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SWISSRAY INTERNATIONAL, INC.
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $2,940,000
This offering consists of $2,940,00 of Convertible Debentures of Swissray
International, Inc.
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SUBSCRIPTION AGREEMENT
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SUBSCRIPTION PROCEDURES
Convertible Debentures of SWISSRAY INTERNATIONAL, INC.. (the "Company")
are being offered in an aggregate amount not to exceed $2,940,000 The Debentures
will be transferable to the extent that any such transfer is permitted by law.
This offering is being made in accordance with the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and
Rule 506 of Regulation D promulgated under the Act (the "Regulation D
Offering").
The Investor Questionnaire is designed to enable the Investor
to demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Debentures. The Signature Page for the Investor
Questionnaire and the Subscription Agreement contain representations relating to
the subscription.
Also included is an Internal Revenue Service Form W-9:
"Request for Taxpayer Identification Number and Certification" for U.S. citizens
or residents of the U.S. for U.S. federal income tax purposes only. (Foreign
investors should consult their tax advisors regarding the need to complete
Internal Revenue Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer as provided below:
Immediately available funds should be sent via wire transfer to the escrow
account stated below and the completed subscription documents should be
forwarded to the Escrow Agent. Your subscription funds will be deposited into a
non-interest bearing escrow account of Xxxxxx X. XxXxxxx, Esq., Escrow Agent, at
First Union Bank of Connecticut, Stamford, Connecticut. In the event of a
termination of the Regulation D Offering or the rejection of this subscription,
all subscription funds will be returned without interest. The wire instructions
are as follows:
First Union Bank of Connecticut
Executive Xxxxxx
000 Xxxx Xxxxxx, X. X. Xxx 000
Xxxxxxxx, XX 00000-0000
ABA #: 000000000
Swift #: XXXXXX00
Account #: 00000-0000000-0
Xxxx.Xxxx: Xxxxxx X. XxXxxxx, Esq. Trustee Account
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
To: Swissray International, Inc.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
Convertible Debentures (the "Debentures"). The Debentures being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. The conversion terms of the Debentures are set forth in Section 4. This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement together with any Exhibits
thereto, relating to an offering (the "Offering") of up to $2,940,000 of
Debentures. This Offering is comprised of an offering of the Debentures to
accredited investors (the "Regulation D Offering") in accordance with the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and Rule 506 of Regulation D promulgated under the Act
("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase $2,940,000 of the Company's Debentures. The Debentures shall pay an 5%
cumulative interest payable annually, in cash or in freely trading Common Stock
of the Company, at the Company's option, at the time of each conversion. If paid
in Common Stock, the number of shares of the Company's Common Stock to be
received shall be determined by dividing the dollar amount of the dividend by
the then applicable Market Price, as of the interest payment date. "Market
Price" shall mean the lesser of (a) 82% of the 10-day average closing bid price,
as reported by Bloomberg, LP, for the ten (10) consecutive trading days
immediately preceding the date of conversion or (b) $1.00 (each being referred
to as the "Conversion Price"). If the interest is to be paid in cash, the
Company shall make such payment within 5 business days of the date of
conversion. If the interest is to be paid in Common Stock, said Common Stock
shall be delivered to the Purchaser, or per Purchaser's instructions, within 5
business days of the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which time all
Debentures outstanding will be automatically converted based upon the formula
set forth in Section 4(d). The closing shall be deemed to have occurred on the
date the funds are received by the Company or its designated attorney (the "
Closing Date").
(b) Upon receipt by the Company of the requisite payment for the
Debentures being purchased the Debentures so purchased will be forwarded by the
Escrow Agent, Xxxxxx X. XxXxxxx, to the Purchaser and the name of such Purchaser
will be registered on the Debenture transfer books of the Company as the record
owner of such Debentures. The Escrow Agent shall not be liable for any action
taken or omitted by him in good faith and in no event shall the Escrow Agent be
liable or responsible except for the Escrow Agent's own gross negligence or
willful misconduct. The Escrow Agent has made no representations or warranties
in connection with this transaction and has not been involved in the negotiation
of the terms of this Agreement or any matters relative thereto. Seller and
Purchaser each agree to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement. The Escrow Agent
is not rendering securities advice to anyone with respect to this proposed
transaction; nor is the Escrow Agent opining on the compliance of the proposed
transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully
read the applicable form of Debenture included herein as Exhibit A and
the form of Registration Rights Agreement annexed hereto as Exhibit B
(the "Registration Rights Agreement"), and is familiar with and
understands the terms of the Offering. With respect to tax and other
economic considerations involved in his investment, the undersigned is
not relying on the Company. The undersigned has carefully considered
and has, to the extent the undersigned believes such discussion
necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in
the Company, by purchasing the Debentures, for the undersigned's
particular tax and financial situation and has determined that the
investment being made by the undersigned is a suitable investment for
the undersigned.
