or affiliates
or with any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or individual owns a 5%
or more beneficial interest (each a "RELATED PARTY"), except for (i) customary
employment arrangements and benefit programs on reasonable terms, (ii) any
agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, or (iii) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "CONTROL" or
"CONTROLS" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
i. Filing of Form 8-K. On or before the date which is fifteen (15)
calendar days after the Execution Date, the Company shall file a Current Report
on Form 8-K with the SEC describing the terms of the transaction contemplated by
the Transaction Documents in the form required by the 1934 Act, if such filing
is required.
j. Corporate Existence. The Company shall use its best efforts to
preserve and continue the corporate existence of the Company.
k. Notice of Certain Events Affecting Registration; Suspension of Right
to Make a Put. The Company shall promptly notify Investor upon the occurrence of
any of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Shares: (i) receipt of any request
for additional information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or related prospectus;
(ii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading,
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and that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to Investor any Put Notice during the continuation of any of
the foregoing events.
l. Reimbursement. If (i) Investor, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, or (ii) Investor, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Investor for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this section shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliates of Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees, attorneys,
accountants, auditors and controlling persons (if any), as the case may be, of
Investor and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, Investor and any such affiliate and any such person.
m. Dilution. The number of Shares issuable pursuant to a Put Notice may
increase substantially in certain circumstances, including, but not necessarily
limited to, the circumstance wherein the trading price of the Common Stock
declines during the period between the Effective Date and the end of the Open
Period. The Company's executive officers and directors have studied and fully
understand the nature of the transactions contemplated by this Agreement and
recognize that they have a potential dilutive effect. The board of directors of
the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon issuance of a Put
Notice is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the
Company.
6. COVER. If the number of Shares represented by any Put Notices become
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<PAGE>
restricted or are no longer freely trading for any reason, and after the
applicable Closing Date, the Investor purchases, in an open market transaction
or otherwise, the Company's Common Stock (the "Covering Shares") in order to
make delivery in satisfaction of a sale of Common Stock by the Investor (the
"Sold Shares"), which delivery such Investor anticipated to make using the
Shares represented by the Put Notice (a "Buy-In"), the Company shall pay to the
Investor, in lieu of the Repurchase Option, the Buy-In Adjustment Amount (as
defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (a) the Investor's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (b) the net proceeds (after
brokerage commissions, if any) received by the Investor from the sale of the
Sold Shares. The Company shall pay the Buy-In Adjustment Amount to the Investor
in immediately available funds immediately upon demand by the Investor. By way
of illustration and not in limitation of the foregoing, if the Investor
purchases Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to the Common Stock it
sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the Company
will be required to pay to the Investor will be $1,000.
7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the Shares to
the Investor is further subject to the satisfaction, at or before each Closing
Date, of each of the following conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
a. The Investor shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company on or prior
to the Execution Date.
b. The Investor shall have delivered to the Company the Purchase Price
for the Shares being purchased by the Investor at the Closing (after receipt of
confirmation of delivery of such Shares) by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
c. The representations and warranties of the Investor shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and the Investor shall have performed, satisfied and complied
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investor at or
prior to such Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental
26
<PAGE>
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
e. No Valuation Event shall have occurred since the applicable Put
Notice Date.
8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, on or before each Closing Date, of each of the following
conditions set forth below. These conditions are for the Investor's sole benefit
and may be waived by the Investor at any time in its sole discretion.
a. The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor on or prior to the Execution Date.
b. The Common Stock shall be authorized for quotation on the Principal
Market and trading in the Common Stock shall not have been suspended by the
Principal Market or the SEC, at any time beginning on the date hereof and
through and including the respective Closing Date (excluding suspensions of not
more than one Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
c. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that time (except for (i) representations and warranties that speak as
of a specific date and (ii) with respect to the representations made in Sections
4(g), (h) and (j) and the third sentence of Section 4(m) hereof, events which
occur on or after the date of this Agreement and are disclosed in SEC filings
made by the Company at least ten (10) Trading Days prior to the applicable Put
Notice Date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company on or before such
Closing Date. The Investor shall have received a certificate, executed by the
Chief Executive Officer and Chief Financial Officer of the Company, dated as of
the applicable Closing Date, in the form of Exhibit "E" attached hereto, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Investor including, without limitation, an update as of such Closing Date
regarding the representation contained in Section 4(c) above.
d. Investor shall have received an opinion letter of the Company's
counsel on or before the Execution Date, or a blanket opinion letter covering
all Shares to be issued pursuant to the terms of this Agreement, in the form of
Exhibit "F" attached hereto and if required by the Company's transfer agent any
additional opinion letters after the Effective Date so as to allow for the
issuance of Securities to Investor as may be required pursuant to the
Transaction Documents.
