SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
March , 2004, by and among THE PROJECT GROUP, INC., a Nevada corporation (the
"Company" or PJG"), and the subscribers identified on the signature page hereto
(each a "Subscriber" and collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement to provide for the offer and sale by the Company to the
Subscribers of the securities described herein, in reliance upon an exemption
from securities registration afforded by the provisions of Section 4(2), Section
4(6) and/or Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase up to $1,500,000 (the "Purchase Price") of units, ("Units") comprised
of (A) 1500 shares of Series B Convertible Preferred Stock ("Series B Stock")
issued with the terms and conditions contained in the Certificate of Designation
as set forth in Exhibit A annexed hereto and (B) 6,500 common stock purchase
warrants ("Warrants" and together with the shares of Series B Stock, sometimes
referred to as the "Securities") for each share of Series B stock issued to
Subscribers, substantially in the form of Exhibit B annexed hereto;
WHEREAS, parties have hereby agreed that of the Purchase Price,
$750,000 shall be delivered by the Subscribers and released to the Company at
the Initial Closing (as defined herein) and the remaining $750,000 shall be
delivered and released to the Company upon satisfaction of the conditions set
forth in Section 2 hereof;
WHEREAS, the aggregate proceeds of the sale of the Securities
contemplated hereby shall be held in escrow with counsel to the Subscribers
pursuant to the terms of a Funds Escrow Agreement to be executed by the parties
substantially in the form attached hereto as Exhibit C (the "Escrow Agreement').
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
1. Initial Closing.
(a) Subject to the satisfaction or waiver of the terms and conditions
of this Agreement, on the initial closing date ("Initial Closing Date"), each
Subscriber shall purchase and the Company shall sell to each Subscriber, for
consideration of $1,000, (a) 1 share of Series B Stock and (B) 6,500 Warrants.
The aggregate amount of the Units to be purchased by the Subscribers on the
Initial Closing Date ("First Closing Units") shall, in the aggregate, be equal
to the initial closing purchase price of up to $750,000 ("Initial Closing
Price"). The Initial Closing Date shall be the date that subscriber funds
representing the net amount due the Company from the Initial Closing Purchase
Price of the Offering is received by the Escrow Agent by wire transfer or
otherwise to or for the benefit of the Company, and such funds are released to
the Company.
(b) Conditions to First Closing. The occurrence of the First Closing is
expressly contingent on (i) the truth and accuracy, on the Closing Date of the
representations and warranties of the Company and Subscriber contained in this
Agreement, (ii) the filing of the Certificate of Designation for the Series B
Preferred Stock, (iii) delivery of immediately available funds representing the
Purchase Price for the First Closing by the Subscribers, (iv) the delivery by
counsel to the Company of a legal opinion in form and substance acceptable to
the Subscribers, (v) delivery by the Company of the Securities and (vi) deliver
of the Lockup Agreements (as described in Section 8(p) below) .
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2. Second Closing.
(a) Second Closing. The closing date in relation to the second closing
purchase price ("Second Closing Purchase Price") of up to an additional $750,000
shall be the fifth (5th) business day after the Actual Effective Date (the
"Second Closing Date"). Subject to the satisfaction or waiver of the terms and
conditions of this Agreement on the Second Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Unit for each $1,000 of
Purchase Price ("Second Closing Securities"). The aggregate Purchase Price of
the Second Closing Units for all Subscribers shall be equal to the Second
Closing Purchase Price. In no event shall the Second Closing Purchase price be
less than the Initial Closing Purchase Price.
(b) Conditions to Second Closing. The occurrence of the Second Closing
is expressly contingent on (i) the truth and accuracy, on the Effective Date,
Actual Effective Date (as defined in this Agreement) and the Second Closing Date
of the representations and warranties of the Company and Subscriber contained in
this Agreement, (ii) continued compliance with the covenants of the Company set
forth in this Agreement, (iii) the non-occurrence of any default by the Company
of its obligations and undertakings contained in this Agreement, (iv) the
delivery by the Company on the Second Closing Date of the Second Closing
Securities and (v) the Company and Xxxxx Xxxxxxxx shall have entered into an
employment agreement whereby Xx. Xxxxxxxx shall be retained as President and
Chief Executive Officer for a term of at least three years and including such
other terms as may be reasonably acceptable to the Board of Directors.
(c) Second Closing Deliveries. On or before the Second Closing Date,
the Company will deliver the Second Closing Units to the Escrow Agent and each
Subscriber will deliver his portion of the Second Closing Purchase Price to the
Escrow Agent. On the Second Closing Date, the Company will deliver a certificate
("Second Closing Certificate") signed by its chief operating officer or chief
financial officer (i) representing the truth and accuracy of all the
representations and warranties made by the Company contained in this Agreement,
as of the Initial Closing Date, the Actual Effective Date, and the Second
Closing Date, as if such representations and warranties were made and given on
all such dates, (ii) reaffirming the covenants and conditions set forth in
Sections 9, 10, 11, and 12 of this Agreement, and (iii) representing the timely
compliance by the Company with the Company's registration obligations set forth
in Section 11 of this Agreement. A legal opinion nearly identical to the legal
opinion referred to in Section 6 of this Agreement shall be delivered to the
Subscribers at the Second Closing in relation to the Company and Second Closing
Units ("Second Closing Legal Opinion"). The Second Closing Legal Opinion must
also state that all of the Registerable Securities (as defined in this
Agreement) have been included for resale under the Securities Act of 1933, as
amended in an effective registration statement effective as of the Actual
Effective Date and Second Closing Date.