(b) The undersigned acknowledges that all documents, records,
and books pertaining to this investment which the undersigned has
requested includes Form 10-KSB for the fiscal year ended June 30, 1997
inclusive of 10-KSB/A1, 10-KSB/A2 and 10-KSB/A3 and Form 10-Q for the
quarters ended September 30, 1997, December 31, 1997 and March 31, 1998
inclusive of 10-Q/A1 for September 30, 1997 and December 31, 1997 (the
"Disclosure Documents") have been made available for inspection by the
undersigned or the undersigned has access to the Disclosure Documents.
(c) The undersigned has had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting on behalf
of the Company concerning the Offering and all such questions have been answered
to the full satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the
Debentures without registration under the Act or applicable state
securities laws or an exemption therefrom. The Debentures have not been
registered under the Act or under the securities laws of any states.
The Common Stock underlying the Debentures is to be registered by the
Company pursuant to the terms of the Registration Rights Agreement
attached hereto as Exhibit B and incorporated herein and made a part
hereof. Without limiting the right to convert the Debentures and sell
the Common Stock pursuant to the Registration Rights Agreement, the
undersigned represents that the undersigned is purchasing the
Debentures for the undersigned's own account, for investment and not
with a view to resale or distribution except in compliance with the
Act. The undersigned has not offered or sold any portion of the
Debentures being acquired nor does the undersigned have any present
intention of dividing the Debentures with others or of selling,
distributing or otherwise disposing of any portion of the Debentures
either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined
event or circumstance in violation of the Act. Except as provided in
the Registration Rights Agreement, the Company has no obligation to
register the Common Stock issuable upon conversion of the Debentures.
(e) The undersigned recognizes that an investment in the
Debentures involves substantial risks, including loss of the entire amount of
such investment. Further, the undersigned has carefully read and considered the
schedule entitled Pending Litigation matters attached hereto
as Exhibit C.
(f) Legends.
(i) The undersigned acknowledges that each
certificate representing the Debentures unless registered pursuant to the
Registration Rights Agreement, shall be stamped or otherwise imprinted with a
legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THE COMMON STOCK INTO WHICH THE
SECURITIES EVIDENCED BY THIS CERTIFICATE ARE CONVERTIBLE ARE
ALSO SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF
THAT CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Common Stock issued upon conversion shall
contain the following legend if converted prior to effectiveness of Registration
Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) Common Stock issued upon conversion and
subsequent to effective date of Registration Statement (pursuant to which shares
underlying conversion are registered) shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered
on behalf of a corporation, (i) such corporation has the full legal
right and power and all authority and approval required (a) to execute
and deliver, or authorize execution and delivery of, this Subscription
Agreement and all other instruments (including, without limitation, the
Registration Rights Agreement) executed and delivered by or on behalf
of such corporation in connection with the purchase of the Debentures
and (b) to purchase and hold the Debentures: (ii) the signature of the
party signing on behalf of such corporation is binding upon such
corporation; and (iii) such corporation has not been formed for the
specific purpose of acquiring the Debentures, unless each beneficial
owner of such entity is qualified as an accredited investor within the
meaning of Rule 501(a) of Regulation D and has submitted information
substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the
Company and each stockholder, executive, employee, representative,
affiliate, officer, director, agent (including Counsel) or control
person of the Company, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made
by the undersigned to the Company or omitted or alleged to have been
omitted by the undersigned, concerning the undersigned or the
undersigned's subscription for and purchase of the Debentures or the
undersigned's authority to invest or financial position in connection
with the Offering, including, without limitation, any such
misrepresentation, misstatement or omission contained in this
Subscription Agreement, the Questionnaire or any other document
submitted by the undersigned, against losses, liabilities and expenses
for which the Company, or any stockholder, executive, employee,
representative, affiliate, officer, director, agent (including Counsel)
or control person of the Company has not otherwise been reimbursed
(including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the
Company, or such officer, director stockholder, executive, employee,
agent (including Counsel), representative, affiliate or control person
in connection with such action, suit or proceeding.