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<PAGE>
e. The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the Shares (in such denominations as such Investor shall request) being
purchased by the Investor at such Closing.
f. The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4(b)(ii) above and in a form reasonably acceptable to
the Investor (the "RESOLUTIONS") and such Resolutions shall not have been
amended or rescinded prior to such Closing Date.
g. If requested by the Investor, the Investor shall receive a letter of
the type, in the form and with the substance of the letter described in Section
4(s) of the Registration Rights Agreement from the Company's auditors.
h. The Company shall have delivered to the Investor or the Investor has
had access through EDGAR to a copy of its Articles of Incorporation, as amended
and in effect on such Closing Date, certified by the Secretary of State of the
Company's state of incorporation within ten (10) days of such Closing Date.
i. The Company shall have delivered to the Investor a secretary's
certificate, dated as of such Closing Date, in the form of Exhibit "G" attached
hereto, as to (i) the Resolutions described in Section 8(f), (ii) the Articles
of Incorporation and (iii) the Bylaws, each as in effect on such Closing Date.
j. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
k. The Registration Statement shall be effective on each Closing Date
and no stop order suspending the effectiveness of the Registration Statement
shall be in effect or shall be pending or threatened. Furthermore, on each
Closing Date (i) neither the Company nor Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action),and (ii) no other suspension of the
use or withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.
l. At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to
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| To: ChainSaw who started this subject | 7/3/2001 11:53:43 PM | | From: jmhollen | | | | <PAGE>
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
m. There shall have been no filing of a petition in bankruptcy, either
voluntarily or involuntarily, with respect to the Company and there shall not
have been commenced any proceedings under any bankruptcy or insolvency laws, or
any laws relating to the relief of debtors, readjustment of indebtedness or
reorganization of debtors, and there shall have been no calling of a meeting of
creditors of the Company or appointment of a committee of creditors or
liquidating agents or offering of a composition or extension to creditors by,
for, with or without the consent or acquiescence of the Company.
n. If applicable, the shareholders of the Company shall have approved
the issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2(h).
o. The conditions to such Closing set forth in Section 2(e) shall have
been satisfied on or before such Closing Date.
p. The Company shall have certified to the Investor the number of
shares of Common Stock outstanding as of a date within five (5) Trading Days
prior to such Closing Date.
q. The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by this Agreement as such
Investor or its counsel may reasonably request upon reasonable advance notice.
9. TERMINATION.
a. Optional Termination. This Agreement may be terminated (i) at any
time by the mutual written consent of the Company and the Investor and (ii) by
either party upon eighteen (18) months' prior written notice to the other party.
The representations, warranties and covenants contained in or incorporated into
this Agreement, insofar as applicable to the transactions consummated hereunder
prior to such termination, shall survive its termination for the period of any
applicable statute of limitations.