3. Subscriber's Representations and Warranties. Each Subscriber hereby
represents and warrants to and agrees with the Company as to such Subscriber
that:
(a) Information on Company. The Subscriber has been furnished with or has
obtained from the XXXXX Website of the Securities and Exchange Commission (the
"Commission") the Company's Form 10-KSB for the year ended December 31, 2002 as
filed with the Commission, together with all subsequently filed Forms 10- QSB,
8-K, and filings made with the Commission available at the XXXXX website
(hereinafter referred to collectively as the "Reports"). In addition, the
Subscriber has received in writing from the Company such other information
concerning its operations, financial condition and other matters as the
Subscriber has requested in writing (such other information is collectively, the
"Other Written Information"), and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities.
(b) Information regarding Subscriber. The Subscriber is, and will be at the time
of the Second Closing and the date of conversion of the Series B Stock and
exercise of any of the Warrants, 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
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speculative nature and has purchased securities of United States publicly-owned
companies in private placement offerings 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 Securities; Offering. On each Closing Date, the Subscriber will
purchase the Securities as principal for its own account and not with a view to
any distribution thereof. Subscriber hereby acknowledges and understands that
this Agreement is a binding irrevocable commitment to purchase the Securities,
including the Securities to be issued in the Second Closing, subject to the
limited conditions to such Second Closing as described herein. The Subscriber
understands that the offer and sale of the Securities in being conducted on a
"best efforts" basis an there is no guarantee or commitment that the entire
$1,500,000 will be subscribed. Pending the closings, funds will be placed in an
escrow account and will not bear interest on the event of return to the
Subscriber.
(d) Compliance with Securities Act. The Subscriber understands and agrees that
the Securities have not been registered under the 1933 Act or any applicable
state securities laws, 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 representations and warranties of Subscriber contained herein), and that
such Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration. In any event, and subject to compliance with
applicable securities laws, the Subscriber may enter into hedging transactions
with third parties, which may in turn engage in short sales of the Securities in
the course of hedging the position they assume and the Subscriber may also enter
into short positions or other derivative transactions relating to the
Securities, or interests in the Securities, and deliver the Securities, or
interests in the Securities, to close out their short or other positions or
otherwise settle short sales or other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties that in turn may
dispose of these Securities.
(e) Certificate Legend. The certificates representing the Series B Stock, the
Warrants and the shares issuable upon conversion of the Series B Stock and upon
exercise of the Warrants shall bear the following or a substantially similar
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPANY, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(f) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. 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.
(g) Authority; Enforceability. This Agreement and other agreements delivered
together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency,
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fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity; and Subscriber has full legal power and authority
necessary to enter into this Agreement and such other agreements and to perform
its obligations hereunder and under all other agreements entered into by the
Subscriber relating hereto.
(h) Correctness of Representations. Each Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and will be true and correct as of each closing
date and unless a Subscriber otherwise notifies the Company prior to any closing
date, shall be true and correct as of such closing dates.
(i) Commissions and Fees Payable. The Subscriber acknowledges and understands
that First Montauk Securities Corp, shall be entitled to receive the commissions
and other fees and consideration as described in Schedule 5(aa) for serving as
selling agent in connection with the offer and sale of the Securities. These
fees and commissions may also include a warrant solicitation fee equal to 5% of
the aggregate exercise price of the Warrants in the event that the Company seeks
to solicit exercise or redemption of the Warrants. The solicitation fee may only
be paid in compliance with NASD Rule 2710(6)(xii), which provides, in part: (i)
the market price of the common stock must be higher than the exercise price of
the Warrants; (ii) the Warrant cannot be held in a discretionary account; (iii)
the exercise or redemption must be solicited by First Montauk Securities Corp.
and the Subscriber must provide written acknowledgment that the exercise was
solicited and First Montauk Securities Corp. will be receiving compensation.
4. Company Representations and Warranties. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Subscribers
concurrently herewith (the "Disclosure Schedules") the Company represents and
warrants to and agrees with each Subscriber that the following representations
and warranties are true and correct as of the date hereof and shall be true and
correct each closing date:
(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 financial condition of the Company.
(b) Capitalization/Outstanding Stock. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company (including all
Common Stock, classes of preferred stock and options and warrants and other
convertible securities), and all shares of Common Stock reserved for issuance
under the Company's various option and incentive plans, is set forth in Schedule
4(b) of the Disclosure Schedule. Except as set forth in Schedule 4(b) of the
Disclosure Schedule, no securities of the Company are entitled to preemptive or
similar rights, and no person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by this Agreement. Except as a result of the purchase and sale of
the Securities and except as disclosed in Schedule 4(b) of the Disclosure
Schedule, there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
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.
Except as set forth in Schedule 4(b) of the Disclosure Schedule, the issue and
sale of the Securities will not, immediately or with the passage of time,
obligate the Company to issue shares of Common Stock or other securities to any
person (other than the Subscribers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities. All issued and
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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 and the Escrow Agreement and any
other agreements delivered together with this Agreement or in connection
herewith have been duly authorized, executed and delivered by the Company and
are valid and binding agreements enforceable in accordance with their 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 or
the Escrow Agreement and such other agreements delivered together with this
Agreement or in connection herewith and to perform its obligations hereunder and
under 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 on
Schedule 4(d), or the SEC Reports ( as defined in this Agreement).
(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, including without limitation, the OTC Bulletin Board
("Bulletin Board") nor the Company's shareholders is required for the execution
and compliance by the Company of its obligations under this Agreement, and all
other agreements entered into or to be entered into by the Company relating
hereto, including, without limitation, the issuance and sale of the Securities,
and the performance of the Company's obligations hereunder and under all such
other agreements.
