1
EXHIBIT 10.4
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Cambio, Inc., a
Delaware corporation (the "Company") hereby agrees to issue and to sell to the
Subscriber, 6% Convertible Notes (the "Notes") convertible in accordance with
the terms thereof into shares of the Company's $.01 par value Class A common
stock (the "Company Shares") for the aggregate consideration as set forth on the
signature page hereof ("Purchase Price"). The form of Convertible Note is
annexed hereto as Exhibit A. (The Company Shares included in the Securities (as
hereinafter defined) are sometimes referred to herein as the "Shares" or "Common
Stock"). (The Notes, the Company Shares, Common Stock Purchase Warrants
("Warrants") issuable to the recipients identified on Schedule B hereto, the
Common Stock issuable upon exercise of the Warrants, and the Put Securities (as
herein defined) are collectively referred to herein as, the "Securities"). Upon
acceptance of this Agreement by the Subscriber, the Company shall issue and
deliver to the Subscriber the Note against payment, by federal funds (U.S.) wire
transfer of the Purchase Price.
The following terms and conditions shall apply to this
subscription.
1. Subscriber's Representations and Warranties. The Subscriber
hereby represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been
furnished with the Company's Form 10-KSB for the year ended June 30, 1999 as
filed with the Securities and Exchange Commission (the "Commission") together
with all subsequently filed forms 10-Q (hereinafter referred to as the
"Reports"). In addition, the Subscriber has received from the Company such other
information concerning its operations, financial condition and other matters as
the Subscriber has requested, and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities (such
information in writing is collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the Securities Act of 1933, as amended (the "1933 Act"), is
experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its representatives, has
such knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. The Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
The information set forth on the signature page hereto regarding the Subscriber
is accurate.
(c) Purchase of Note. On the Closing Date, the Subscriber
will purchase the Note for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act, by reason of their issuance in a transaction that does not require
registration under the 1933 Act (based in part on the accuracy of the
2
representations and warranties of Subscriber contained herein), and that such
Securities must be held unless a subsequent disposition is registered under the
1933 Act or is exempt from such registration.
2
3
(e) Company Shares Legend. The Company Shares, and the
shares of Common Stock issuable upon the exercise of the Warrants, shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IF
APPLICABLE, STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO CAMBIO, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(f) Warrants Legend. The Warrants shall bear the following
legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CAMBIO, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(g) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CAMBIO, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(h) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber
represents that the foregoing representations and warranties are true and
correct as of the date hereof and, unless the
3
4
Subscriber otherwise notifies the Company prior to the Closing Date (as
hereinafter defined), shall be true and correct as of the Closing Date. The
foregoing representations and warranties shall survive the Closing Date.
2. Company Representations and Warranties. The Company
represents and warrants to and agrees with the Subscriber that, except as set
forth on the Schedule of Exceptions annexed hereto as Schedule 2:
(a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or prospects or condition (financial
or otherwise) of the Company.
(b) Outstanding Stock. All issued and outstanding shares of
capital stock of the Company and each of its subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder and all other agreements entered into by the Company relating hereto.
(d) Additional Issuances. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common stock
or equity and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company, except as described in the Reports or Other Written
Information.
(e) Consents. No consent, approval, authorization or order
of any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the NASD, NASDAQ or the Company's
Shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations
and warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation, charter or bylaws of the Company or any of
4
5
its affiliates, (B) to the Company's knowledge, any decree, judgment, order,
law, treaty, rule, regulation or determination applicable to the Company or any
of its affiliates of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or any of its affiliates or over the
properties or assets of the Company or any of its affiliates, (C) the terms of
any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company or any of its affiliates is a
party, by which the Company or any of its affiliates is bound, or to which any
of the properties of the Company or any of its affiliates is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the Company,
or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized
and on the date of issuance and on the Closing Date, as hereinafter defined, and
the date the Note is converted, and the Warrants are exercised, the Securities
will be duly and validly issued, fully paid and nonassessable (and if registered
pursuant to the 1933 Act, and resold pursuant to an effective registration
statement will be free trading and unrestricted, provided that the Subscriber
complies with the Prospectus delivery requirements);
(iii) will not have been issued or sold in violation of
any preemptive or other similar rights of the holders of any securities of the
Company; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
(h) Litigation. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating hereto.
(i) Reporting Company. The Company is a publicly-held
company whose common stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The Company's
common stock is trading on the NASD OTC Bulletin Board. Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Securities and Exchange
Commission during the preceding twelve months.
(j) No Market Manipulation. The Company has not taken, and
will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the common stock of the Company to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be issued.
(k) Information Concerning Company. The Reports and Other
Written Information contain all material information relating to the Company and
its operations and financial
5
6
condition as of their respective dates which information is required to be
disclosed therein. Since the date of the financial statements included in the
Reports, and except as modified in the Other Written Information, there has been
no material adverse change in the Company's business, financial condition or
affairs not disclosed in the Reports except as disclosed on Schedule 2 hereto.
The Reports and Other Written Information do 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 not misleading.
(l) Dilution. The number of Shares issuable upon conversion
of the Note may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines prior to conversion of the Note. The Company's executive
officers and directors have studied and fully understand the nature of the
Securities being sold hereby 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 conversion of the Note and exercise of the Warrants is binding upon the
Company and enforceable, except as otherwise described in this Subscription
Agreement or the Note, regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
(m) Stop Transfer. The Securities are restricted securities
as of the date of this Agreement. The Company will not issue any stop transfer
order or other order impeding the sale and delivery of the Securities at such
time as the Securities are registered for public sale or an exemption from
registration is available, except as may be agreed to by Subscriber, or required
by federal securities laws.
(n) Defaults. Neither the Company nor any of its
subsidiaries is in violation of its Articles of Incorporation or ByLaws. Neither
the Company nor any of its subsidiaries is (i) in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a material adverse effect on the Company, (ii) in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its knowledge in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(o) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act which would prevent the Company from
selling the Securities pursuant to Rule 506 under the 1933 Act, or any
applicable exchange-related stockholder approval provisions. Nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
(p) No General Solicitation. Neither the Company, nor any
of its affiliates, nor to its knowledge, 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 Act) in connection with the offer
or sale of the Securities.