b. Termination. In the Investor's sole discretion, this Agreement shall
terminate upon written notice sent by facsimile transmission or overnight
delivery by the Investor to the Company of any of the following events:
(i) when the Investor has purchased an aggregate of $10,000,000 in the
Common Stock of the Company pursuant to this Agreement; provided that
the representations, warranties and covenants contained in this
Agreement insofar as applicable to the transactions consummated
hereunder prior to such termination, shall survive the termination of
this
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<PAGE>
Agreement for the period of any applicable statute of limitations,
(ii) on the date which is thirty-six (36) months after the Effective
Date;
(iii) if the Company shall file or consent by answer or otherwise to
the entry of an order for relief or approving a petition for relief,
reorganization or arrangement or any other petition in bankruptcy for
liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or shall make an assignment for the benefit of its
creditors, or shall consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers of itself or of
any substantial part of its property, or shall be adjudicated a
bankrupt or insolvent, or shall take corporate action for the purpose
of any of the foregoing, or if a court or governmental authority of
competent jurisdiction shall enter an order appointing a custodian,
receiver, trustee or other officer with similar powers with respect to
the Company or any substantial part of its property or an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law, or an order for the dissolution,
winding up or liquidation of the Company, or if any such petition shall
be filed against the Company;
(iv) if the Company shall issue or sell any equity securities or
securities convertible into, or exchangeable for, equity securities or
enter into an equity financing facility without the prior written
consent of the Investor (which consent shall not be unreasonably
withheld), except that no such consent shall be required in connection
with (A) the issuance or sale of such securities in connection with the
acquisition of Campus Custom Publishing, Inc., (B) shares issued under
the Company's stock option plan, (C) shares issued to employees,
consultants, advisors or independent contractors in an aggregate amount
of up to 750,000 during any three (3) month period, and (D) the
issuance and sale of such securities pursuant to the terms of a merger,
acquisition, share exchange, strategic alliance or other similar
transaction;
(v) the trading of the Common Stock is suspended by the SEC, the
Principal Market or the NASD for a period of five (5) consecutive
Trading Days;
(vi) the Company shall not have filed with the SEC the initial
Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the initial Registration
Rights Agreement within sixty (60) calendar days of the date hereof or
the Registration Statement has not been declared effective within one
hundred eighty (180) calendar days of the date hereof; or
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(vii) the Common Stock ceases to be registered under the 1933 Act.
(viii) The occurrence of a Material Adverse Effect;
(ix) The Commission or the NASD shall have suspended trading in the
Common Stock for a period of five (5) consecutive Trading Days during
Open Period.
(x) The Securities cease to be registered under the 1934 Act or listed
or traded on the Nasdaq National Market, American Stock Exchanged or
Nasdaq Small Cap Market or OTC Bulletin Board; or
(xi) The Company requires shareholder approval under AMEX rules to
issue additional shares and such approval is not obtained within 60
days from the date when the Company has issued its 19.9% maximum
allowable shares.
Upon the occurrence of one of the above-described events, the Company shall send
written notice of such event to the Investor, who shall have thirty (30)
calendar days to terminate by sending written notice by facsimile transmission
or overnight delivery to the Company. Failure of the Investor to send the
Company written notice within thirty (30) calendar days pursuant to the terms of
this Section 9 shall be deemed a waiver by the Investor to terminate as to the
occurrence of such event, but not a waiver to terminate upon the occurrence of
any other event enumerated above.
10. INDEMNIFICATION. In consideration of the Investor's execution and
delivery of the this Agreement and the Registration Rights Agreement and
acquiring the Shares hereunder and in addition to all of the Company's other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless the Investor and all of their shareholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents 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 attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES'), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(ii) 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, (iii) any cause of action, suit or
claim brought or made against such Indemnitee by a third party and arising out
of or resulting from the execution, delivery, performance or enforcement of the
Transaction
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Documents or any other certificate, instrument or document contemplated hereby
or thereby, (iv) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Shares or (v)
the status of the Investor or holder of the Shares as an investor in the
Company, except insofar as any such untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
written information furnished to the Company by the Investor which is
specifically intended by the Investor for use in the preparation of any such
Registration Statement, preliminary prospectus or prospectus. 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 is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any cause
of action or similar rights the Investor may have, and any liabilities the
Investor may be subject to.
11. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
b. Fees and Expenses.
(i) As a further inducement to the Investor to enter into this
Agreement, on each Closing Date the Company shall pay to the
Investor or its designee, an amount equal to 5% of the Purchase
Amount, which amount the Investor may, at its sole option, deduct
against the Purchase Amount.
(ii) On each Closing Date the Company shall pay to Dutchess
Advisors, Ltd. a finder's fee equal to the sum of 10% of gross
proceeds
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raised over $250,000 and up to $3,000,000; 8% of gross proceeds
raised over $3,000,000 and up to $7,000,000; 6% of gross proceeds
raised over $7,000,000 and up to $10,000,000; and 4% of gross
proceeds raised over $10,000,000.
(iii) On or before the Execution Date, the Company shall pay its
counsel, Akin, Gump, Strauss, Hauer & Feld, LLP the sum of $50,000
on the Execution Date for legal expenses.