(f) No Violation or Conflict. Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company's obligations under this
Agreement and all other agreements entered into by the Company relating hereto
by the Company will:
(g) 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, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its subsidiaries 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 or
subsidiaries is a party, by which the Company or any of its affiliates or
subsidiaries is bound, or to which any of the properties of the Company or any
of its affiliates or subsidiaries 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 or subsidiaries is a party except the
violation, conflict, breach, or default of which would not have a material
adverse effect on the Company; 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, its subsidiaries or any
of its affiliates.
(h) 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
any applicable state securities laws;
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(ii) have been, or will be, duly and validly authorized and on the date of
conversion of the Series B Stock, and upon exercise of the Warrants, the shares
issuable thereon, 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 each
Subscriber complies with the prospectus delivery requirements of the 1933 Act);
(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.
(v) will not result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other debtor or equity
holder of the Company.
(i) Litigation. Except as described in Schedule 4(i), 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. Except as disclosed in the SEC Reports, 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 which
litigation if adversely determined could have a material adverse effect on the
Company.
(j) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement or the issuance of the
Securities, other than (i) the filing with the Commission of one or more
Registration Statements in accordance with the requirements hereof, (ii) any
filings required by state securities laws, (iii) the filing of a Notice of a
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act (iv) those that have been made or obtained prior to the date of
this Agreement.
(k) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Disclosure Schedule, the
"Disclosure Materials") on a timely basis or has timely filed a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained 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 included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
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(l) Press Releases. The press releases disseminated by the Company during the
two (2) years preceding the date of this Agreement do not contain any untrue
statement of a material fact or omit 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 and when made, not misleading.
(m) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for confidential
treatment of information.
(n) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of this Agreement or the Securities or (ii)
except as specifically disclosed in the SEC Reports, could, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the SEC Reports. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
(o) Labor Relations. Except as set forth under the Schedule for clause 4(l), no
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company.
(p) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. The Company is in compliance with the
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the
rules and regulations thereunder, except where such noncompliance could not have
or reasonably be expected to result in a material adverse effect.
(q) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
proceedings
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relating to the revocation or modification of any Material Permit.
(r) No Market Manipulation. The Company will abide by the provisions of SEC
Regulation M.
(s) Stop Transfer. The Securities, when issued, will be restricted securities.
The Company will not issue any stop transfer order or other order impeding the
sale, resale or delivery of any of the Securities, except as may be required by
any applicable federal or state securities laws and unless contemporaneous
notice of such instruction is given to the Subscriber.
(t) No Integrated Offering. Neither the Company, nor any of its subsidiaries or
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 offer and/or sale of
the Securities pursuant to this Agreement to be integrated with prior offerings
by the Company for purposes of the 1933 Act or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of the Bulletin Board. Nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offer and/or sale
of the Securities to be integrated with other offerings. The Company will not
conduct any offering other than the transactions contemplated hereby that will
be integrated with the offer or issuance of the Securities.
(u) 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 0000 Xxx) in connection with the offer or sale of the
Securities.
(v) Listing. The Company's common stock is quoted on the Bulletin Board. The
Company has not received any oral or written notice that its common stock will
be delisted from the Bulletin Board nor that its common stock does not meet all
requirements for the continuation of such quotation and the Company satisfies
the requirements for the continued listing of its common stock on the Bulletin
Board.
(w) No Undisclosed Liabilities. The Company has no liabilities or obligations
which are material, individually or in the aggregate, which are not disclosed in
the Reports and Other Written Information, other than those incurred in the
ordinary course of the Company's businesses since December 31, 2003 and which,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the Company's financial condition.
(x) No Undisclosed Events or Circumstances. Since December 31, 2003, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(y) Dilution. 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 on the equity holdings of other
holders of the Company's equity or rights to receive equity of the Company. 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 Series B Stock and exercise of the Warrants is binding upon
the Company and enforceable, except as otherwise described in this Subscription
Agreement, regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company or parties entitled to receive
equity of the Company.
(z) No Disagreements with Accountants and Lawyers. There are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company, including but not limited to disputes or conflicts over payment owed to
8
such accountants and lawyers.
(aa) Investment Company. The Company is not, and is not an Affiliate (as defined
in Rule 405 under the 0000 Xxx) of, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(bb) Brokers/Certain Fees. The Company represents and warrants that other than
fees payable to First Montauk Securities Corp. as described on Schedule 5(bb) ,
there are no fees, commissions, or other payments due to any person in
connection with the offer and sale of the Securities pursuant to this Agreement.
The Subscribers shall have no liability or obligation with respect to any fees
payable to First Montauk Securities Corp. in connection with the offer and sale
of the Securities.
(cc) Internal Accounting Controls. The Company and its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-KSB or 10-QSB, as
the case may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures as of a
date within 90 days prior to the filing date of the Form 10-QSB for the
Company's most recently ended fiscal quarter (such date, the "Evaluation Date").
The Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 307(b) of
Regulation S-B under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
(dd) Correctness of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof and
will be true and correct as of each closing date, and unless the Company
otherwise notifies the Subscribers prior to any closing date, shall be true and
correct as of such closing dates. The foregoing representations and warranties
shall survive the Second Closing Date for a period of three (3) years.
