EXHIBIT 10.10
SUBSCRIPTION AGREEMENT
FINANCIAL INTRANET, INC.
Re: Private Placement of up to $500,000 consisting of a 7% Convertible
Promissory Note in the principal amount of $500,000 and Warrants to purchase
1,250,000 shares of Common Stock.
Dear Subscriber::
Financial Intranet Inc. (the "Company") is offering 7% convertible
promissory note in the principal amount of $500,000 (the "Promissory Note") and
warrants to purchase an aggregate of 1,250,000 shares of Common Stock, par value
$.001 per share (the "Warrants") for an aggregate of $500,000 (the "Offering").
The undersigned ("Investor") has indicated its desire to participate in
this private offering and to subscribe to and agree to purchase the Promissory
Note and the Warrants as set forth on the signature page of this Agreement,
receipt of which the Company acknowledges. The Company shall have the right to
reject this subscription in whole or in part and to accept the subscription of a
lesser amount.
ARTICLE I
Purchase and Sale of the Promissory Note and Warrants
Section 1.1 Closing. The Company will sell, and the Investor will buy, on
the date indicated on the signature page of this Subscription Agreement
("Closing Date"), the Promissory Note (attached as Exhibit B) and Warrants
(attached as Exhibit C) to purchase an aggregate of 1,250,000 shares of Common
Stock, par value $.001 per share for the purchase price of FIVE HUNDRED THOUSAND
($500,000) Dollars ("Purchase Price"), provided each of the conditions set forth
in Section 1.4 below have been satisfied or waived in writing.
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Section 1.2 Form of Payment. The Investor shall pay the Purchase Price by
delivering good funds in United States Dollars by wire transfer to the Escrow
Agent, against delivery of the original 7% Convertible Promissory Note and
Warrants. The parties have entered into an Escrow Agreement annexed hereto as
Exhibit D.
Section 1.3 Wire Instructions. Wire instructions for the Escrow Agent are
as follows:
Chase Manhattan Bank, N.A.
ABA No. 000000000
For the Account of:
United States Trust Company of New York
Account No. 000-0-000000
In favor of:
The Xxxxxxxxx Law Group, P.C. Attorney Escrow Account
Account No. 59-01405
Section 1.4 Promissory Note and Warrants. The right of the Company to
receive the Purchase Price from the Investor, and the right of the Investor to
receive the Promissory Note and Warrants is subject to the satisfaction (or
written waiver) on the Closing Date, of each of the following conditions:
(i) acceptance by the Company, and the Investor, of this Agreement
(including execution of the Statement of Accredited Investor Status attached
hereto) and all duly executed Exhibits thereto by an authorized officer of the
Company;
(ii) delivery into escrow by the Investor of clear funds for the Purchase
Price (as more fully set forth in the Escrow Agreement attached hereto as
Exhibit D);
(iii) all representations and warranties of the Investor and of the Company
contained herein shall remain true and correct in all material respects as of
the Closing Date;
(iv) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Promissory Note and the
Warrants, or shall have the availability of exemptions therefrom;
(v) the sale and issuance of the Promissory Note and Warrants, and the
proposed issuance of the underlying shares of Common Stock (the "Underlying
Shares") and Warrant shares shall be legally permitted by all laws and
regulations to which the Investor and the Company are subject;
(vi) delivery of the original Promissory Note and Warrants as described
herein;
(vii) receipt by the Investor of an opinion of counsel of the Company as
set forth in Exhibit E attached hereto;
(viii) payment of all fees as set forth in Section 7.1 below, provided that
certificates representing the shares of Common Stock issuable to the placement
agents are not
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required to be delivered by the Company as of the Closing Date but within
10 days of the Closing Date.
Section 1.5 The Promissory Note and Warrants have not been registered under
the registration provisions of the Securities Act of 1933, as amended (the
"Securities Act"), or the laws of any state, and are being offered and sold by
the Company in reliance upon an exemption from registration under Sections 4(2)
of the Securities Act. Absent an exemption from registration contained in the
federal or state securities laws, the issuance and sale of the Promissory Note
and Warrants would require registration, and the reliance upon such exemption is
based upon the Investor 's representations, warranties, and agreements contained
in this Agreement.
ARTICLE II
Description of Securities Contained in Promissory Note and Warrants
The following summary of the Securities contained in the Promissory Note
and Warrants and the registration rights with respect to the Common Stock
issuable upon conversion or exercise of the Securities is qualified in its
entirety by the form of Promissory Note, Warrant and Registration Rights
Agreement (Exhibit F) attached to this agreement.
Section 2.1 Promissory Note. The Company will issue a 7% Convertible
Promissory Note which will be convertible into Common Stock of the Company in
the principal amount of $500,000.
Section 2.2 Interest: The holders of the Promissory Note shall be entitled
to receive interest, payable at the option of the Company in cash or registered
Common Stock, at the rate of seven percent on the outstanding principal amount,
per annum based upon a 365 day year commencing on the date the Promissory Note
is issued, payable upon the conversion of the Promissory Note into shares of
Common Stock. Such interest shall be cumulative and shall be compounded on a
yearly basis.