(q) Listing. The Company's Common Stock is listed for
trading on the NASD OTC Bulletin Board and satisfies all requirements for the
continuation of such listing. The
6
7
Company has not received any notice that its common stock will be delisted from
the NASD OTC Bulletin Board or that the Common Stock does not meet all
requirements for the continuation of such listing.
(r) Correctness of Representations. The Company represents
that the foregoing representations and warranties are true and correct as of the
date hereof in all material respects, will be true and correct as of the Closing
Date, and, unless the Company otherwise notifies the Subscriber prior to the
Closing Date, shall be true and correct in all material respects as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
3. Regulation D Offering. This Offering is being made pursuant
to the exemption from the registration provisions of the Securities Act of 1933,
as amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Warrants.
4. Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to dispose of such Securities pursuant to Rule 144(k) under the Act, or (b) upon
resale subject to an effective registration statement after the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested representations from the Subscriber and
selling broker, if any.
5. Redemption. The Company may not redeem the Securities
without the consent of the holder of the Securities except as otherwise
described herein.
6. Fees/Warrants.
(a) The Company shall pay to counsel to the Subscriber its
fees, up to a maximum of $25,000 ($5,000 of which has already been paid) for
services rendered to Subscribers in connection with this Agreement and the other
Subscription Agreements for aggregate subscription amounts of up to $1,000,000
(the "Initial Offering") and the initial aggregate $1,000,000 of Section 11.2(e)
Put Amount set forth on the signature page hereto, and acting as escrow agent
for the Initial Offering and Section 11.2(e) Put Amount. The Company will pay a
cash fee in the amount of ten percent (10%) of the Purchase Price and Put
Purchase Price defined in Section 11.1(a) hereto, and set forth on the signature
page hereto ("Finder's Fee") and of the actual cash proceeds received by the
Company in connection with the exercise of the Warrants issued in connection
with the Initial Offering ("Initial Warrants"), and Warrants issuable in
connection with the balance of the Put ("Put Warrants") ("Warrant Exercise
Compensation") to the Finders identified on Schedule B hereto. Collectively, the
Initial Warrants, 11.2(e) Warrants and Put Warrants are referred to herein as
Warrants. The Finder's Fee must be paid each Closing Date and Put Closing Date
with respect to the Notes subscribed and sold on such date. The Warrant Exercise
Compensation must be paid within ten (10) days of Warrant exercise to the
Finders identified on Schedule B hereto. The Finder's Fee and legal fees will be
payable out of funds held pursuant to a Funds Escrow Agreement to be entered
into by the Company, Subscriber and an Escrow Agent.
7
8
(b) The Company will also issue and deliver to the Warrant
Recipients identified on Schedule B hereto, Warrants in the amounts designated
on Schedule B hereto in connection with the Initial Offering and exercise of the
Put. A form of Warrant is annexed hereto as Exhibit D. The per share "Purchase
Price" of Common Stock as defined in the Warrant shall be equal to the lowest
closing price of the Common Stock for the ten (10) trading days preceding but
not including the Closing Date or Put Closing Date, as the case may be, as
reported on the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National
Market System, American Stock Exchange, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or market for the
Common Stock, the "Principal Market"), or such other principal market or
exchange where the Common Stock is listed or traded. The Company shall issue
common stock purchase warrants in connection with the 11.2(e) Amount defined in
Section 11.2(e) and set forth on the signature page hereto. The aggregate number
of Common Shares purchasable upon exercise of the Initial Put Warrants is set
forth on Schedule B hereto. The aggregate number of Common Shares purchasable
upon exercise of the 11.2(e) Warrants is set forth on Schedule B hereto. The
number of Common Shares issuable upon exercise of the balance of the Put
Warrants is equal to 12% of the Common Shares to be issued upon conversion of
the final $15,000,000 of Put Notes, to the extent actually sold by the Company,
in the aggregate by all Subscribers to the Initial Offering. The Initial
Warrants must be delivered at the Closing Date. The Put Warrants must be
delivered no later than the Delivery Date (defined in Section 9.1(b) hereof) in
relation to the relevant Conversion Date. Failure to timely deliver the Warrant
Exercise Compensation or the Warrants shall be deemed an Event of Default as
defined in Article III of the Note and Put Note.
(c) The Finder's Fee and legal fees will be paid to the
Finders and attorneys only when, as, and if a corresponding subscription amount
is released from escrow to the Company and out of the escrow proceeds. All the
representations, covenants, warranties, undertakings, and indemnification, other
rights including but not limited to registration rights, and rights in Section 9
hereof, made or granted to or for the benefit of the Subscriber are hereby also
made and granted to the Warrant Recipients in respect of the Warrants and
Company Shares issuable upon exercise of the Warrants.
7.1. Covenants of the Company. The Company covenants and
agrees with the Subscriber as follows:
(a) The Company will advise the Subscriber, promptly
after it receives notice of issuance by the Securities and Exchange Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) The Company shall promptly secure the listing of the
Company Shares, and Common Stock issuable upon the exercise of the Warrants upon
each national securities exchange, or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any other shares of Common
Stock shall be so listed. The Company will maintain the listing of its Common
Stock on a Principal Market, and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company will provide the Subscriber copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market.
(c) The Company shall notify the SEC, NASD and applicable
state authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement,
8
9
and shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscriber and promptly provide copies thereof
to Subscriber.
(d) Until at least two (2) years after the effectiveness
of the Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will (i) cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, (ii) comply in all respects with its reporting and filing obligations under
the Exchange Act, (iii) comply with all reporting requirements that is
applicable to an issuer with a class of Shares registered pursuant to Section
12(g) of the Exchange Act, and (iv) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will not
take any action or file any document (whether or not permitted by the Act or the
Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said Acts
until the later of (y) two (2) years after the effective date of the
Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, or (z) the sale by the Subscribers of all
the Company Shares issuable by the Company pursuant to this Agreement. Until at
least two (2) years after the Warrants have been exercised, the Company will use
its commercial best efforts to continue the listing of the Common Stock on the
NASD OTC Bulletin Board and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and NASDAQ.