(iv) Except as otherwise set forth herein, each party shall pay
the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. Any attorneys' fees
and expenses incurred by either the Company or by the Investor in
connection with the preparation, negotiation, execution and
delivery of any amendments to this Agreement or relating to the
enforcement of the rights of any party, after the occurrence of
any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions
contemplated hereunder, shall be paid on demand by the party which
breached the Agreement and/or defaulted, as the case may be. The
Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of any Shares issued pursuant hereto.
c. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
d. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
f. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
(including the other Transaction Documents) contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither
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<PAGE>
the Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Investor, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.
g. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Booktech.com, Inc.
42 Cummings Park
Woburn, MA 01801
Attention: Morris A. Shepard, Chief Executive Officer
Telephone: 781-933-5400
Facsimile: 781-933-6750
If to the Investor:
Cornell Capital Partners, L.P.
-----------------------------
-----------------------------
With a copy to:
-----------------------------
-----------------------------
-----------------------------
Attention: _________________
Telephone: _________________
Facsimile: _________________
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
h. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns,
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<PAGE>
including any purchasers of the Shares. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investor, including by merger or consolidation. The Investor may
assign some or all of its rights hereunder; provided, however, that any such
assignment shall not release the Investor from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Investor shall be entitled to pledge
the Shares in connection with a bona fide margin account.
i. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
j. Survival. The representations and warranties of the Company and the
Investor contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4 and 5, and the indemnification provisions set forth in Section 10,
shall survive each of the Closings. The Investor shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
k. Publicity. The Company and Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties with prior notice of such public statement. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of Investor without
the prior written consent of such Investor, except to the extent required by
law. Investor acknowledges that this Agreement and all or part of the
Transaction Documents may be deemed to be "material contracts" as that term is
defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore
be required to file such documents as exhibits to reports or registration
statements filed under the Securities 1933 Act or the 1934 Act. Investor further
agrees that the status of such documents and materials as material contracts
shall be determined solely by the Company, in consultation with its counsel.
l. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
m. Placement Agent. The Company acknowledges and warrants that it has
not engaged a placement agent or broker in connection with the sale of the
Shares. Except for the fee payable to Dutchess Advisors, Ltd. by the Company
pursuant to Section
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11(b)(ii) hereof, no fees or commissions will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other person or entity, with respect to the transactions
contemplated by the Transaction Documents. The Investor shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
other persons or entities for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents. The Company shall indemnify and hold harmless the Investor, their
employees, officers, directors, agents, and partners, and their respective
affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses incurred in respect of
any such claimed or existing fees, as such fees and expenses are incurred.
n. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
o. Remedies. The Investor and each holder of the Shares shall have all
rights and remedies set forth in this Agreement and the Registration Rights
Agreement and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any default
or breach of any provision of this Agreement, including the recovery of
reasonable attorneys fees and costs, and to exercise all other rights granted by
law.
p. Payment Set Aside. To the extent that the Company makes a payment or
payments to the Investor hereunder or the Registration Rights Agreement or the
Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
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| To: ChainSaw who started this subject | 7/3/2001 11:55:15 PM | | From: jmhollen | | | | <PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be duly executed as of the date and year first above written.
COMPANY: BOOKTECH.COM, INC.
By: ____________________________________
Name: Morris A. Shepard
Title: Chief Executive Officer
INVESTOR: CORNELL CAPITAL PARTNERS, L.P
By its General Partner, Yorkeville Advisors Management, LLC
By: ____________________________________
Name:
Title:
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<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 4(a) Subsidiaries
Schedule 4(c) Capitalization
Schedule 4(e) Conflicts
Schedule 4(g) Material Changes
Schedule 4(h) Litigation
Schedule 4(n) Intellectual Property
Schedule 4(p) Liens
Schedule 4(v) Certain Transactions
<PAGE>
LIST OF EXHIBITS
-----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Escrow Agreement
EXHIBIT C Put Notice
EXHIBIT D Lock Up Agreement
EXHIBIT E Officers' Certificate
EXHIBIT F Opinion of Company's Counsel
EXHIBIT G Secretary's Certificate
<PAGE>
EXHIBIT "A"
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT "B"
ESCROW AGREEMENT
<PAGE>
EXHIBIT "C"
PUT NOTICE
Booktech.com, Inc. (the "Company) hereby elects to sell shares of its Common
Stock to the Investor, during the designated Purchase Period, at a Purchase
Price and for the number of shares of Common Stock to be determined on the last
day of the Purchase Period, all pursuant to that certain Investment Agreement by
and between the Company and Investor dated as of March 22, 2001.