Section 2.3 Conversion: The Promissory Note may be converted, in whole or
in part, at any time. Notwithstanding anything else herein to the contrary, the
holder of the Promissory Note may not convert any Promissory Note to the extent
that after such conversion, the sum of (1) the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of
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the unconverted portion of the Promissory Note) and (2) the aggregate
number of shares of Common Stock issuable upon the conversion of the Promissory
Note and exercise of the Warrants with respect of which the determination of
this provision is being made, would result in ownership by the Investor and its
affiliates of 4.99% or more of the Company's issued and outstanding shares of
Common Stock following such exercise or conversion. This restriction shall be
binding upon any transferee of the Promissory Note or Warrants from the
purchaser of such shares from the Company.
Section 2.4 Automatic Conversion: Three years from the Closing Date the
Company shall be required to automatically convert any and all remaining
outstanding principal amount and accrued interest of the Promissory Note at the
Conversion Price into the Company's Common Stock (the "Automatic Conversion").
The 4.99% limitations set forth in Section 2.3 and in the Promissory Note and
Warrants shall not apply to the Automatic Conversion provision contained herein.
Section 2.5 Conversion Price: The "Conversion Price" shall be the lessor of
: (i) 75% of the average of the five lowest closing bid prices of the Common
Stock during the 30 trading days ending on the trading day immediately preceding
the Conversion Date, or (ii) $.40 per share. The closing bid price shall be
deemed to be the reported last bid price regular way as reported by Bloomberg LP
or if unavailable, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or if the Common Stock is not
listed or admitted to trading on any national securities exchange, the closing
bid price as reported by NASDAQ or such other system then in use, or, if the
Common Stock is not quoted by any such organization, the closing bid price in
the over-the-counter market as furnished by the principal national securities
exchange on which the Common Stock is traded.
Section 2.6 Warrants: The Warrants will entitle the holder to purchase one
share of Common Stock at an exercise price per share of Common Stock (the
"Warrant Shares") of $.60. The Warrants may be exercised for the period
commencing upon the Closing Date and ending five years from the Closing Date.
Section 2.7 Registration Rights: The Company and the Investors have
executed the Registration Rights Agreement annexed hereto as Exhibit "F". The
Company is required to file a registration statement (the "Registration
Statement") under the Securities Act with respect to the shares of Common Stock
issuable upon conversion of the Promissory Note (the "Underlying Shares") and
exercise of the Warrants (the "Warrant Shares", the Warrant Shares and the
Underlying Shares are collectively referred to as the "Registrable Shares").
ARTICLE III
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Investor's Representations
Section 3.1 The Investor represents and warrants to the Company as follows:
(a) The Investor has carefully read this Agreement, including certain risk
factors and the Company's audited financial statements for the year ended
December 31, 1997 (attached hereto as Exhibit A) and the forms of Registration
Rights Agreement, Warrant, and Promissory Note (collectively, the "Disclosure
Materials"), all of which the Investor acknowledges have been provided to the
Investor. The Investor has been given the opportunity to ask questions, and
receive answers, concerning the terms and conditions of the sale of the
Promissory Note and Warrants and the Disclosure Materials and to obtain such
additional written information, to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of same as the Investor desires in order to evaluate the
investment. The Investor further acknowledges that he or she fully understands
the Disclosure Materials. The Investor acknowledges that the Investor has
received no representations or warranties from the Company or its employees or
agents in making this investment decision except as set forth in this Agreement.
The Investor has been informed of all facts pertaining to the Company as it may
have required or believed desirable in connection with its investment (including
access to the Certificate of Incorporation and By-Laws of the Company) and is
not relying on any information concerning them not contained in the Disclosure
Materials.
(b) The Investor is aware that the purchase of the Promissory Note and
Warrants is a speculative investment involving a high degree of risk and that
there is no guarantee that the Investor will realize any gain from this
investment, and that the Investor could lose the total amount of the
Investor's's investment and that the Investor can bear the economic risk of such
investment.
(c) The Investor understands that no federal or state agency has made any
finding or determination regarding the fairness of this Offering of the
Promissory Note and Warrants for investment, or any recommendation or
endorsement of this Offering of the Promissory Note and Warrants. Any
representation to the contrary is a criminal offense.
(d) The Investor is purchasing the Promissory Note and Warrants for the
Investor's own account, without limiting the Investor's right to transfer, sell
or assign the Promissory Note, Warrants and Underlying Shares and Warrant Shares
(provided such transfer, sale or assignment is in compliance with applicable
law), with the intention of holding the Promissory Note and Warrants, with no
present intention of dividing or allowing others to participate in this
investment or of reselling or otherwise participating, directly or indirectly,
in a distribution of the Promissory Note and Warrants. The Investor understands
that the Promissory Note and Warrants are unregistered and may be required to be
held until such time as they are registered under the
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Securities Act and any applicable state securities laws, or until such time
as an exemption from such registration is available. The Investor agrees that
(a) it will not offer, sell, pledge, hypothecate, or otherwise dispose of the
Promissory Note and Warrants unless such offer, sale, pledge, hypothecation or
other disposition is (i) registered under the Securities Act, or (ii) such
offer, sale, pledge, hypothecation or other disposition thereof does not violate
the Securities Act.