5. Regulation D Offering. The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. The Offering is
being made on a "best efforts" basis, with no minimum purchase amount. Officers,
directors and affiliates of the Company and its selling agent may purchase
securities in the Offering. On each closing date, the Company will provide an
opinion reasonably acceptable to Subscriber from the Company's legal counsel
opining on the availability of an exemption from registration under the 1933 Act
as it relates to the offer and issuance of the Securities, and such other
matters as shall be requested by the Subscribers. 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 Series B Stock and exercise of the Warrants and resale of the
underlying shares pursuant to the Registration Statement or pursuant to Rule
144.
9
6.1. Conversion of Series B Stock and Exercise of Warrants.
(a) The terms of conversion of the Series B Stock are governed by the
Certificate of Designation and the terms of the exercise of the Warrants are
governed by the Warrants. Holders of the Series B Stock and Warrants shall also
be entitled to the rights under this Section 6. Upon the conversion of the
Series B Stock or exercise of the Warrants or part thereof, the Company shall,
at its own cost and expense, take all necessary action, including obtaining and
delivering, 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 representing the number of shares of common stock issuable upon such
conversion or exercise, as the case may be. 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, unless waived by the
Subscriber, the Conversion Shares and Warrant Shares will be free-trading, and
freely transferable, and will not contain a legend restricting the resale or
transferability of the Conversion Shares and Warrant Shares provided the Shares
are being sold pursuant to an effective registration statement which includes
the Conversion Shares or Warrant Shares or the sale is otherwise exempt from
registration and the rules and regulations of the Securities and Exchange
Commission allow for the issuance without a restrictive legend.
(b) Subscriber will give notice of its decision to exercise its right to convert
the Series B Stock or exercise the Warrants or part thereof by faxing or
otherwise delivering an executed and completed Notice of Conversion (a form of
which is annexed hereto as Exhibit D) or warrant exercise form (attached to the
Warrant) to the Company via confirmed telecopier transmission or otherwise
pursuant to Section 11 (a) of this Agreement. The Subscriber will not be
required to surrender certificate for the Series B Stock until the Series B
Stock has been fully converted or satisfied, but will be required to deliver the
Warrant with the exercise price. Each date on which a Notice of Conversion or
Warrant Exercise is faxed to the Company in accordance with the provisions
hereof shall be deemed a Conversion Date. The Company will itself or cause the
Company's transfer agent to transmit the Company's Common Stock certificates
representing the shares issuable upon conversion of the Series B Stock
("Conversion Shares") to the Subscriber via express courier for receipt by such
Subscriber within five (5) business days (or such lesser period if delivery time
periods are reduced under federal securities' laws and regulations) after
receipt by the Company of the Notice of Conversion (the "Delivery Date"). In the
event the Conversion Shares are electronically transferable, then delivery of
the Conversion Shares must be made by electronic transfer provided request for
such electronic transfer has been made by the Subscriber. A new certificate
representing the balance of the unconverted Series B Stock not so converted will
be provided by the Company to the Subscriber if requested by Subscriber,
provided the Subscriber delivers an original certificate for Series B Stock to
the Company. To the extent that a Subscriber elects not to surrender a
certificate for the Series B Stock 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 regarding the Series B Stock.
6.2 Damages for Failure to Deliver Conversion Shares/Warrant Shares. The Company
understands that a delay in the delivery of the Conversion Shares or shares
issuable upon exercise of the Warrants ("Warrant Shares") beyond the Delivery
Date could result in economic loss to the Subscriber. As compensation to the
Subscriber for such loss, which the Company and the Subscriber agree may be
difficult to measure, the Company agrees to pay to the Subscriber, as liquidated
damages, for late issuance of Conversion Shares or Warrant Shares an amount (X)
for each business day the Conversion Shares are not delivered to Subscriber
determined by the following formula:
X = ((original Purchase Price - amount previously converted/exercised) x 2%)/360
The Company shall pay any payments incurred under this Section in immediately
available funds within 10 days of demand by the Subscriber. 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, the Subscriber will be entitled to revoke all or part of the
relevant Notice of Conversion by delivery of a
10
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. The delivery date by which Common Stock must be delivered pursuant to
this Section 6.2 shall be tolled for the amount of days that the Subscriber does
not deliver information reasonably requested by the Company's transfer agent.
(c) 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 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.
6.3. Maximum Conversion. The Subscriber shall not be entitled to
convert on a Conversion Date any Series B Stock if the number of shares of
Common Stock to be received by the Subscriber 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 (if expressly known to the Company) on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Series B Stock with respect to which the determination of this
provision is being made on a Conversion Date, which would result in beneficial
ownership by the Subscriber and its affiliates of more than 4.99% of the
outstanding shares of common stock of the Company on such Conversion Date. For
the purposes of the provision 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 4.99% and aggregate conversion by the Subscriber may exceed 4.99%. The
Subscriber may void the conversion limitation described in this Section 6.3 upon
and effective after (sixty-one) 61 days prior written 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 4.99% amount described above
and which shall be allocated to the excess above 4.99%.
6.4. 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 the Series B Stock or exercise of a Warrant by the
Delivery Date and if ten (10) days 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 original
Purchase Price plus all accrued dividends, 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 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 Series B Stock and accrued dividends, 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.
6.5 Adjustments. The conversion rate of the Series B Stock , exercise
price of the Warrants and amount of Conversion Shares or Warrants Shares
issuable upon conversion of the Series B Stock and exercise of the Warrants
shall be adjusted to offset the effect of stock splits, stock dividends, pro
rata distributions of property or equity interests to the Company's shareholders
and similar events.