(e) The Company undertakes to use the proceeds of the
Subscriber's funds for working capital purposes generally, and as may be
determined by the Company's Board of Directors, acting in their fiduciary
capacity on behalf of the Company, and expenses of this offering.
8. Covenants of the Company and Subscriber Regarding
Idemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend Subscriber, Subscriber's officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon Subscriber or any such person
which results, arises out of or is based upon (i) any misrepresentation by
Company or breach of any warranty by Company in this Agreement or in any
Exhibits or Schedules attached hereto; or (ii) after any applicable notice
and/or cure periods, any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company at all times against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (a) any misrepresentation by Subscriber
in this Agreement or in any Exhibits or Schedules attached hereto; or (b) after
any applicable notice and/or cure periods, any breach or default in performance
by Subscriber of any covenant or undertaking to be performed by Subscriber
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.
(c) The procedures set forth in Section 10.6 shall apply
to the indemnifications set forth in Sections 8(a) and 8(b) above.
9
10
9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof, the
Company shall, at its own cost and expense, take all necessary action (including
the issuance of an opinion of counsel) to assure that the Company's transfer
agent shall issue stock certificates in the name of Subscriber (or its nominee)
or such other persons as designated by Subscriber and in such denominations to
be specified at conversion representing the number of shares of common stock
issuable upon such conversion. The Company warrants that no instructions other
than these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that the Shares will be unlegended, free-trading, and
freely transferable, and will not contain a legend restricting the resale or
transferability of the Company Shares provided the Shares are being sold
pursuant to an effective registration statement covering the Shares to be sold
or are otherwise exempt from registration when sold.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note or part thereof by telecopying an
executed and completed Notice of Conversion (as defined in the Note) to the
Company. The Subscriber will not be required to surrender the Note until the
Note has been fully converted or satisfied. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the provisions hereof
shall be deemed a Conversion Date. The Company will or cause the transfer agent
to transmit the Company's Common Stock certificates representing the Shares
issuable upon conversion of the Note (and a Note representing the balance of the
Note not so converted, if requested by Subscriber) to the Subscriber via express
courier for receipt by such Subscriber within six business days after receipt by
the Company of the Notice of Conversion (the "Delivery Date"). To the extent
that a Subscriber elects not to surrender a Note for reissuance upon partial
payment or conversion, the Subscriber hereby indemnifies the Company against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note.
(c) The Company understands that a delay in the delivery
of the Shares in the form required pursuant to Section 9 hereof, or the
Mandatory Redemption Amount described in Section 9.2 hereof, beyond the Delivery
Date or Mandatory Redemption Payment Date (as hereinafter defined) could result
in economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay late payments to the Subscriber for late
issuance of Shares in the form required pursuant to Section 9 hereof upon
Conversion of the Note or late payment of the Mandatory Redemption Amount, in
the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Note principal
amount being converted or redeemed. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand. Furthermore, in
addition to any other remedies which may be available to the Subscriber, in the
event that the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment Date, the
Subscriber will be entitled to revoke all or part of the relevant Notice of
Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and the
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that late payment charges described
above shall be payable through the date notice of revocation or rescission is
given to the Company.
(d) Nothing contained herein or in any document referred
to herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of
10
11
interest or dividends required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.
9.2. Mandatory Redemption. In the event the Company is
prohibited from issuing Shares on a Delivery Date or at any time when the Note
is converted, for any reason other than pursuant to the limitations set forth in
Section 9.3 hereof, then at the Subscriber's election, the Company must pay to
the Subscriber five (5) business days after request by the Subscriber or on the
Delivery Date (if requested by the Subscriber) a sum of money determined by
multiplying the principal of the Note required to be converted and not so
converted by 130%, together with accrued but unpaid interest thereon ("Mandatory
Redemption Payment"). The Mandatory Redemption Payment must be received by the
Subscriber on the same date as the Company Shares otherwise deliverable or
within five (5) business days after request, whichever is sooner ("Mandatory
Redemption Payment Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal and interest will be deemed paid and no longer
outstanding.
9.3. Maximum Conversion. The Subscriber shall not be entitled
to convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this proviso is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of Common Stock of the Company on such Conversion Date.
For the purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99%. The Subscriber may void the conversion limitation
described in this Section 9.3 upon 75 days prior notice to the Company. The
Subscriber may allocate which of the equity of the Company deemed beneficially
owned by the Subscriber shall be included in the 9.99% amount described above
and which shall be allocated to the excess above 9.99%.
9.4. Injunction - Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof, the Company may not refuse
conversion based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law,
unless, an injunction from a court, on notice, restraining and or enjoining
conversion of all or part of said Note shall have been sought and obtained and
the Company posts a surety bond for the benefit of such Subscriber in the amount
of 130% of the amount of the Note, which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of
the dispute and the proceeds of which shall be payable to such Subscriber to the
extent it obtains judgment.
9.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if after the
Delivery Date the Subscriber purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of the Common Stock which the Subscriber anticipated receiving upon
such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which
11
12
amount shall be paid as liquidated damages and not as a penalty). For example,
if the Subscriber purchases shares of Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000
of note principal and/or interest, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.