(i) The undersigned is not subscribing for the Debentures
as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar
or meeting.
(j) The undersigned or the undersigned's representatives, as
the case may be, has such knowledge and experience in financial, tax
and business matters so as to enable the undersigned to utilize the
information made available to the undersigned in connection with the
Offering to evaluate the merits and risks of an investment in the
Debentures and to make an informed investment decision with respect
thereto.
(k) The Purchaser is purchasing the Debentures for its
own account for investment, and not with a view toward the resale or
distribution thereof. Purchaser is neither an underwriter of, nor a
dealer in, the Debentures or the Common Stock issuable upon conversion
thereof and is not participating in the distribution or resale of the
Debentures or the Common Stock issuable upon conversion thereof.
(l) There has never been represented, guaranteed, or warranted
to the undersigned by any broker, the Company, its officers, directors
or agents, or employees or any other person, expressly or by
implication (i) the percentage of profits and/or amount of or type of
consideration, profit or loss to be realized, if any, as a result of
the Company's operations; and (ii) that the past performance or
experience on the part of the management of the Company, or of any
other person, will in any way result in the overall profitable
operations of the Company.
3. SELLER REPRESENTATIONS.
(a) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued and enforceable in accordance with their terms,
subject to the laws of bankruptcy and creditors' rights generally. At least 200%
of the number of shares of Common Stock issuable upon conversion of all the
Debentures issued pursuant to this Offering have been duly and validly reserved
for issuance, or alternative arrangements agreed to in writing to cover the
contingency of their being insufficient reserved shares or stockholder approval
to authorize additional shares as described in the proxy statement for the
August 31, 1998 meeting has or will be obtained and, upon issuance shall be duly
and validly issued, fully paid, and non-assessable (the "Reserved Shares"). From
time to time, the Company shall keep such additional shares of Common Stock
reserved so as to allow for the conversion of all the Debentures issued pursuant
to this offering.
Prior to conversion of all the Debentures, if at anytime the conversion
of all the Debentures outstanding would result in an insufficient number of
authorized shares of Common Stock being available to cover all the conversions,
then in such event, the Company will move to call and hold a shareholder's
meeting within 60 days of such event for the purpose of authorizing additional
shares of Common Stock to facilitate the conversions. In such an event the
Company shall recommend to all shareholders to vote their shares in favor of
increasing the authorized number of shares of Common Stock. Seller represents
and warrants that under no circumstances will it deny or prevent Purchaser's
right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in Section 4(h).
(b) Authority to Enter Agreement. This Agreement has
been duly authorized, validly executed and delivered on behalf of Seller and is
a valid and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(c) Non-contravention. The execution and
delivery of this Agreement and the consummation of the issuance of the
Debentures, and the transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Seller of any of the terms or
provisions of, or constitute a default under, the articles of incorporation
or by-laws of Seller, or any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Seller is a party or by which it or
any of its properties or assets are bound, or any existing applicable law,
rule, or regulation of the United States or any State thereof or any applicable
decree, judgment, or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental body
having jurisdiction over Seller or any of its properties or assets.
(d) Company Compliance. The Company represents and warrants
that the Company and its subsidiaries are: (i) in full compliance, to the extent
applicable, with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; (ii) not in violation of any term or
provision of its Certificate of Incorporation or by-laws; (iii) not in default
in the performance or observance of any obligation, agreement or condition
contained in any bond, debenture (excepting for reservation of number of shares
required if all Debentures were to be converted), note or any other evidence of
indebtedness or in any mortgage, deed of trust, indenture or other instrument or
agreement to which they are a party, either singly or jointly, by which it or
any of its property is bound or subject. Furthermore, the Company is not aware
of any other facts, which it has not disclosed which could have a material
adverse effect on the business, condition, (financial or otherwise), operations,
earnings, performance, properties or prospects of the Company and its
subsidiaries taken as a whole.
(e) Pending Litigation. Except as otherwise disclosed in
Exhibit C, there is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental body now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of its subsidiaries is or
may be a party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Debentures or
would be reasonably likely to render this Subscription Agreement or the
Debentures, or any portion thereof, invalid or unenforceable.