7. Legal Fee/Escrow Agent. The Company shall pay to Xxxxxxxxx & XxXxxxx
LLP, a fee of
11
$15,000 ("Legal Fees") as reimbursement for services rendered to Subscribers in
connection with this Agreement and the purchase and sale of the Securities and
acting as Escrow Agent. Of such amount, $2,500 has previously been paid, $10,000
of the Legal Fees shall be payable on or before the Initial Closing Date and
$2,500 shall be payable on the Second Closing Date. The Legal Fees not
previously advanced will be payable out of funds held pursuant to the Escrow
Agreement.
8. Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, promptly
after it receives notice of issuance by the Securities and Exchange Commission
("SEC"), 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 or the Securities of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
(b) Listing. The Company shall promptly secure the listing of the
Shares and Warrant Shares upon each national securities exchange, or 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
Securities are outstanding. The Company will maintain the listing of its Common
Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National
Market System, OTC Bulletin Board, 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"), and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Principal Market, as applicable. The Company will provide the Subscribers
copies of all notices it receives notifying the Company of the threatened and
actual delisting of the Common Stock from any Principal Market. As of the date
of this Agreement and the Initial Closing Date, the Bulletin Board is and will
be the Principal Market.
(c) Market Regulations. The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, 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 Subscribers and promptly provide copies thereof to Subscriber.
(d) Reporting Requirements. From the date of this Agreement and until
at least two (2) years after the Actual Effective Date, the Company will (i)
comply in all respects with its reporting and filing obligations under the 1934
Act, (ii) comply with all reporting requirements that are applicable to an
issuer required to file reports pursuant to Section 13 and Section 15(d) of the
1934 Act, and (iii) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 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 two (2) years after the Actual
Effective Date. Until the earlier of the resale of the Conversion Shares and the
Warrant Shares by each Subscriber or at least two (2) years after the Warrants
have been exercised, the Company will use its best efforts to continue the
listing or quotation of the Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Principal Market. The Company agrees to file a Form D
with respect to the offer and sale of the Securities as required under
Regulation D and to provide a copy thereof to each Subscriber and First Montauk
Securities Corp. within 10 days after filing with the SEC and each state.
(e) Use of Proceeds. The Company undertakes to use the proceeds of the
Subscribers' funds for the purposes set forth on Schedule 9(e) hereto. A
deviation from the use of proceeds set forth on Schedule 9(e) of more than 15%
per item or more than 25% in the aggregate shall be deemed a material breach of
the Company's
12
obligations hereunder. Except as set forth on Schedule 9(e), the Purchase Price
may not and will not be used for accrued and unpaid officer and director
salaries (except for the payment of up to $100,000 for the past due wages to
directors who are employees), payment of financing related debt or redeeming or
purchasing equity instruments of the Company.
(f) Reservation. The Company undertakes to reserve, pro rata on behalf
of each holder of a the Securities, from its authorized but unissued common
stock, at all times that Series B Stock or Warrants remain outstanding, a number
of common shares equal to not less than 110% of the amount of common shares
necessary to allow each such holder at all times to be able to convert all such
outstanding Series B Stock, and one common share for each Warrant Share. Failure
to have sufficient shares reserved pursuant to this Section 9(f) for three (3)
consecutive business days or ten (10) days in the aggregate during any 365 day
period shall be entitle the holder of the all remedies available at law and
equity, including claims for lost profit.
(g) Taxes. From the date of this Agreement until two (2) years after
the Closing Date (or Second Closing Date if held), the Company will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefore.
(h) Insurance. From the date of this Agreement until two (2) years
after the Closing Date (or Second Closing Date if held), the Company will keep
its assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, in
amounts sufficient to prevent the Company from becoming a co-insurer and not in
any event less than 100% of the insurable value of the property insured; and the
Company will maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner customary for companies in similar businesses similarly
situated and to the extent available on commercially reasonable terms.
(i) Books and Records. From the date of this Agreement until two (2)
years after the Closing Date (or Second Closing Date if held), the Company will
keep true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business and
affairs in accordance with generally accepted accounting principles applied on a
consistent basis.
(j) Governmental Authorities. From the date of this Agreement until two
(2) years after the Closing Date (or Second Closing Date if held), the Company
shall duly observe and conform in all material respects to all valid
requirements of governmental authorities relating to the conduct of its business
or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement until two
(2) years after the Closing Date (or Second Closing Date if held), the Company
shall maintain in full force and effect its corporate existence, rights and
franchises and all licenses and other rights to use intellectual property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.
(l) Properties. From the date of this Agreement until two (2) years
after the Closing Date (or Second Closing Date if held), the Company will keep
its properties in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and the Company will
at all times comply with each provision of all leases to which it is a party or
under which it occupies property if the breach of such provision
13
could reasonably be expected to have a material adverse effect.
(m) Confidentiality. From the date of this Agreement until two (2)
years after the Closing Date (or Second Closing Date if held), the Company
agrees that it will not disclose publicly or privately the identity of the
Subscribers unless (i) expressly agreed to in writing by a Subscriber or (ii)
only to the extent required by law and then only upon ten (10) days prior notice
to Subscriber or (iii) in connection with the filing of a registration statement
as required hereunder.
(n) Prohibition on Financings. The Company undertakes and covenants
that until the earlier to occur of (i) the registration statement described in
Section 11.1(iv) having been effective for 90days days, or (ii) until all the
Conversion Shares and Warrant Shares have been resold pursuant to said
registration statement, the Company will not issue any shares of Common Stock,
or securities convertible into Common Stock; provided, however, the Company may
(i) issue options or shares or other securities to its employees and other
eligible persons under its existing employee option plans; (ii) issue warrants
or other securities to consultants or advisors provided such securities have an
exercise or conversion price in excess of $0.14 per share and (iii) may issue
shares of Common Stock in connection with the exercise or conversion of
convertible securities outstanding on the date hereof in accordance with the
terms thereof. In the event that the Company issues securities in violation of
this clause (n), then conversion price of the Series B Stock shall be reduced to
reflect the issue or conversion or exercise price of such securities.