9.6. Optional Redemption. The Company will have the option of
redeeming the Note and Put Notes ("Optional Redemption") by paying to the
Subscriber a sum of money determined by multiplying the principal amount of the
Note or Put Note by 130% together with accrued but unpaid interest thereon
("Redemption Amount") outstanding on the day notice of redemption ("Notice of
Redemption) is given to a Subscriber ("Redemption Date"). A Notice of Redemption
may not be given in connection with any portion of Note or Put Note for which
notice of conversion has been given by the Subscriber at any time before receipt
of a Notice of Redemption. The Subscriber may elect within three (3) business
days after receipt of a Notice of Redemption to give the Company Notice of
Conversion in connection with some or all of the Note and Put Note principal and
interest which was the subject of the Notice of Redemption. A Notice of
Redemption must be accompanied by a certificate signed by the chief executive
officer or chief financial officer of the Company stating that the Company has
on deposit and segregated ready funds equal to the Redemption Amount. The
Redemption Amount must be paid in good funds to the Subscriber no later than the
sixth business day after the Redemption Date. In the event the Company fails to
pay the Redemption Amount by such date, then the Redemption Notice will be null
and void and the Company will thereafter have no further right to effect an
Optional Redemption. Such failure will also be deemed an Event of Default under
the Note and Put Note. Any Notice of Redemption must be given to all holders of
Notes and Put Notes issued in connection with the Initial Offering, in
proportion to their holdings of Note and Put Note principal on a Redemption
Date. A Notice of Redemption may be given by the Company, provided (i) no Event
of Default, as described in the Note shall have occurred or be continuing; and
(ii) the Company Shares issuable upon conversion of the full outstanding Note
and Put Note principal are included in a registration statement effective as of
the Redemption Date and the average closing price of the common stock on the
Principal Market for the twenty-two (22) consecutive trading days prior to the
Redemption Date is not less than 300% of the Conversion Price in effect on the
Redemption Date and the daily trading volume during such period is not less than
600,000 Common Shares per day. Only one Notice of Redemption may be given to the
Subscriber.
10.1. Registration Rights. The Company hereby grants the
following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 126 days
after the Closing Date, but not later than three years after the Closing Date
("Request Date"), the Company, upon a written request therefor from any record
holder or holders of more than 50% of the aggregate of the Company's Shares
issued and issuable upon Conversion of the Note and the Put Notes which are
actually issued (the Common Stock issued or issuable upon conversion or exercise
of the Securities, Put Securities and securities issued or issuable by virtue of
ownership of the Securities, and Put Securities, being, the "Registrable
Securities"), shall prepare and file with the SEC a registration statement under
the Act covering the Registrable Securities which are the subject of such
request, unless such Registrable Securities are the subject of an effective
registration statement. In addition, upon the receipt of such request, the
Company shall promptly give written notice to all other record holders of the
Registrable Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it has
received written requests within 10 days after the Company gives such written
notice. Such other requesting record holders shall be deemed to have exercised
their demand registration right under this Section 10.1(i). As a condition
precedent to the inclusion of Registrable
12
13
Securities, the holder thereof shall provide the Company with such information
as the Company reasonably requests. The obligation of the Company under this
Section 10.1(i) shall be limited to one registration statement.
(ii) If the Company at any time proposes to register any
of its securities under the Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscriber or Holder pursuant to an effective registration statement, each
such time it will give at least 30 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request of the holder, received by the Company within 30 days after the giving
of any such notice by the Company, to register any of the Registrable
Securities, the Company will cause such Registrable Securities as to which
registration shall have been so requested to be included with the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the "Seller"). In the event that any registration pursuant to this
Section 10.1(ii) shall be, in whole or in part, an underwritten public offering
of common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the underwriter shall
reasonably be of the opinion that such inclusion would adversely affect the
marketing of the securities to be sold by the Company therein; provided,
however, that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the forgoing provisions, or Section 10.4 hereof, the
Company may withdraw or delay or suffer a delay of any registration statement
referred to in this Section 10.1(ii) without thereby incurring any liability to
the Seller.
(iii) If, at the time any written request for
registration is received by the Company pursuant to Section 10.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account, such
written request shall be deemed to have been given pursuant to Section 10.1(ii)
rather than Section 10.1(i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed by Section
10.1(ii).
(iv) The Company shall file with the Commission within
90 days of the Closing Date (the "Filing Date"), and use its reasonable
commercial efforts to cause to be declared effective a Form SB-2 registration
statement (or such other form that it is eligible to use) within 125 days of the
Closing Date in order to register the Registrable Securities for resale and
distribution under the Act. The registration statement described in this
paragraph must be declared effective by the Commission within 125 days of the
Closing Date (as defined herein) ("Effective Date"). The Company will register
not less than a number of shares of Common Stock in the aforedescribed
registration statement that is equal to 200% of the Company Shares issuable at
the Conversion Price that would be in effect on the Closing Date or the date of
filing of such registration statement (employing the Conversion Price which
would result in the greater number of Shares), assuming the conversion of 100%
of the Notes and one-third of the Put Notes which are issuable, and one share of
common stock for each common share issuable upon exercise of the Initial
Warrants and Put Warrants which are issuable in connection with one-third of the
Put, employing the Conversion Price that would result in the greater number of
Shares. The Registrable Securities shall be reserved and set aside exclusively
for the benefit of the Subscriber and Warrant Recipients, as the case may be,
and not issued, employed or reserved for anyone other than the Subscriber and
Warrant Recipients. Such registration statement will be promptly amended or
additional registration statements will be promptly filed by the Company as
necessary to register additional Company Shares to allow the public resale of
all Common Stock included in and issuable by virtue of the
13
14
Registrable Securities. No securities of the Company other than the Registrable
Securities will be included in the registration statement described in this
Section 10.1(iv).
10.2. Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any shares of
Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of Registrable Securities copies of all filings and
Commission letters of comment;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective until the latest of: (i) six months after the latest exercise period
of the Warrants; (ii) twelve months after the Maturity Date of the Note or Put
Note; or (iii) two years after the Closing Date, but in no event beyond the date
upon which all Registrable Securities are sold and comply with the provisions of
the Act with respect to the disposition of all of the Registrable Securities
covered by such registration statement in accordance with the Seller's intended
method of disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if
any, such number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such persons
reasonably may request in order to facilitate the public sale or their
disposition of the securities covered by such registration statement;
(d) use its best efforts to register or qualify the
Seller's Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction or subject itself to
taxation;
(e) list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Seller and each underwriter
under such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act, of the happening of any event of
which the Company has knowledge as a result of which the prospectus contained in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably
14
15
requested by the seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for
registration has been made pursuant to Section 10.1(i) or a request for
registration has been made pursuant to Section 10.1(ii), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 10.