(f) Issuance of the Debentures. No action has been taken and
no law, statute, rule, regulation, order or ordinance has been enacted, adopted
or issued by any Governmental Body that prevents the issuance of the Debentures
or the Common Stock issuable upon conversion or exercise thereof; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Debentures or the Common Stock issuable upon conversion or exercise thereof or
suspends the sale of the Debentures or the Common Stock issuable upon conversion
thereof in any jurisdiction; and no action, suit or proceeding is pending
against or, to the best knowledge of the Company, threatened against or
affecting, the Company, any of its subsidiaries or, to the best knowledge of the
Company, before any court or arbitrator or any Governmental Body that, if
adversely determined, would prohibit, materially interfere with or adversely
affect the issuance or marketability of the Debentures or the Common Stock
issuable upon conversion or exercise thereof or render the Subscription
Agreement or the Debentures, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Debentures or the
Purchaser 's authority to invest or financial position in connection with the
Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the Company, against losses,
liabilities and expenses for which the Purchaser, or any stockholder, executive,
employee, representative, affiliate, officer, director or control person of the
Purchaser has not otherwise been reimbursed (including attorneys' fees and
disbursements, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Purchaser, or such officer, director, stockholder,
executive, employee, representative, affiliate or control person in connection
with such action, suit or proceeding.
(h) No Change. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Debentures, has
been obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(i) True Statements. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Xxxxxx X.
XxXxxxx, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Xxxxxx X. XxXxxxx, Esq. with respect
to any matters herein described.
(k) Prior Shares Issued Under Regulation S or Regulation D. In
the past six months the Company raised $13,643,849 in Regulation S and
Regulation D offerings, including redemptions and rollovers.
(l) Current Authorized Shares. As of September 25, 1998 there were
50,000,000 authorized shares of Common Stock of which approximately ___________
shares of Common Stock were deemed issued and outstanding on a fully diluted
basis.
(m) Disclosure Documents. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreeements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents 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, and no material event has occurred since the Company's initial
filing on Form 10-KSB for the year ended June 30, 1997 (or the filing of
necessary amendments thereto so as to restate certain financial statements for
fiscal years ended June 30, 1997 and 1996 so as to properly record the
accounting treatment of certain beneficial conversion features and debt issuance
cost of convertible debentures issued during the year ended June 30, 1997 and
the auditing for the value of stock options granted during the years June 30,
1997 and 1996), which could make any of the disclosures contained therein (as
subsequently amended and restated) misleading The financial statements of the
Company included in the Disclosure Documents have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the audit
adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and changes in financial position for the periods then
ended.
(n) Information Supplied. The information supplied by the Company to
Purchaser in connection with the offering of the Debentures does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(o) Delivery Instructions. On the Closing Date the Debentures being
purchased hereunder shall be delivered to Xxxxxx X. XxXxxxx, Esq. as Escrow
Agent, who will simultaneously wire to the Company's counsel the funds being
held in escrow, less placement fees, if not already directly wired to Company
Counsel, at which time the Escrow Agent shall then have the Debentures delivered
to the Purchaser, per the Purchaser's instructions.
(p) Non-contravention. The execution and delivery of this Agreement by
the Company, the issuance of the Debentures, and the consummation by the Company
of the other transactions contemplated by this Agreement, and the Debentures do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the (i) certificate
of incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed
of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, (iii) any
material existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(q) No Default. Except as may be set forth in the Company's report on
form 10-KSB for the fiscal year ending June 30, 1997, as initially filed and
subsequnetly amended, the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement or the
Debentures, other than the conversion provision thereof, will conflict with or
result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, (i) any material
indenture, mortgage, deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound,
(ii) any statute applicable to the Company or its property, (iii) the
Certificate of Incorporation or ByLaws of the Company, (iv) any decree ,
judgment, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its properties, or (v) the Company's
listing agreement for its Common Stock.
(r) Use of Proceeds. The Company represents that the
net proceeds of this offering will be primarily used for the purposes set forth
on page 4 of the term sheet under the caption "Closing Proceeds".