(e) The Investor agrees to the imprinting, so long as is required by this
Section, of the following legend (or such substantially similar legend as is
acceptable to the Investor and their counsel, the parties agreeing that any
unacceptable legended securities shall be replaced promptly by and at the
Company's cost) on the securities:
Legend
[FOR PROMISSORY NOTE AND WARRANTS] NEITHER THESE SECURITIES NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
[ONLY FOR UNDERLYING SHARES AND WARRANT SHARES TO THE EXTENT THE
RESALE THEREOF IS NOT COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
AT THE TIME OF CONVERSION, ISSUANCE OR EXERCISE] THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
The Underlying Shares and/or Warrant Shares shall not contain the legend
set forth above or any other restrictive legend if the conversion of the
Promissory Note, exercise of Warrants or other issuances of Underlying Shares
and/or Warrant Shares, as the case may be, occurs at any time while a
Registration
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Statement is effective under the Securities Act in connection with the
resale of the shares of Common Stock or, in the event there is not an effective
Registration Statement at such time, if in the opinion of counsel to the Company
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Securities and Exchange Commission (the "Commission")). The Company agrees
that it will provide the Investor, upon request, with a certificate or
certificates representing Underlying Shares and/or Warrant Shares, free from
such legend at such time as such legend is no longer required hereunder. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investors to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and except as provided below, without consultation
by the transfer agent with the Company or its counsel and without the need for
any further advice or instruction or documentation to the transfer agent by or
from the Company or its counsel or the Investors:
(i) at any time after the effective date of the Registration Statement (the
"Effective Date"), upon surrender of one or more certificates evidencing the
Warrants, Promissory Note, Underlying Shares or Warrant Shares that bear the
aforementioned Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the aforementioned legend to replace those
surrendered; provided that (i) the Registration Statement shall then be
effective; (ii) the Investor confirms to the transfer agent in writing (with a
copy to the Company) that it has sold, pledged or otherwise transferred or
agreed to sell, pledge or otherwise transfer such Common Stock in a bona fide
transaction to a third party that is not an affiliate of the Company; (iii) the
Investor confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement and (iv) with respect to the issuance of the
Warrant Shares, the Investor has paid the Company the purchase price for such
shares.
(ii) at any time upon any surrender of one or more certificates evidencing
Registrable Securities, that bear the aforementioned legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of such
legend to replace those surrendered (and delivered a Form 144 if such form is
required) and containing representations that (a) the Investor is permitted to
dispose of such Registrable Securities, without limitation as to amount or
manner of sale pursuant to Rule 144(k) under the Securities Act or (b) the
Investor has sold, pledged or
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otherwise transferred or agreed to sell, pledge or otherwise transfer such
Registrable Securities, in a manner other than pursuant to an effective
registration statement, to a transferee who will upon such transfer be entitled
to freely tradeable securities. The Company shall have counsel provide any and
all opinions necessary for the sale under Rule 144.
Any of the notices referred to above in this Section may be sent by
facsimile to the Company's transfer agent, with a copy to the Company.
(f) No legend other than the one specified in this Article has been or
shall be placed on the share certificates representing the Common Stock, and no
instructions or "stop transfer orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article.
(g) Nothing in this Article shall affect in any way any of the Investor's
obligations under any agreement to comply with all applicable securities laws
upon resale of the Common Stock.
(h) Investor confirms that the Investor has the financial means to make the
proposed investment, that the Investor has sufficient knowledge and experience
in financial matters to evaluate the merits and risks of the transaction, and
that the Investor is relying on advisers (including such attorneys, accountants
and financial advisers as the Investor deem appropriate) to evaluate the merits
and risks of the transaction on the Investor's behalf. Investor has had access
to such professional advisors as the Investor deems necessary in connection with
the evaluation, execution and delivery of this Agreement.
(i) If the Investor is a partnership, corporation, trust or other entity,
(i) the Investor represents and warrants that it was not organized or
reorganized for the specific purpose of acquiring Promissory Note and Warrants,
and (ii) the Investor has the full power and authority to execute this Agreement
on behalf of such entity and to make the representations and warranties made
herein on its behalf, and (iv) this investment in the Company has been
affirmatively authorized, if required, by the governing board of such entity and
is not prohibited by the governing documents of the entity.
(j) The address shown under the Investor's signature at the end of this
Agreement is the Investor's Power of Attorney's principal residence if he or she
is an individual or its principal business address if a corporation or other
entity.