(b) In connection with each registration hereunder, the
Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public
offering, the Company and the Seller agree to enter into a written agreement
with the managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber
agree that the Seller will suffer damages if any registration statement required
under Section 10.1(i) or 10.1(ii) above is not filed within 60 days after
written request by the Holder and not declared effective by the Commission
within 120 days after such request [or the Filing Date and Effective Date,
respectively, in reference to the Registration Statement on Form SB-2 or such
other form described in Section 10.1(iv)], and maintained in the manner and
within the time periods contemplated by Section 10 hereof, and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(i) the Registration Statement described in Sections 10.1(i) or 10.1(ii) is not
filed within 60 days of such written request, or is not declared effective by
the Commission on or prior to the date that is 120 days after such request, or
(ii) the registration statement on Form SB-2 or such other form described in
Section 10.1(iv) is not filed on or before the Filing Date or not declared
effective on or before the sooner of the Effective Date, or within five days of
receipt by the Company of a communication from the Commission that the
registration statement described in Section 10.1(iv) will not be reviewed, or
(iii) any registration statement described in Sections 10.1(i), 10.1(ii) or
10.1(iv) is filed and declared effective but shall thereafter cease to be
effective (without being succeeded immediately by an additional registration
statement filed and declared effective) for a period of time which shall exceed
30 days in the aggregate per year but not more than 20 consecutive calendar days
(defined as a period of 365 days commencing on the date the Registration
Statement is declared effective) (each such event referred to in clauses (i),
(ii) and (iii) of this Section 10.4 is referred to herein as a "Non-Registration
Event"), then, for so long as such Non-Registration Event shall continue, the
Company shall pay in cash as Liquidated Damages to each holder of any
Registrable Securities an amount equal to one (1%) percent for the initial
thirty days or part thereof and two (2%) percent per month or part thereof
thereafter during the pendency of such Non-Registration Event, of (i) the
principal of the Notes issued in connection with the Initial Offering, whether
or not converted; (ii) the principal amount of Put Notes actually issued,
whether or not converted, then owned of record by such holder or issuable as of
or subsequent to the occurrence of such Non-Registration Event. Payments to be
made pursuant to this Section 10.4 shall be due and payable immediately upon
demand in immediately available funds. In the event a Mandatory Redemption
Payment is demanded from the Company by the Holder pursuant to Section 9.2 of
this Subscription Agreement, then the Liquidated Damages described in this
Section 10.4 shall no longer accrue on the portion of the Purchase Price
underlying the Mandatory Redemption Payment, from and after the date the Holder
receives the Mandatory Redemption Payment. It shall be deemed a Non-Registration
Event to the extent that all the Common Stock underlying the
15
16
Registrable Securities is not included in an effective registration statement as
of and after the Effective Date at the Conversion Prices in effect from and
after the Effective Date.
10.5. Expenses. All expenses incurred by the Company in
complying with Section 10, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs
of insurance are called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Seller, are called
"Selling Expenses". The Seller shall pay the fees of its own additional counsel,
if any.
The Company will pay all Registration Expenses in
connection with the registration statement under Section 10. All Selling
Expenses in connection with each registration statement under Section 10 shall
be borne by the Seller and may be apportioned among the Sellers in proportion to
the number of shares sold by the Seller relative to the number of shares sold
under such registration statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the Act pursuant to Section 10, the Company will indemnify and
hold harmless the Seller, each officer of the Seller, each director of the
Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Seller or underwriter within the meaning
of the 1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
was registered under the Act pursuant to Section 10, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable to the Seller to the extent that any such damages
arise out of or are based upon an untrue statement or omission made in any
preliminary prospectus if (i) the Seller failed to send or deliver a copy of the
final prospectus delivered by the Company to the Seller with or prior to the
delivery of written confirmation of the sale by the Seller to the person
asserting the claim from which such damages arise, (ii) the final prospectus
would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (iii) to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Seller, or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the Act pursuant to Section 10, the Seller will
indemnify and hold harmless the Company, and each person, if any, who controls
the Company within the meaning of the Act, each officer of the Company who signs
the registration statement, each director of the Company, each underwriter and
each person who controls any underwriter within the meaning of the Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling
16
17
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Registrable
Securities were registered under the Act pursuant to Section 10, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the gross proceeds received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 10.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 10.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 10.6(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties shall have the right to
select one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the Act in any case in which
either (i) the Seller, or any controlling person of the Seller, makes a claim
for indemnification pursuant to this Section 10.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10.6 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of the
Seller or controlling person of the Seller in circumstances for which
indemnification is provided under this Section 10.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by
17
18
the registration statement bears to the public offering price of all securities
offered by such registration statement, provided, however, that, in any such
case, (A) the Seller will not be required to contribute any amount in excess of
the public offering price of all such securities offered by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
11.1. Obligation To Purchase.
(a) The Subscriber agrees to purchase from the Company
convertible notes ("Put Notes") in up to the principal amount set forth on the
signature page hereto for up to the aggregate amount of Put Note principal ("Put
Purchase Price") designated on the signature page hereto (the "Put").
Collectively the Put Notes, Warrants issuable in connection with the Put, and
Common Stock issuable upon conversion of the Put Notes and exercise of the
Warrants are referred to as the "Put Securities".) The Warrants issuable in
connection with the Put Notes are referred to herein as Warrants or Put
Warrants. Except as described in Section 11.1(c) hereof, each Put Note will be
identical to the Note except that the Maturity Date will be three years from
each Put Closing Date (as hereinafter defined). The Holders of the Put
Securities are granted all the rights, undertakings, remedies, liquidated
damages and indemnification granted to the Subscriber in connection with the
Note, including but not limited to, the rights and procedures set forth in
Section 9 hereof and the registration rights described in Section 10 hereof.