(o) Prohibitions on S-8 Filings. Except as allowed under Section 10.1,
the Company will not file a Form S-8 with the Commission during the Exclusion
Period (as defined in Section 10(a) of the Agreement) without the prior written
consent of the holders of a majority of the then outstanding Series B Stock.
(p) Delivery of Lockup Agreements. The Company shall deliver to First
Montauk Securities Corp., as agent for the Subscribers duly executed copies of
lockup agreements ("Lockup Agreements") as follows: (i) officer and directors of
the Company shall agree not to sell, transfer, assign, pledge or hypothecate in
any manner any securities of the Company beneficially owned by them (as
determined in accordance with Section 13d of the Securities and Exchange Act of
1934 and the rules promulgated thereunder) or to engage in any "short sales" for
a period commencing on the date hereof and ending on a date which is one year
from the date of funding of 2nd tranche of the Purchase Price, provided,
however, officers and directors shall be allowed to exercise currently
outstanding options for which the shares underlying such options were previously
registered on a Form S-8 registration statement and, beginning 90 days after the
Effective Date, shall be allowed to sell up to 30,000 shares per month as long
as the sale price of any sale of Common Stock by the undersigned is equal to or
exceeds $0.25 per share and (ii) "founding shareholders" (as set forth on
Schedule 8(p)) beneficially owning approximately 7,000,000 shares of Common
Stock of the Company shall agree not to sell, transfer, assign, pledge or
hypothecate in any manner any securities of the Company beneficially owned by
them (as determined in accordance with Section 13d of the Securities and
Exchange Act of 1934 and the rules promulgated thereunder) or to engage in any
"short sales" for a period commencing on the date hereof and ending on a date
which is 90 days after the Effective Date (as defined in Section 10); provided
however, the founding shareholders shall each be allowed to sell up to 50,000
shares per month as long as the sale price of any sale of Common Stock by such
persons is equal to or exceeds $0.25 per share.
9. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend the Subscribers, the Subscribers' 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 the Subscriber or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice
14
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 Subscriber relating hereto.
(b) Each Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers, directors, agents,
affiliates, counsel and control persons 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 (i) any material misrepresentation by
such Subscriber in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
such Subscriber of any covenant or undertaking to be performed by such
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribes relating hereto.
(c) In no event shall the liability of any Subscriber or permitted
successor hereunder or under any other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
received by such Subscriber upon the sale of Registerable Securities (as defined
herein) giving rise to such indemnification obligation.
(d) The procedures set forth in Section 11.6 shall apply to the
indemnifications set forth in Sections 9(a) and 9(b) above.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) The Company shall file with the SEC not later than 45 days
after the Initial Closing Date (the "Filing Date"), and use its best efforts to
cause to be declared effective within 120 days after the Initial Closing Date
(the "Effective Date"), a Form SB-2 registration statement (the "Registration
Statement") (or such other form that it is eligible to use) in order to register
(A) the Conversion Shares and Warrant Shares representing the total Purchase
Price of $1,500,000 and (B) any shares of Common Stock which may be issuable to
Subscribers by way of dividend under the Series B Stock or (C) as a result of
any anti-dilution or adjustments under the Series B Stock or Warrants (for
purposes of this Section 10, such shares issuable under clauses (A), (B) or (C)
referred to as "Registerable Securities") for resale and distribution under the
1933 Act by the Subscribers. The Company will register not less than a number of
shares of common stock in the aforedescribed registration statement that is
equal to 110% of the total Conversion Shares (using the Conversion Rate on the
Initial Closing Date or the trading day immediately preceding the filing date of
the Registration Statement, or any amendment thereto; whichever results in the
greatest number of Registerable Securities, such amount of shares being included
in the definition of Registerable Securities plus an amount to cover any shares
issued as dividends or in payment of any penalties under this Agreement) and one
hundred percent (100%) of the Warrant Shares issuable upon exercise of the
Warrants. The Registerable Securities shall be reserved and set aside
exclusively for the benefit of each Subscriber, and not issued, employed or
reserved for anyone other than each Subscriber. Such Registration Statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares of Common Stock
to allow the public resale of all Common Stock included in and issuable by
virtue of the Registerable Securities. No securities of the Company other than
the Registerable Securities will be included in the registration statement
described in this Section 10 without the written consent of the holders of a
majority of the outstanding shares of Series B Stock. The Company shall not file
any other registration statement with the SEC commencing on the date of hereof
until a date which is 90 days after the Effective Date ("Exclusion Period");
provided, however, the Company may file a Form S-8 to register up to 1,500,000
shares of Common Stock under its Employee option Plan under the 1933 Act. A
registration that is filed but withdrawn prior to being declared effective shall
be deemed not to have been filed for purposes of this Section 10.1.