(k) The Investor agrees to hold in strict confidence the information
regarding the Company disclosed to Investor in the Disclosure Materials, shall
not use such information for any purpose other than the evaluation of the
Company's business, finances and operations, shall not reproduce such
information in whole or in part except as the Company expressly authorizes, and
hall not disclose,
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divulge, or otherwise furnish such information to anyone other than
Investor's accountants, legal counsel or consultants, who are involved in
evaluating or implementing the proposed transaction.
(l) The Investor is an "accredited investor" as defined in section 2(15) of
the Securities Act and Regulation D promulgated by the Securities and Exchange
Commission thereunder.
(m) The Investor has not as of the date hereof, and covenants that on
behalf of its affiliates and agents that neither the Investor nor any affiliate
or agent of Investor will at any time in which the Investor or any affiliate of
the Investor owns the Promissory Note which has not been converted into Common
Stock, engage, directly or indirectly, in any short sales of, or hedging or
arbitrage transactions with respect to , the Common Stock or any other
securities of the Company, or sell "put" options or similar instruments with
respect to the Common Stock or any other securities of the Company; provided,
however, that the undersigned may maintain a short position with respect to the
shares of Common Stock issuable upon conversion of the Promissory Note and
provided that such short position (i) is not commenced earlier than the date of
the delivery of a Conversion Notice (as defined in the Promissory Note) and (ii)
does not exceed the number of shares subject to such Conversion Notice.
ARTICLE IV
Company's Representations
The Company represents and warrants to the Investor as follows:
Section 4.1 The Company is a corporation duly organized and existing in
good standing under the laws of the jurisdictions in which it is incorporated,
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise in any material respect interfere with the ability of the Company
to enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Promissory Note or the
Warrants in any material respect.
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Section 4.2 The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Escrow Agreement, the Registration
Rights Agreement, to issue and sell the Promissory Note and the Warrants and to
issue the Registrable Shares in accordance with the terms of the Promissory Note
and the Warrants, (ii) the execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Promissory Note and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by the Company's Board
of Directors and no further consent or authorization of the Company, its Board
of Directors, or its stockholders is required, (iii) this Agreement, the
Registration Rights Agreement, the Warrants and the Promissory Note have been
duly and validly authorized, executed and delivered by the Company, and (iv)
this Agreement, the Registration Rights Agreement, the Warrants and the
Promissory Note constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting, generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
Section 4.3 The Registrable Shares are all duly authorized and reserved for
issuance, and in all cases upon issuance shall be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.
Section 4.4 The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of Incorporation or
Bylaws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture 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 federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). The Company
is not in violation of its Certificate of Incorporation or other organizational
documents, and the Company is not in default (and no event has occurred which,
with notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for possible defaults
or rights as would not, in the aggregate or individually, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted so long as the Investor owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations which neither singly or in the aggregate
would have a Material Adverse Effect. Except as specifically
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contemplated by this Agreement and as required under the Securities Act and
any applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, the Registration Rights Agreement, the
Promissory Note or the Warrants in accordance with the terms hereof and thereof.
Section 4.5 The shares of the Company's Common Stock are listed on the OTC
Bulletin Board. The Company has received no notice, either written or oral, with
respect to the continued eligibility of the Common Stock for such listing, and
the Company has maintained all applicable requirements for the continuation of
such listing, and the Company does not reasonably anticipate that the Common
Stock will be delisted from the OTC Bulletin Board for the foreseeable future.
The Company shall use its best efforts to continue to keep its stock listed on
the OTC Bulletin Board or become listed on NASDAQ or a national securities
comparable stock market or exchange.
Section 4.6 The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, $0.001 par value per share, of which
approximately 20,534,381 shares are issued and outstanding, and no shares of
Preferred Stock . All of the outstanding shares of Common Stock and Preferred
Stock of the Company have been duly and validly authorized and issued and are
fully paid and nonassessable. No shares of Common Stock are entitled to
preemptive or similar rights. Except as specifically disclosed herein by the
Company (including the exhibits attached hereto), there are no outstanding
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever giving any Person or entity any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any subsidiary is or may become bound to
issue additional shares of Common Stock or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company and
except as disclosed herein or in the Disclosure Materials, no person or group of
persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) or has the right to acquire by agreement with or by
obligation binding upon the Company beneficial ownership of in excess of five
percent of the Common Stock.
Section 4.7 The Company has delivered or made available to the Investor
true and complete copies of the Company's most recent audited financial
statements and the Company's interim financial statements for the current fiscal
year and its latest annual report (collectively referred to as "Financial
Statements"). The Financial Statements do not contain any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Financial
Statements of the Company comply as to form in all material respects with
applicable accounting requirements and all other applicable rules and
regulations with respect thereto. Such Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such Financial Statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may
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not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of operations and cash flows for the periods then
ended.