(b) The agreement to purchase the Put Notes is
contingent on the following any, some or all of which may be waived by the
Subscriber:
(i) As of a Put Date and Put Closing Date (as
hereinafter defined), the Common Shares issuable upon conversion of a Put Note
and exercise of Put Warrants must be included in an effective registration
statement described in Section 10 hereof.
(ii) As of a Put Date and Put Closing Date, the
Company will be a reporting company with the class of Shares registered pursuant
to Section 12(g) of the Securities Exchange Act of 1934.
(iii) No material adverse change in the Company's
business or business prospects shall have occurred after the date of the most
recent financial statements included in the Reports. Material adverse change is
defined as 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 interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, or any other agreement entered into or to be entered into in
connection herewith, in any material respect. There shall not have been a
material negative restatement of the Company's financial statements included in
the Reports.
18
19
(iv) An Event of Default as described in Article III
of the Note shall not have occurred.
(v) The execution and delivery to the Subscriber of
a certificate signed by its chief executive officer representing the truth and
accuracy of all the Company's representations and warranties contained in this
Subscription Agreement as of the Put Date, and Put Closing Date and confirming
the undertakings contained herein, and representing the satisfaction of all
contingencies and conditions required for the exercise of the Put.
(vi) The Company's listing on, and compliance with
the listing requirements of the Principal Market.
(vii) The Company's not having received notice from
the OTC Bulletin Board, (or any Principal Market) that the Company is not in
compliance with the requirements for continued listing.
(viii) The execution by the Company and delivery to
the Subscriber of all required documents in relation to the Put set forth in
Section 11.2 below and such other documents which may be reasonably requested by
the Subscriber.
(c) Subject to the adjustments set forth in the Note,
the Conversion Price of the Put Note shall be as follows:
(i) The Conversion Price of the initial 6-1/4% of
the aggregate Put Note Purchase Price set forth on the signature page hereto
shall be the lesser of (i) 85% of the average of the three lowest closing prices
of the Common Stock on the Principal Market for the thirty (30) trading days
prior to the Closing Date, or (ii) 78% of the average of the three lowest
closing prices of the Common Stock on the Principal Market for the ninety (90)
trading days prior to the Conversion Date, as defined in the Note. The Maturity
Date of the Put Notes shall be three years from the respective Put Closing
Dates.
(ii) The Conversion Price of the balance of the Put
Note Purchase Price shall be 82% of the average of the three lowest closing
prices of the Common Stock on the Principal Market for the ten (10) trading days
prior to the Conversion Date.
11.2. Exercise of Put.
(a) The Company's right to exercise the Put commences on
the actual effective date of the registration statement described in Section
10.1(iv) hereof and expires three (3) years after the Effective Date ("Put
Exercise Period").
(b) The Put may be exercised by the Company by giving
the Subscriber written notice of exercise ("Put Notice") not more often than one
time each calendar month during the Put Exercise Period in relation to up to the
maximum principal amount of Put Note that the Subscriber has agreed to purchase
subject to the limits described in this Agreement. The date a Put Notice is
given is a Put Date. Each Put Notice must be accompanied by (i) the officer's
certificate described in Section 11.1(b)(v) above; (ii) a legal opinion relating
to the Put Securities in form reasonably acceptable to
19
20
Subscriber substantially similar to the opinion annexed hereto as Exhibit C; and
(iii) such other documents and certificates reasonably requested by the
Subscriber.
(c) Unless otherwise agreed to by the Subscribers, Put
Notices must be given to all Subscribers in proportion to the amounts agreed to
be purchased by all Subscribers undertaking to purchase Put Notes in the Initial
Offering.
(d) Payment by the Subscriber in relation to a Put
Notice relating to a Put must be made within fourteen (14) business days after
receipt of a Put Notice and the items set forth in Section 11.2(b) above.
Payment will be made against delivery to the Subscriber or an escrow agent to be
agreed upon by the Company and Subscriber, of the Put Securities, and delivery
to the Finders of the Put Commissions relating to the Put being exercised which
the Company may elect to be paid out of funds deposited with the escrow agent.
(e) Maximum Put Exercise. The Company may not give the
Subscriber a Put Notice in connection with that amount of Put Note which could
be converted as of the Put Date into a number of shares of Common Stock which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Subscriber and its affiliates on such Put Date, and
(ii) the number of shares of Common Stock issuable upon the conversion of the
Put Note with respect to which the determination of this proviso is being made
on a Put Date, which would result in beneficial ownership by the Subscriber and
its affiliates of more than 9.99% of the outstanding shares of Common Stock of
the Company on such Put Date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Subject to the foregoing, the Subscriber shall not be limited
to aggregate conversions of only 9.99%. The Subscriber may revoke the
restriction described in this paragraph upon 75 days prior notice to the
Company. The Subscriber shall have the right to determine which of the equity of
the Company deemed beneficially owned by the Subscriber shall be included in the
9.99% described above and which shall be allocated to the excess above 9.99%.
The aggregate amount of all Put Notices to all Subscribers of the Initial
Offering may not exceed $16,000,000. The aggregate maximum principal amount of
Put Notes for which Put Notices may be given during any calendar month to all
Subscribers in the Initial Offering may not exceed twelve (12%) of the daily
closing prices of the Common Stock reported on a Principal Market, during the
calendar month prior to the giving of the Put Notice, multiplied by the
aggregate reported trading volume of the Company's Common Stock during such
prior month ("Trading Volume Limitation"). The foregoing Trading Volume
Limitation notwithstanding and provided all other preconditions to Put exercise
are satisfied, the Company may exercise the Put for up to the amount designated
on the signature page hereto as "Section 11.2(e) Put Amount" during the first
thirty (30) days following the actual effective date of the registration
statement described in Section 10.1(iv) hereof. In any event, the Conversion
Price of the initial Put Purchase Price amount equal to the Section 11.2(e)
amount shall be the same Conversion Price as for the Notes issued in the Initial
Offering.