Put Notice Date: __________________________
Dollar Amount Requested: __________________
Purchase Period: _________________________
Purchase Price: __________________________ (to be determined)
Number of Shares: _______________________ (to be determined)
Note: Capitalized terms shall have the meaning ascribed to them in the
Investment Agreement.
Booktech.com, Inc.
By: ______________________
<PAGE>
EXHIBIT "D"
LOCK UP AGREEMENT
<PAGE>
EXHIBIT "E"
OFFICER'S CERTIFICATE
<PAGE>
EXHIBIT "F"
OPINION OF COMPANY'S COUNSEL
<PAGE>
EXHIBIT "G"
SECRETARY'S CERTIFICATE
</TEXT>
</DOCUMENT>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 22,
2001, by and between booktech.com, inc., a company organized under the laws of
state of Nevada, with its principal executive office at 42 Cummings Park,
Woburn, MA 01801 (the "Company"), Cornell Capital Partners, L.P., a New York
limited partnership, (the "Investor"), and Yorkeville Advisors Management, LLC,
a _________ limited liability company ("Yorkeville", together with the Investor
referred to as the "Stockholders").
WHEREAS, In connection with the Investment Agreement by and between the
Company and the Investor of even date herewith (the "Investment Agreement"), the
Company has agreed to issue (i) to the Investor an indeterminate number of
shares of the Company's common stock, $.00042 par value per share (the "Common
Stock"), to be purchased pursuant to the Investment Agreement, and (ii) to
Yorkeville, 250,000 shares of Common Stock; and
WHEREAS, To induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws, with respect to the shares of Common Stock
issuable pursuant to the Investment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained hereinafter and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Holder" means the Stockholders and any transferee or assignee
thereof to whom the Stockholders assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "Principal Market" means the Nasdaq National Market, the New York
Stock Exchange, the American Stock Exchange, Inc., the Nasdaq SmallCap Market,
or the OTC Bulletin Board, whichever is the principal market for the Common
Stock.
d. "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule
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<PAGE>
415 under the 1933 Act or any successor rule providing for offering securities
on a continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United States Securities
and Exchange Commission (the "SEC").
f. "Registrable Securities" means the shares of Common Stock issued or
issuable (i) pursuant to the Investment Agreement, and (ii) any shares of
capital stock issued or issuable with respect to the such shares of Common Stock
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, which have not been (x) included in a Registration
Statement that has been declared effective by the SEC, (y) sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the 1933 Act or (z) otherwise transferred
to a holder who may trade such shares without restriction under the 1933 Act.
g. "Registration Statement" means a registration statement of the
Company filed under the 1933 Act.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Investment
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than May 22, 2001, file with the SEC a
Registration Statement or Registration Statements (as is necessary) on Form SB-2
(or, if such form is unavailable for such a registration, on such other form as
is available for such a registration), covering the resale of all of the
Registrable Securities, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement(s) also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon stock splits, stock dividends or
similar transactions. The Company shall initially register for resale 250,000
shares of Common Stock which would be issuable on the date preceding the filing
of the Registration Statement based on the closing bid price of the Company's
Common Stock on such date pursuant to the terms of the Investment Agreement. In
the event the Company cannot register, due to the remaining number of authorized
shares of Common Stock being insufficient, the Company will use its best efforts
to register the maximum number of shares it can based on the remaining balance
of authorized shares and will use its best efforts to increase the number of its
authorized shares as soon as reasonably practicable.