Section 4.8 When issued and payment has been made therefor, the Promissory
Note, Warrants, Underlying Shares and Warrant Shares, sold to the Investor will
be duly and validly issued, fully paid, and nonassessable. Neither the issuance
of the Promissory Note, Warrants, Underlying Shares and Warrant Shares, to the
Investor, pursuant to, nor the Company's performance of its obligations under
this Agreement, and all Exhibits annexed hereto will (i) result in the creation
or imposition by the Company of any liens, charges, claims or other encumbrances
upon Promissory Note, Warrants, Underlying Shares and Warrant Shares issued to
the Investor, or any of the assets of the Company, or (ii) except as set forth
in the Disclosure Materials, entitle the holders of outstanding capital stock to
preemptive or other rights to subscribe to or acquire the Common Stock or other
securities of the Company.
Section 4.9 Neither the Company nor any of its affiliates nor any
distributor or any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to any of the Promissory Note,
Warrants, Underlying Shares and Warrant Shares, or (ii) made any offers or sales
of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Promissory Note, Warrants,
Underlying Shares and Warrant Shares under the Securities Act.
Section 4.10 The Company has furnished or made available to the Investor
true and correct copies of the Company's Articles of Incorporation, as amended
and in effect on the date hereof, and the Company's by-laws, as amended and in
effect on the date hereof (the By-Laws).
Section 4.11 To the Company's 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, other than pursuant to this Agreement or pursuant to the
Company's existing employee benefit plan, under circumstances that would require
registration of the Common Stock under the Securities Act, or cause the offering
of the Promissory Note and Warrants pursuant to this Agreement to be integrated
with prior or future offerings by the Company for purposes of the Securities Act
or any applicable stockholder approval provisions, provided that the Company may
offer promissory notes and warrants for an aggregate consideration of up to
$1,700,000 which may be integrated with this offering.
Section 4.12 Except as set forth in the Financial Statements, there are no
lawsuits or proceedings pending or to the knowledge of the Company threatened,
against the Company, nor has the Company received any written or oral notice of
any such action, suit, proceeding or investigation, which would reasonably be
expected to have a Material Adverse Effect. Except as set forth in the Financial
12
Statements, no judgment, order, writ, injunction or decree or award has
been issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which would be reasonably expected to result
in a Material Adverse Effect.
Section 4.13. The Company is aware and acknowledges that issuance of Common
Stock upon the conversion of the Promissory Note and/or exercise of the
Warrants, may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market conditions. The Company
further acknowledges that its obligation to issue (i) the Underlying Shares in
accordance with the conversion rights in the Promissory Note, and (iii) the
Warrant Shares in accordance with the Warrants is unconditional and absolute
regardless of the effect of any such dilution.
Section 4.14 The Company is not involved in any labor dispute, nor, to the
knowledge of the Company, is any such dispute threatened which could reasonably
be expected to have a Material Adverse Effect. None of the Company's employees
is a member of a union and the Company believes that its relations with its
employees are good.
Section 4.15 The Company is (i) in compliance with any and all foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants and which the Company know is applicable to
them ("Environmental Laws"), (ii) has received all permits, licenses or other
approvals required under applicable Environmental Laws to conduct its business,
and (iii) is in compliance with all terms and conditions of any such permit,
license or approval.
Section 4.16 The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company is engaged. The Company has no notice to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires,
or obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operation, of
the Company.
Section 4.17 The board of directors of the Company has concluded, in its
good faith business judgment, that the issuances of the securities of the
Company in connection with this Agreement are in the best interests of the
Company.
Section 4.18 The Company shall not and shall use its best efforts to ensure
that no affiliate shall sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security of the Company that would be
integrated with the offer or sale of the Promissory Note and Warrants in a
manner that would require the registration under the Securities Act of the
issue, offer or sale of the Promissory Note and Warrants to the Investor. The
Promissory Note and Warrants are being offered and sold pursuant to the terms
hereunder, are not being offered and sold as part of a previously commenced
private placement of securities.
13
Section 4.19 The Company has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses, trade secrets and other intellectual property rights which
it currently uses in connection with its business for which the failure to so
have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). To the best knowledge of the Company, none of the
Intellectual Property Rights infringe on any rights of any other Person, and the
Company either owns or has duly licensed or otherwise acquired all necessary
rights with respect to the Intellectual Property Rights. The Company has not
received any notice from any third party of any claim of infringement by the
Company of any of the Intellectual Property Rights, and has no reason to believe
there is any basis for any such claim. To the best knowledge of the Company,
there is no existing infringement by another Person on any of the Intellectual
Property Rights.
Section 4.20 Subsidiaries. Except for Financial Intranet Telcom, Inc. and
as disclosed in the Financial Statements, the Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity.
ARTICLE V
Registration Rights
Section 5.1 The registration rights are more fully set forth in the
Registration Rights Agreement, attached hereto as Exhibit G.
ARTICLE VI
Covenants of the Company
Section 6.1 Use of Proceeds: The Company will use the proceeds from the
sale of the Promissory Note and Warrants for general business purposes and not
for the repayment of any judgment.