(s) The Company hereby represents that it shall be paying
consultant a fee of $230,000 from the gross proceeds of this Offering, which
fee shall be paid out of escrow by the Escrow Agent
4. TERMS OF CONVERSION.
(a) Debentures. Upon receipt by the Company or its designated
attorney of a facsimile or original of Purchaser's signed Notice of Conversion
followed by receipt of the original Debenture to be converted in whole or in
part (within 5 business days as indicated in 4(b) below), the Company shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debenture is convertible in
accordance with the provisions regarding conversion set forth in Exhibit D
hereto. The Seller's transfer agent or attorney shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Conversion Procedures. The face amount of each Debenture
may be converted anytime following the Closing Date. Such conversion shall be
effectuated by surrendering to the Company, or its attorney, the Debentures to
be converted together with a facsimile or original of the signed Notice of
Conversion which evidences Purchaser's intention to convert those Debentures
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Purchaser has delivered to
the Company a facsimile or original of the signed Notice of Conversion, as long
as the original Debentures to be converted are received by the Company or its
designated attorney within 5 business days thereafter. Unless otherwise notified
by the Company in writing via facsimile, the Company's designated attorney is
Xxxx X. Xxxxx, Esq., 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 (P) 212-644-6446 (f)
000-000-0000.
(c) Common Stock to be Issued. Upon the conversion of any
Debentures and upon receipt by the Company or its designated attorney of a
facsimile or original of Purchaser's signed Notice of Conversion (see Exhibit D)
Seller shall instruct Seller's transfer agent to issue Stock Certificates
without restrictive legend or stop transfer instructions, if at that time the
Registration Statement has been deemed effective (or with proper restrictive
legend if the Registration Statement has not as yet been declared effective), in
the name of Purchaser (or its nominee) and in such denominations to be specified
at conversion representing the number of shares of Common Stock issuable upon
such conversion, as applicable. Seller warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely transferable on the books and
records of Seller, except as may be set forth herein.
(d) (i) Conversion Rate. Purchaser is entitled, at its option,
to convert the face amount of each Debenture, plus accrued interest, anytime
following the Closing Date, at the lesser of (a) 82% of the 10 day average
closing bid price, as reported by Bloomberg, LP for the 10 consecutive trading
days immediately preceding the applicable Conversion Date or (b) $1.00 (each
being referred to as the "Conversion Price"). No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
(ii) Most Favored Financing. If after the Closing Date, but
prior to the Purchaser's conversion of all the Debentures, the Company raises
money under either Regulation D or Regulation S on terms that are more favorable
than those terms set forth in this Subscription Agreement, then in such event,
the Purchaser at its sole option shall be entitled to completely replace the
terms of this Subscription Agreement with the terms of the more beneficial
Subscription Agreement as to that balance, including accrued interest and any
accumulated liquidated damages, remaining on Purchaser's original investment.
The Debentures are subject to a mandatory, 24 month conversion feature at the
end of which all Debentures outstanding will be automatically converted, upon
the terms set forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Subscription Agreement shall be
deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the Purchaser to the
Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Purchaser a new Debenture equal to the unconverted amount, if so requested in
writing by Purchaser.
(g) Within five (5) business days after receipt of the
documentation referred to above in Section 4(b), the Company shall deliver a
certificate in accordance with Section 4(c) for the number of shares of Common
Stock issuable upon the conversion. It shall be the Company's responsibility to
take all necessary actions and to bear all such costs to issue the Common Stock
as provided herein, including the cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchaser a new Debenture
equal to the unconverted amount, if so requested in writing by Purchaser.
In the event the Company does not make delivery of the Common Stock, as
instructed by Purchaser, within 8 business days after delivery of the original
Debenture, then in such event the Company shall pay to Purchaser an amount, in
cash in accordance with the following schedule, wherein "No. Business Days Late"
is defined as the number of business days beyond the 8 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 + $200 for each
Business Day Beyond 10
The Company acknowledges that its failure to deliver the Common Stock
within 8 business days after the Conversion Date will cause the Purchaser to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to qualify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Agreement.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 4(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 4(g) shall not
apply but instead the provisions of Section 4(h) shall apply. The Company shall
make any payments incurred under this Section 4(g) in immediately available
funds within five (5) business days from the Conversion Date if late. Nothing
herein shall limit a Purchaser's right to pursue actual damages or cancel the
conversion for the Company's failure to issue and deliver Common Stock to the
Holder within 8 business days after the Conversion Date.