15
10.2. Registration Procedures. If and whenever the Company is required
by the provisions of Section 10.1(i), 10.1(ii), or (iv) to effect the
registration of any shares of Registerable Securities under the 1933 Act, the
Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and
file with the Commission a registration statement required by Section 10, 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 Registerable Securities (individually a "Seller" and collectively
the "Sellers") 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 such registration statement has been effective for a period of two (2)
years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registerable 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 and further, promptly file
any amendments under Rule 462 (or other applicable SEC regulations) if required
in order to provide for the issuance of additional shares to the Subscribers as
dividends or as a result of anti-dilution adjustments under the terms of this
Agreement, the Series B Stock or the Warrants;
(c) furnish to the Seller, at the Company's expense, 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
Registerable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller, 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;
(e) if applicable, list the Registerable 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 when a prospectus relating thereto is
required to be delivered under the 1933 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) provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by the Seller,
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 requested by the seller,
attorney, accountant or agent in connection with such registration statement;
and
10.3. Provision of Documents/Information by Sellers. In connection with
each registration described in this Section 10, 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.
16
10.4. Non-Registration Events. The Company and the Subscribers agree
that the Seller will suffer damages if any registration statement required under
Section 10.1(iv) above is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, and any registration
statement required under Section 10 is not filed within 45 days as provided
above and declared effective by the Commission within 120 days after such
request, 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 on
Form SB-2 or such other form described in Section 10.1 is not filed on or before
the Filing Date or is not declared effective on or before the sooner of the
Effective Date, or within five (5) business days of receipt by the Company of a
written or oral communication from the Commission that the registration
statement described in Section 10.1 will not be reviewed, (ii) any registration
statement described in Sections 10.1 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 (defined as a period
of three hundred and sixty-five days commencing on the date the Registration
Statement is declared effective) or more than twenty (20) consecutive days (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 the Company shall
deliver to the holder of Registerable Securities, as Liquidated Damages, an
amount equal to two percent (2%) for each thirty (30) days or part thereof, of
the original Purchase Price, for the Registerable Securities owned of record by
such holder as of and during the pendency of such Non-Registration Event which
are subject to such Non-Registration Event. Payments to be made pursuant to this
Section 10.4 shall be due and payable in cash or in shares of Common Stock which
have been included in the Registration Statement within ten (10) business days
after the end of each 30 day period or part thereof. For purposes hereof, any
shares of Common Stock issued to a Subscriber in payment of a penalty or as a
Liquidated Damage payment, shall be valued at the average closing price of the
Company's Common Stock for the 10 trading days ending one day prior to the
Effective Date of the Registration Statement; provided however, in the event
that the Registration Statement is not declared effective, the value of the
shares shall be deemed to be $0.14 per share.
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, costs of insurance and fee of one
counsel for all Sellers are called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Registerable
Securities, including any fees and disbursements of any additional counsel to
the Seller, are called "Selling Expenses". The Company will pay all Registration
Expenses in connection with the registration statement under Section 10. 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 Registerable Securities under
the 1933 Act pursuant to Section 10, the Company will, to the extent permitted
by law, indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registerable 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 1933 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 Registerable Securities was registered under the 1933 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
17
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances when made, and will subject to the provisions of Section 10.6(c)
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 Registerable
Securities under the 1933 Act pursuant to Section 10, each Seller severally but
not jointly will, to the extent permitted by law, indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the 1933 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 1933 Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the 1933 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 Registerable Securities were
registered under the 1933 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 net proceeds received by the Seller from the sale of Registerable 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
18
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, as a
group, 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 1933 Act in any case in which either (i) a
Seller, or any controlling person of a 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 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not 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 the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) 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 (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
10.7. Delivery of Unlegended Shares.
(a) Within three (3) business days (such third business day, the
"Unlegended Shares Delivery Date") after the business day on which the Company
has received (i) a notice that Registerable Securities have been sold either
pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii) a
written representation that the prospectus delivery requirements, or the
requirements of Rule 144, as applicable, have been satisfied, and (iii) the
original share certificates representing the shares of Common Stock that have
been sold, the Company at its expense, (y) shall deliver, and shall cause legal
counsel selected by the Company to deliver, to its transfer agent (with copies
to Subscriber) an appropriate instruction and opinion of such counsel, for the
delivery of shares of Common Stock without any legends including the legends set
forth in Sections 4(e) and 4(g) above, issuable pursuant to any effective and
current registration statement described in Section 10 of this Agreement or
pursuant to Rule 144 under the 1933 Act (the "Unlegended Shares"); and (z) cause
the transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the unsold shares of
Common Stock, if any, to the Subscriber at the address specified in the notice
of sale, via express courier, by electronic transfer or otherwise on or before
the Unlegended Shares Delivery Date.
(b) In lieu of delivering physical certificates representing the
Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of a Subscriber, so long as the certificates therefore do not bear
a legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber's prime Broker with DTC through its Deposit Withdrawal Agent
Commission system. Such delivery must be made on or before the Unlegended Shares
Delivery Date.
(c) The Company understands that a delay in the delivery of the
Unlegended Shares pursuant to Section 11 hereof beyond the Unlegended Shares
Delivery Date could result in economic loss to a Subscriber. As compensation to
a Subscriber for such loss, the Company agrees to pay late payment fees (as
liquidated
19
damages and not as a penalty) to the Subscriber for late delivery of Unlegended
Shares in the amount determined in accordance with Section 7.2 above. If during
any 360 day period, the Company fails to deliver Unlegended Shares as required
by this Section 10.7 for an aggregate of thirty (30) days, then each Subscriber
or assignee holding Securities subject to such default may, at its option,
require the Company to purchase all or any portion of the Conversion Shares or
Warrant Shares subject to such default at a price per share equal to 130% of the
conversion rate of such Conversion Shares and exercise price of the Warrants.