Section 6.2 NASDAQ Listing / 20% Rule Limitation: In the event that the
Company's Common Stock becomes listed on NASDAQ and shareholder consent is
required for the issuance of shares of Common Stock exceeding twenty percent
(20%), the Company shall call a meeting of its shareholders, to be held no later
than 60 calendar days after the date of the Company's NASDAQ listing (the
"Listing Date"), seeking shareholder approval of the below market issuances of
shares of Common Stock (and securities convertible into and exercisable for
Common Stock) to the Investors of an aggregate of 20% or more of the number of
shares of Common Stock outstanding as of the Listing Date. In the event that the
aforementioned proposal is not so approved with such 60 calendar day period, the
Company shall seek a waiver from the
14
NASDAQ (or such other Principal Market) for such below market issuances. In
the event the Company does not receive such waiver within the earlier of ten
calendar days after the aforementioned shareholders meeting, or 70 calendar days
after the Listing Date, the Company shall either delist the Common Stock from
the NASDAQ and immediately (within two Trading Days thereafter) list the Common
Stock on the OTC Bulletin Board or with respect to the aggregate shares of
Common Stock issuable upon conversion of the Promissory Note and exercise of the
Warrants which exceed 20% of the Company's issued and outstanding shares of
Common Stock as of the Closing Date (the "Excess Shares"), (assuming that the
70th calendar day after the Listing Date is the Conversion Date), pay the
Investor a sum equal to (i) the number of Excess Shares multiplied by the
closing bid price per share of Common Stock as quoted on NASDAQ on such
Conversion Date minus (ii) the number of Excess Shares that are Warrant Shares
multiplied by the Exercise Price. Upon making the payment described in this
Section, the Promissory Note and Warrants shall be delivered by the Investor to
the Company and the Promissory Note shall be deemed converted and the Warrants
shall be deemed exercised with respect to the Excess Shares.
Section 6.3 Restrictions on Future Financings: For a period of one hundred
twenty (120) days following the date of the issuance of the Promissory Notes and
Warrants, the Company may not issue additional shares of Common Stock or
securities convertible into shares of Common Stock, unless such securities are
subject to a one year statutory or contractual hold period or, if not subject to
such a hold period, unless (i) the Investor has sold the shares of Common Stock
issuable upon conversion of the Promissory Note or (ii) the Investor has been
offered such securities for purchase for its own account on the same terms and
conditions as are being offered by the third party and the Investor has not
accepted such offer within five days of receipt of notice of such offer.
Notwithstanding the foregoing, the Company may enter into the following types of
transactions: (1) "permanent financing" transactions, which would include any
form of debt or equity financing (other than an underwritten offering); (2)
"project financing" transactions, which provide for the issuance of non-
recourse debt instruments in connection with the operation of the Company's
business as presently conducted or as proposed to be conducted; and (3) an
underwritten offering of the Company's Common Stock, provided that such offering
prices for the registration of the common stock to be received by the Investor
as a result of the exercise of the Warrants or conversion of the Promissory
Note. Notwithstanding the forgoing, the restriction on the issuance of
additional securities set forth in this paragraph shall not apply to the
issuance of promissory notes in the aggregate amount of a maximum of $1,700,000
and associated warrants to purchase shares of Common Stock.
Section 6.4 Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect so long as any Registrable
Securities remain outstanding and the Company shall comply in all material
respects with the terms thereof.
Section 6.5 Reservation of Common Stock. As of the date hereof, the Company
has authorized and reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the
Underlying Shares and Warrant Shares; such amount of shares of Common Stock to
be reserved
15
shall be calculated based upon the Conversion Price and the Exercise Price
therefor under the terms of this Agreement, the Promissory Note and Warrants.
The number of shares so reserved shall be increased or decreased to reflect
potential increases or decreases in the Common Stock that the Company may
thereafter be so obligated to issue by reason of adjustments to the Promissory
Note and the Warrants.
Section 6.6 Corporate Existence. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.7 Notice of Certain Events Affecting Registration. The Company
will immediately notify the Investor upon the occurrence of any of the following
events in respect of a registration statement or related prospectus in respect
of an offering of Registrable Securities: (i) receipt of any request for
additional information by the Commission 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 Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in the Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the related prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate. The Company will immediately make available to the
Investor any such supplement or amendment to the related prospectus.
Section 6.8 Consolidation; Merger. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investors are entitled to receive pursuant to this Agreement.
Section 6.9 Issuance of Underlying Shares and Warrant Shares. The issuance
of the Underlying Shares and the Warrant Shares pursuant to exercise of the
Warrants and the Underlying Shares pursuant to the conversion of the Promissory
Note, shall be made in accordance with the provisions and requirements of
Section 4(2) of the Securities Act, or Regulation D and any applicable state
securities law.