b. The Company shall use its best efforts to have the Registration
Statement(s) declared effective by the SEC within one hundred twenty (120)
calendar days after the filing thereof.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition
2
<PAGE>
thereof and, with respect thereto, the Company shall have the following
obligations:
a. The Company shall use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective within one
hundred twenty (120) days after the date of the filing thereof, and shall keep
such Registration Statement effective pursuant to Rule 415 until the earlier of
(i) the date as of which the Holders may sell all of the Registrable Securities
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto) or (ii) the date on which (A) the Holders shall have sold all
the Registrable Securities, and (B) the Investor has no right to acquire any
additional shares of Common Stock under the Investment Agreement, respectively
(the "Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the event the
number of shares of Common Stock available under a Registration Statement filed
pursuant to this Agreement is at any time insufficient to cover all of the
Registrable Securities, the Company shall amend such Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within thirty (30) calendar days
after the necessity therefor arises (based on the then Purchase Price of the
Common Stock and other relevant factors on which the Company reasonably elects
to rely), assuming the Company has sufficient authorized shares at that time,
and if it does not, within thirty (30) calendar days after such shares are
authorized. The Company shall use it best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof.
c. The Company shall furnish to each Holder whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) upon the effectiveness of any Registration Statement, ten
(10) copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Holder may reasonably request) and (ii) such other documents, including copies
of any final prospectus, as such Holder may reasonably request from time to time
in order to facilitate the disposition of the Registrable Securities owned by
such Holder.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of
3
<PAGE>
such states in the United States as any Holder reasonably requests, (ii) prepare
and file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Holder who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
e. As promptly as practicable after becoming aware of such event, the
Company shall notify each Holder in writing of the happening of any event as a
result of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission 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, ("Registration Default") and use all diligent efforts to promptly
prepare a supplement or amendment to such Registration Statement and take any
other necessary steps to cure the Registration Default, (which, if such
Registration Statement is on Form S-3, may consist of a document to be filed by
the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act (as defined below) and to be incorporated by reference in the
prospectus) to correct such untrue statement or omission, and deliver ten (10)
copies of such supplement or amendment to each Holder (or such other number of
copies as such Holder may reasonably request). The Company shall also promptly
notify each Holder in writing (i) when a prospectus or any prospectus supplement
or post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Holder by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Holder who holds Registrable Securities being sold of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall permit each Holder and a single firm of counsel,
designated as selling
4
<PAGE>
shareholders' counsel by the Holders who hold a majority of the Registrable
Securities being sold, to review and comment upon a Registration Statement and
all amendments and supplements thereto at least three (3) business days prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects. The Company shall not submit to the SEC a request
for acceleration of the effectiveness of a Registration Statement or file with
the SEC a Registration Statement or any amendment or supplement thereto without
the prior approval of such counsel, which approval shall not be unreasonably
withheld.
h. Reserved.
i. The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Holder is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Holder and allow such Holder, at the Holder's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
j. The Company shall use its best efforts to secure designation and
quotation of all the Registrable Securities covered by any Registration
Statement on the Principal Market. If, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding sentence, it shall use its
best efforts to cause all the Registrable Securities covered by any Registration
Statement to be listed on each other national securities exchange and automated
quotation system, if any, on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or system. If,
despite the Company's best efforts, the Company is unsuccessful in satisfying
the two preceding sentences, it will use its best efforts to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. as such with respect to such Registrable Securities.
The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(j).
k. The Company shall cooperate with the Holders who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Holders may reasonably request and
registered in such names of the Persons who shall acquire such Registrable
Securities from the Holders, as the Holders may request.
5
<PAGE>
l. The Company shall provide a transfer agent for all the Registrable
Securities not later than the effective date of the first Registration Statement
filed pursuant hereto.
m. If requested by the Holders holding a majority of the Registrable
Securities, the Company shall (i) as soon as reasonably practical incorporate in
a prospectus supplement or post-effective amendment such information as such
Holders reasonably determine should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by such Holders.
n. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
o. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
p. Within one (1) business day after a Registration Statement which
includes Registrable Securities is declared effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Holders whose
Registrable Securities are included in such Registration Statement) confirmation
that such Registration Statement has been declared effective by the SEC in the
form attached hereto as Exhibit A.
q. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Holders of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE HOLDERS.
a. At least fifteen (15) calendar days prior to the first anticipated
filing date of a Registration Statement the Company shall notify each Holder in
writing of the information the Company requires from each such Holder if such
Holder elects to have any of such Holder's Registrable Securities included in
such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Holder that
such Holder shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall reasonably be
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. Each Holder covenants and agrees that, in connection with
any disposition or transfer of Registrable Securities by it pursuant to a
Registration Statement, it shall comply with the "Plan of Distribution" section
of the current prospectus relating to such Registration Statement.
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