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
(d) In addition to any other rights available to a Subscriber, if the
Company fails to deliver to a Subscriber Unlegended Shares within ten (10)
calendar days after the Unlegended Shares Delivery Date and 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 shares of Common
Stock which the Subscriber anticipated receiving from the Company (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 purchase price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, 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 amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, 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.
11. Miscellaneous.
(a) Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Xxxxx Xxxxxxxx,
President, fax no.: 000- 000-0000, 000 X. Xxx Xxxxxxx xxxxxxx, Xxxxxxx XX 00000
with a copy by telecopier only to: Xxxx Xxxxxxx, Esq., telecopier: 000-000-0000,
(ii) if to the Subscribers, to: the address and telecopier number indicated on
the signature page hereto, with a copy by telecopier to: First Montauk
Securities Corp., 000 Xxxxxx Xxxxxxx Xxxx, Xxx Xxxx, Xxx Xxxxxx 00000 telecopier
no. 000-000-0000 attn: Xxxx Xxxxxxx and a copy to Xxxxxxxxx & XxXxxxx LLP, 00
Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: 000- 000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
(b) Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Xxxxxxxxx & XxXxxxx LLP, upon the
satisfaction of all conditions to Closing set forth in this Agreement.
(c) Entire Agreement; Assignment. This Agreement and other documents
delivered in connection
20
herewith represent 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. Neither the Company nor the Subscribers have relied on any
representations not contained or referred to in this Agreement and the documents
delivered herewith. 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) Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
(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. The parties and the individuals executing this
Agreement and other agreements referred to herein or delivered in connection
herewith 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 injunction 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) Independent Nature of Subscribers' Obligations and Rights. The
obligations of each Subscriber hereunder are several and not joint with the
obligations of any other Subscriber hereunder, and no such Subscriber shall be
responsible in any way for the performance of the obligations of any other
hereunder.
[THIS SPACE INTENTIONALLY LEFT BLANK]
21
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Platinum Partners Value Arbitrage Fund
000 Xxxx 00xx Xx 54 fl
Subscription Amount: $200,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxx Norducht
----------------------------------
____________________________ Name: Xxxx Norducht
____________________________ Title: G.P.
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 000 Xxxx 00xx Xx
54 fl
Xxx Xxxx, X.X. 00000
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.: 00-0000000
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
22
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Platinum Partners Value Macro Fund
000 Xxxx 00xx Xx 54 fl
Subscription Amount: $200,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxx Norducht
----------------------------------
____________________________ Name: Xxxx Norducht
____________________________ Title: G.P.
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 000 Xxxx 00xx Xx
54 fl
Xxx Xxxx, X.X. 00000
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.: 00-0000000
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
23
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Genesis Micrcap Inc.
Subscription Amount: $100,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxxx Xxxxxxx
----------------------------------
____________________________ Name: Xxxxx Xxxxxxx
____________________________ Title: Officer
FOR ALL SUBSCRIBERS TO COMPLETE
Address: Genesis Micrcap Inc.
c/o SDC Capital LLC
00 Xxxx xxxxxxx Xxxxxxx Xxxxx 000
Xxxxx Xxxxx, XX 00000
Telephone No.: 000-0000-0000
Fax No.: 020-8938-3272
Social Security/Fed ID No.:
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
24
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Alpha Capital AG
Subscription Amount: $300,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Alpha Capital AG
----------------------------------
____________________________ Name: Alpha Capital AG
____________________________ Title: Director
FOR ALL SUBSCRIBERS TO COMPLETE
Address: Pradafort & Funstertoples
9490
Vaduz Liechtenstein
Telephone No.: 000-000-000-0000
Fax No.: 000-000-000-0000
Social Security/Fed ID No.:
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
25
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Keren MYCB Xxxxx Foundation
000 Xxxx 00xx Xx 54 fl
Subscription Amount: $150,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxxx Xxxxx
----------------------------------
____________________________ Name: Xxxxx Xxxxx
____________________________ Title: President
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 1548 5oth St
Brooklyn, N.Y. 00000-0000
Telephone No.: 00-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.: 00-0000000
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
26
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
X.X. Investors
Subscription Amount: $200,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxxxxx Xxxxxx
----------------------------------
____________________________ Name: Xxxxxxx Xxxxxx
____________________________ Title: General Partner
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 000 X 0xx Xx
54 fl
Xxxxxxxx, X.X. 00000
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.: 00-0000000
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
27
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Xxxxx Xxxxxx
Subscription Amount: $50,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxxx Xxxxxx
----------------------------------
____________________________ Name: Xxxxx Xxxxxx
____________________________ Title:
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 00 Xxxx Xx
00 fl
Monsey, N.Y. 10952
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.:
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
28
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Bais Yaakor Xxxxxx
Subscription Amount: $100,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxxxx Xxxxx
----------------------------------
____________________________ Name: Xxxxxx Xxxxx
____________________________ Title: President
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 000 X Xxxxx Xx
Xxxx Xxxxx, X.X. 00000
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.: 00-0000000
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
29
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
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.
Name of Subscriber(s):
Ateres Mechoel Inc
Subscription Amount: $50,000
Individuals Corporations, Trusts, Partnerships
Signature (s) By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------
____________________________ Name: Xxxxxx Xxxxxxxxxxx
____________________________ Title: President
FOR ALL SUBSCRIBERS TO COMPLETE
Address: 000 Xxxx 00xx Xxxxxx
Xxxxxxxx XX 00000
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Social Security/Fed ID No.: 00-0000000
Accepted and Agreed.
The Company hereby accepts the subscription of the above Subscriber and agrees t
be bound by the terms and conditions contained herein.
THE PROJECT GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
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