16
Section 6.10 Legal Opinion. The Company's independent counsel shall deliver
to the Investor upon execution of this Agreement, an opinion in the form of
Exhibit E annexed hereto. The Company will obtain for the Investor, at the
Company's expense, any and all opinions of counsel which may be reasonably
required in order to convert the Promissory Note and/or exercise the Warrants,
including, but not limited to, obtaining for the Investor an opinion of counsel,
subject only to receipt of a notice of conversion (the "Notice of Conversion")
in the form of Exhibit G, and/or subject only to a receipt of a notice of
exercise in the form annexed to the Warrant, directing the Transfer Agent to
remove the legend from the certificate.
Section 6.11 Conversion of Promissory Note and Exercise of Warrants. The
Company will permit the Investor to exercise its right to convert the Promissory
Note, and/or exercise the Warrants, by telecopying an executed and completed
Notice of Conversion, and Notice of Exercise to the Company as is set forth in
the Promissory Note, and Warrant respectively in accordance with the terms of
the Promissory Note and Warrant.
Section 6.12 Increase in Authorized Shares. At such time as the Company
would be, if a Notice of Conversion and/or notice of exercise (as the case may
be) were to be delivered on such date, precluded from (a) converting in full all
of the shares of the Promissory Note that remain unconverted at such date (and
paying any accrued but unpaid dividends in respect thereof in shares of Common
Stock), or (b) honoring the exercise in full of the Warrants, due to the
unavailability of a sufficient number of shares of authorized but unissued or
re-acquired Common Stock, the Board of Directors of the Company shall promptly
(and in any case within 60 calendar days from such date) hold a shareholders
meeting in which the shareholders would vote for authorization to amend the
Company's certificate of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least a number of
shares equal to the sum of (i) all shares of Common Stock then outstanding, (ii)
the number of shares of Common Stock issuable on account of all outstanding
warrants, options and convertible securities (other than the Promissory Note and
the Warrants) and on account of all shares reserved under any stock option,
stock purchase, warrant or similar plan, (iii) 200% of the number of Underlying
Shares as would then be issuable upon a conversion in full of the then
outstanding shares of Promissory Note and as payment of all future dividends
thereon in shares of Common Stock in accordance with the terms of this Agreement
and the Promissory Note, and (iv) such number of Warrant Shares as would then be
issuable upon the exercise in full of the Warrants. In connection therewith, the
Board of Directors shall promptly (x) adopt proper resolutions authorizing such
increase, (y) recommend to and otherwise use its best efforts to promptly and
duly obtain shareholder approval to carry out such resolutions and (z) within
three Business Days of obtaining such shareholder authorization, file an
appropriate amendment to the Company's certificate of incorporation to evidence
such increase. In no way shall the aforementioned be deemed a waiver of the
Company's obligations contained in Section 6.5 above.
Section 6.16 Notice of Breaches. Each of the Company on the one hand, and
the Investor on the other, shall give prompt written notice to the other of any
breach by it of any representation, covenant, warranty or other agreement
contained in this Agreement or any Exhibit annexed hereto, as well as any
17
events or occurrences arising after the date hereof, which would reasonably
be likely to cause any representation, covenant, or warranty or other agreement
of such party, as the case may be, contained in this Agreement or any Exhibit
annexed hereto, to be incorrect or breached as of such date. However, no
disclosure by either party pursuant to this Section shall be deemed to cure any
breach of any representation, warranty or other agreement contained in this
Agreement or any Exhibit annexed hereto. Notwithstanding the generality of the
foregoing, the Company shall promptly notify the Investor of any notice or claim
(written or oral) that it receives from any lender of the Company to the effect
that the consummation of the transactions contemplated by this Agreement or any
Exhibit annexed hereto, violates or would violate any written agreement or
understanding between such lender and the Company, and the Company shall
promptly furnish by facsimile to Investor a copy of any written statement in
support of or relating to such claim or notice.
Section 6.17 Transfer of Intellectual Property Rights. Except in the
ordinary course of the Company's business consistent with past practice or in
connection with the sale of all or substantially all of the assets of the
Company, the Company shall not transfer, sell or otherwise dispose of, any
Intellectual Property Rights that are material to the Company's business, or
allow any such Intellectual Property Rights to become subject to any Liens, or
fail to renew such Intellectual Property Rights (if renewable and would
otherwise expire).
ARTICLE VII
Fees and Expenses
Section 7.1 Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company agrees to pay on the Closing Date,
out of the Purchase Price, fees, in cash, to: (i) the Placement Agent Cardinal
Capital Management, Inc., the sum equal to four and one half (4.5%) percent of
the Purchase Price pursuant to this Agreement; and (ii) the Placement Agent
Josephberg, Groz & Co., the sum equal to three and one half (3.5%) percent of
the Purchase Price pursuant to this Agreement; and (iii) to The Xxxxxxxxx Law
Group. P.C. the sum of $10,000 for the legal, administrative and escrow fees.