11.3. Put Finders Fees. The Finders identified on Schedule B
hereto shall receive on each Put Closing Date aggregate Finder's Fees as
described in Section 6 hereof in connection with the closing of each Put as set
forth on Schedule B hereto. Put Finder's Fees shall be payable only in
connection with the Put Purchase Price actually paid by a Subscriber. The Put
Finder's Fees and reasonable legal fees for counsel to the Subscriber shall be
paid at each Put Closing. The maximum legal fee to be paid by the Company to one
counsel for the Subscribers to the Initial Offering is $2,500 per Put Closing.
20
21
11.4. Warrants.
(a) The Company shall issue Put Warrants to the Warrant
Recipients in the amounts designated on Schedule B hereto and as described in
Section 6 of this Subscription Agreement. The Put Warrants will be in the form
of Exhibit D hereto. The Put Warrants will be exercisable immediately upon
issuance and for five years thereafter.
(b) In the event, for any reason except for Subscriber's
unwillingness to purchase greater amounts of Put Notes because of the beneficial
ownership limitations of Section 11.2(e), the Put in the amount of at least 25%
of the Put Note Purchase Price set forth on the signature page ("One-Quarter Put
Amount") has not been exercised as of the first anniversary of the Effective
Date, then the Company will issue Put Warrants to the Warrant Recipients in an
amount determined by subtracting the actual amount of Put Note Principal for
which Put Notices have been validly given from the One-Quarter Put Amount (the
result being the "Unexercised Put") and issuing Put Warrants in connection with
such Unexercised Put as if the amount of Put Notes issuable in connection with
the Unexercised Put were actually issued and the first anniversary of the
Closing Date was the Conversion Date of such Put Notes.
(c) In the event, for any reason except for Subscriber's
unwillingness to purchase greater amounts of Put Notes because of the beneficial
ownership limitations of Section 11.2(e), the Put in the amount of 50% of the
Put Note Purchase Price set forth on the signature page hereto ("One-Half Put
Amount") has not been exercised as of the second anniversary of the Effective
Date, then the Company will issue Put Warrants to the Warrant Recipients in an
amount determined by subtracting the actual amount of Put Note Principal for
which Put Notices have been validly given and the amount of Put Note Principal
deemed converted pursuant to Section 11.4(b) above from the One-Half Put Amount
(the result being the "Interim Unexercised Put") and issuing Put Warrants in
connection with such Interim Unexercised Put as if the amount of Put Notes
issuable in connection with the Interim Unexercised Put were actually issued and
the second anniversary of the Closing Date was the Conversion Date of such Put
Notes.
(d) In the event, for any reason except for Subscriber's
unwillingness to purchase greater amounts of Put Notes because of the beneficial
ownership limitations of Section 11.2(e), the Put in the amount of 75% of the
Put Note Purchase Price set forth on the signature page hereto ("Three-Quarter
Put Amount") has not been exercised as of the third anniversary of the Effective
Date, then the Company will issue Put Warrants to the Warrant Recipients in an
amount determined by subtracting the actual amount of Put Note Principal for
which Put Notices have been validly given and the amount of Put Note Principal
deemed converted pursuant to Sections 11.4(b) and (c) above from the
Three-Quarter Put Amount (the result being the "Second Interim Unexercised Put")
and issuing Put Warrants in connection with such Second Interim Unexercised Put
as if the amount of Put Notes issuable in connection with the Second Interim
Unexercised Put were actually issued and the third anniversary of the Closing
Date was the Conversion Date of such Put Notes.
(e) In the event the Company has properly given a Put
Notice and the Subscriber has wrongfully failed to comply with the Put Notice
then the Put Warrants will not be issuable in connection with such defaulted
amounts.
(f) Failure to timely pay Finder's Fees, legal fees or
deliver any Warrants issuable in connection with the Initial Offering and Put
shall be deemed an Event of Default under the Note and a material breach of the
Company's obligations hereunder, for which no notice to cure is required.
21
22
11.5 Assignment of Put. Anything to the contrary herein
notwithstanding, the Subscriber may assign to another party, reasonably
acceptable to the Company, either before or after exercise of the Put by the
Company, the Subscriber's obligations and right to pay all or some of the Put
Purchase Price and receive the corresponding Put Securities. Such assignment
must be in writing. The assignment will be effective only if the assignee
consents in writing to be bound by all of the Subscriber's obligations to the
Company in connection with such assignment. Upon an effective assignment, the
assignee will succeed to all of the Subscriber's rights under this Subscription
Agreement, and all other agreements relating to the assigned portion of the Put.
11.6 Adjustments. The Conversion Price shall be adjusted
consistent with customary anti-dilution adjustments.
12. (a) Right of First Refusal. Until 120 days after the
effective date of the Registration Statement described in Section 10.1(iv)
hereof, the Subscriber shall be given not less than ten (10) business days prior
written notice of any proposed sale by the Company of its common stock or other
securities or debt obligations except as disclosed in the Reports or Other
Written Information or stock or stock options granted to employees or directors
of the Company; or equity or debt issued in connection with an acquisition of a
business or assets by the Company; or the issuance by the Company of stock in
connection with the establishment of a joint venture partnership or licensing
arrangement (these exceptions hereinafter referred to as the "Excepted
Issuances"). The Subscriber shall have the right during the ten (10) business
days following the notice to agree to purchase an amount of Company Shares in
the same proportion as being purchased in the Initial Offering of those
securities proposed to be issued and sold, in accordance with the terms and
conditions set forth in the notice of sale. In the event such terms and
conditions are modified during the notice period, the Subscriber shall be given
prompt notice of such modification and shall have the right during the original
notice period or for a period of ten (10) business days following the notice of
modification, whichever is longer, to exercise such right. In the event the
right of first refusal described in this Section is exercised by the Subscriber
and the Company thereby receives net proceeds from such exercise, then
commissions and fees will be paid by the Company to the Finders in the same
amounts as specified in the notice of sale.