The Placement Agent Cardinal Capital Management, Inc., as part of its fee shall
also receive 12,500 shares of Common Stock and Warrants to purchase 160,000
shares of Common Stock at an exercise price equal to the closing bid price per
share of Common Stock as quoted on the OTC Bulletin Board on the Closing Date
and otherwise on terms set forth in the Common Stock Purchase Warrant included
herein as Exhibit "C"; and the Placement Agent Josephberg, Xxxxx & Co., as part
of its fee shall also receive 12,500 shares of Common Stock and warrants to
purchase 125,000 shares of Common Stock at an exercise price of $0.40 per share.
18
ARTICLE VIII
Miscellaneous
Section 8.1 No party shall be deemed to have waived any of his or her or
its rights hereunder unless such waiver is in writing and signed by the party
waiving said right.
Section 8.2 The parties have not made any representations or warranties
with respect to the subject matter hereof not set forth herein, and this
Agreement, together with any instruments executed simultaneously herewith,
constitutes the entire agreement between them with respect to the subject matter
hereof. All understandings and agreements heretofore had between the parties
with respect to the subject matter hereof are merged in this Agreement and any
such instrument, which alone fully and completely expresses their agreement.
Section 8.3 This Agreement may not be changed, modified, extended,
terminated or discharged orally, but only by an agreement in writing, which is
signed by all of the parties to this Agreement.
Section 8.4 The parties agree to execute any and all such other and further
instruments and documents, and to take any and all such further actions
reasonably required to effectuate this Agreement and the intent and purposes
hereof.
Section 8.5 This Agreement will be construed and enforced exclusively in
accordance with and governed by the laws of the State of New York, except for
matters arising under the Securities Act, without reference to principles of
conflicts of law.
Section 8.6 Any litigation based thereon, or arising out of, under, or in
connection with, this agreement or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or Investor shall
be brought and maintained exclusively in the court of the state of New York
without reference to its conflicts of laws rules or principles. The Company and
the Investor hereby expressly and irrevocably submits to the jurisdiction of the
state and federal Courts of the state of New York for the purpose of any such
litigation as set forth above. The Investor further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. To the extent that the Investor has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or
19
otherwise) with respect to itself or its property, The Investor hereby
irrevocably waives such immunity in respect of its obligations under this
agreement and the other documents.
ARTICLE IX
Indemnification
Section 9.1 The Company agrees to indemnify and hold harmless the Investor
and each officer, director of the Investor or person, if any, who controls the
Investor within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Investor may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon the breach, by the Company, of any term of this Agreement. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
Section 9.2 The Investor agrees that it will indemnify and hold harmless
the Company, and each officer, director of the Company or person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such officer,
director or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the breach, by the Investor, of
any term of this Agreement. This indemnity agreement will be in addition to any
liability which the Investor or any subsequent assignee may otherwise have.
Section 9.3 Promptly after receipt by an indemnified party under this
Article of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Article, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Article. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Article for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue
20
the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is one of the Investors, the fees
and expenses of such counsel shall be at the expense of the indemnifying party
if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Investors and the
indemnifying party and the Investors shall have been advised by such counsel
that there may be one or more legal defenses available to the indemnifying party
different from or in conflict with any legal defenses which may be available to
the Investor (in which case the indemnifying party shall not have the right to
assume the defense of such action on behalf of the Investor, it being
understood, however, that the indemnifying party shall, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable only for the reasonable fees and expenses of one separate firm of
attorneys for the Investor, which firm shall be designated in writing by the
Investor). No settlement of any action against an indemnified party shall be
made without the prior written consent of the indemnified party, which consent
shall not be unreasonably withheld.
21
EXECUTION BY INVESTOR WHO IS A NATURAL PERSON
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on this 31st day of December, 1998.
Promissory Note and Warrants Subscribed for $500,000
Exact Name in Which Title is to be Held
/s/Ahood Sharbatly
(Signature)
Name (Please Print)
Residence: Number and Street
City State Country Postal Code
Social Security Number
Accepted this 31st day of December, 1998
FINANCIAL INTRANET, INC.
By:/s/Xxxxxxx Xxxxxxxx
22
EXECUTION BY INVESTOR WHICH IS A CORPORATION,
PARTNER, TRUST, ETC.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on this ____ day of ________, 1998.
(Promissory Note and Warrants Subscribed) for $500,000
Exact Name in Which Title is to be Held
(Signature)
Name (Please Print)
Title of Person Executing Agreement
Address: Number and Street
City State Zip Code
Tax Identification Number
Accepted this ___ day of , 1998.
FINANCIAL INTRANET, INC.
By:_____________________________
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ACCREDITED INVESTOR STATUS
1. Please check whether one or more of the following definitions of
"accredited investor," if any, applies to you. If none of the following applies
to you, please leave a blank.
(a) A Bank as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended (the "Securities Act"), or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, or its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are Accredited Investors.
(b) A Private Business Development Company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.
(c) An organization described in Section 501(c)(3) of the Internal Revenue
Code or corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000.
(d) A natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of purchase exceeds $1,000,000.
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(e) A natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year.
(f) Any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Promissory Note and Warrants, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D.
(g) Any entity in which all of the equity owners are Accredited Investors.
25