(b) Offering Restrictions. Except with respect to
securities otherwise disclosed in the Reports or Other Written Information, the
Company will not issue any equity, convertible debt or other securities which
are or could be (by conversion or registration) free-trading securities prior to
the expiration of 180 days from the actual effective date of the registration
statement described in Section 10.1(iv) above (the "Exclusion Period"). This
restriction shall not prohibit the Company from issuing any equity, convertible
debt or other securities prior to the expiration of the Exclusion Period,
provided that such equity, convertible debt or other securities are restricted
securities when issued and remain restricted until the expiration of the
Exclusion Period.
13. Miscellaneous.
(a) Notices. All notices or other communications given or
made hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section: (i) if to the Company, to
Cambio, Inc., 0000 Xxxxx Xxxx, Xxxxx 000, Xx Xxxx, XX 00000, telecopier number:
(000) 000-0000, with a copy by telecopier only to Fulbright & Xxxxxxxx L.L.P.,
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxxx Xxxxxxxx, Esq., telecopier
number: (000) 000-0000, and (ii) if to the Subscriber, to the name, address and
telecopy number set forth
22
23
on the signature page hereto, with a copy by telecopier only to Grushko &
Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000,
telecopier number: (000) 000-0000.
(b) Closing. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko & Xxxxxxx, P.C.,
000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of
all conditions to Closing set forth in this Agreement. The closing date shall be
the date that subscriber funds representing the net amount due the Company from
the Purchase Price are transmitted by wire transfer to the Company (the "Closing
Date"). The closing date for the Put shall be the date on which Subscriber funds
representing the net amount due the Company from the Put Purchase Price is
transmitted to or on behalf of the Company ("Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement
represents the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by a writing executed by both
parties. No right or obligation of either party shall be assigned by that party
without prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The
Company and Subscriber acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(g) Confidentiality. The Company agrees that it will not
disclose publicly or privately the identity of the Subscriber unless expressly
agreed to in writing by the Subscriber or only to the extent required by law.
23
24
(h) Automatic Termination. This Agreement shall
automatically terminate without any further action of either party hereto if the
Closing shall not have occurred by the tenth (10th) business day following the
date this Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
24
25
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
CAMBIO, INC.
By:
------------------------------------
Dated: , 2000
----------
Purchase Price: $170,000.00
PUT
Put Note Purchase Price (aggregate): $2,720,000.00
Section 11.2(e) Put Amount: $170,000.00
ACCEPTED: Dated as of , 2000
-------------
THE KESHET FUND, L.P.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
By:
--------------------------------
25
26
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
CAMBIO, INC.
By:
------------------------------------
Dated: , 2000
----------
Purchase Price: $215,000.00
PUT
Put Note Purchase Price (aggregate): $3,440,000.00
Section 11.2(e) Put Amount: $215,000.00
ACCEPTED: Dated as of , 2000
------------
KESHET L.P.
Ragnall House, 00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0 0X0, Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
By:
------------------------------
26
27
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
CAMBIO, INC.
By:
------------------------------------
Dated: , 2000
----------
Purchase Price: $110,000.00
PUT
Put Note Purchase Price (aggregate): $1,760,000.00
Section 11.2(e) Put Amount: $110,000.00
ACCEPTED: Dated as of , 2000
-------------
NESHER LTD.
Ragnall House, 00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0 0X0, Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
By:
--------------------------------
27
28
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
CAMBIO, INC.
By:
------------------------------------
Dated: , 2000
----------
Purchase Price: $105,000.00
PUT
Put Note Purchase Price (aggregate): $1,680,000.00
Section 11.2(e) Put Amount: $105,000.00
ACCEPTED: Dated as of , 2000
-------------
TALBIYA B. INVESTMENTS LTD.
Ragnall House, 00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0 0X0, Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
By:
--------------------------------
28
29
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
CAMBIO, INC.
By:
------------------------------------
Dated: , 2000
----------
Purchase Price: $400,000.00
PUT
Put Note Purchase Price (aggregate): $6,400,000.00
Section 11.2(e) Put Amount: $400,000.00
ACCEPTED: Dated as of , 2000
-------------
ESQUIRE TRADE & FINANCE INC.
Trident Xxxxxxxx
X.X. Xxx 000
Xxxx Xxxx, Xxxxxxx, B.V.I.
Fax: 000-00-00-000-0000
By:
-------------------------------
29
30
SCHEDULE B TO SUBSCRIPTION AGREEMENT
INITIAL OFFERING - CASH
FINDERS FINDER'S FEES PUT CASH FINDER'S FEES
------- ----------------------- ----------------------
ALON ENTERPRISES LTD. $64,000.00 (64%) $1,024,000.00 (64%)
THE BODIE INVESTMENT GROUP $20,000.00 (20%) $320,000.00 (20%)
LIBRA FINANCE, S.A. $16,000.00 (16%) $256,000 (16%)
--------------- ------------------
TOTAL $100,000 (100%) $1,600,000 (100%)
PROPORTIONATE SHARE OF AGGREGATE WARRANTS ISSUABLE
PUT WARRANTS IN
CONNECTION WITH INITIAL
$1,000,000 OF AGGREGATE
PUT FUNDS * ("11.2(e)
WARRANT RECIPIENTS INITIAL WARRANTS WARRANTS") PUT WARRANTS **
------------------ ---------------- ------------------------ ---------------
TALBIYA B. INVESTMENTS LTD. 750,000 750,000 60%
LIBRA FINANCE, S.A. 500,000 500,000 40%
--------- --------- ----
TOTAL 1,250,000 1,250,000 100%
* Warrants to purchase 1,250,000 Common Shares will be issued pro rata in
connection with the initial $1,000,000 of Put Purchase Price payable in the
aggregate by all Subscribers to the Initial Offering.
** This column describes the Put Warrants issuable in connection with
$15,000,000 of Put Purchase Price.
WARRANT EXERCISE COMPENSATION
PROPORTIONATE SHARE OF 10% CASH
COMMISSIONS PAYABLE ON
FINDERS WARRANT EXERCISE
------- -------------------------------
ALON ENTERPRISES LTD. 80%
LIBRA FINANCE, S.A. 20%
---
TOTAL 100%
30