(h) The Company shall at all times reserve (or make
alternative written arrangements for reservation or contribution of shares or
stockholder approval to authorize additional shares as described in the proxy
statement for the August 31, 1998, meeting) and have available all Common Stock
necessary to meet conversion of the Debentures by all Purchasers of the entire
amount of Debentures then outstanding. If, at any time Purchaser submits a
Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the
Purchaser all of the shares of Common Stock which are available, and the Notice
of Conversion as to any Debentures requested to be converted but not converted
(the "Unconverted Debentures"), upon Purchaser's sole option, may be deemed null
and void. The Company shall provide notice of such Conversion Default ("Notice
of Conversion Default") to all existing Purchasers of outstanding Debentures, by
facsimile, within three (3) business day of such default (with the original
delivered by overnight or two day courier), and the Purchaser shall give notice
to the Company by facsimile within five business days of receipt of the original
Notice of Conversion Default (with the original delivered by overnight or two
day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Company agrees to pay to all Purchasers of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company authorizes a sufficient number of shares of Common Stock
to effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Purchaser's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, at the Purchaser's option, payable as follows: (i)
in the event Purchaser elects to take such payment in cash, cash payments shall
be made to such Purchaser of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Purchaser elects to take such
payment in stock, the Purchaser may convert such payment amount into Common
Stock at the conversion rate set forth in section 4(d) at anytime after the 5th
day of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the mandatory 24 month conversion period.
The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Debentures will cause the Purchaser to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to deliver
the Common Stock pursuant to the terms of this Agreement. Nothing herein shall
limit the Purchaser's right to pursue actual damages for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
(i) During the remainder of 1998, the Purchaser agrees to make
up to an additional $1,000,000 in financing available to the Company upon
mutually agreeable terms. Additional funding above $1,000,000 may be available
depending upon certain events and conditions including stock price, trading
volume and changes in the Company. The Purchaser shall be entitled to convert
any or all of the Debentures, even though the Registration Statement covering
those Debentures may not have been declared effective at that time, in which
case the Purchaser shall receive legended Common Stock until the Registration
Statement is declared effective or in the written opinion of legal counsel the
legend may be removed. As a further condition to the Purchaser providing the
funding set forth herein, the Company agrees to repurchase 1,465,000 shares of
Common Stock which the Purchaser currently owns at a price of $.36875 per share.
(j) Right of First Refusal: The Purchaser is granted the
Right of First Refusal on any subsequent financing the Company may seek during
the next twelve months.
(k) Redemption: Company reserves the right, at its sole
option, to call a mandatory redemption of any percentage of the balance on the
Debentures during the two year period following the Closing Date. In the event
the Company exercises such right of redemption up to and including the last day
of the fourth (4th) month following the Closing Date it shall pay the Purchaser,
in U.S. currency One Hundred Fifteen (115%) of the face amount of the Debentures
to be redeemed, plus accrued interest. In the event the Company exercises such
right of redemption at anytime during the fifth (5th) or sixth (6th) months
following the Closing Date it shall pay the Purchaser, in U.S. currency One
Hundred Twenty (120%) of the face amount of the Debentures to be redeemed, plus
accrued interest. In the event the Company exercises such right of redemption at
anytime after the last day of the sixth (6th) month following the Closing Date
it shall pay the Purchaser, in U.S. currency One Hundred Twenty-five (125%) of
the face amount of the Debentures to be redeemed, plus accrued interest. The
date by which the Debentures must be delivered to the Escrow Agent shall not be
later than 5 business days following the date the Company notifies the Purchaser
by facsimile of the redemption. The Company shall give the Purchaser at least 5
business day's notice of its intent to redeem.
(l) The Company shall furnish to Purchaser such number of
prospectuses and other documents incidental to the registration of the shares of
Common Stock underlying the Debentures, including any amendment of or
supplements thereto.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof or of the Debenture(s), in no
event except (i) with respect to a conversion pursuant to redemption or (ii) if
the Company is in default of any of its obligations under the Debenture,
Subscription Agreement, or the Registration Rights Agreement and the Purchaser
has asserted such default) shall the Purchaser be entitled to convert any
Debentures to the extent that, after such conversion, the sum of (1) the number
of shares of Common Stock beneficially owned by the Purchaser and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Debentures), and (2) the
number of shares of Common Stock issuable upon the conversion of the Debentures
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Purchaser and its affiliates of more than
9.99% of the outstanding shares of Common Stock (after taking into account the
shares to be issued to the Purchaser upon such conversion). For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (1) of
such proviso. The Purchaser further agrees that if the Purchaser transfers or
assigns any of the Debentures to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section as
if such transferee or assignee were a signatory to the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Closing Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit E. Also, prior to or on the Closing Date the Company shall
deliver to the Escrow Agent a signed Registration Rights Agreement in the form
attached hereto as Exhibit B. The Debentures being purchased hereunder shall be
delivered to Xxxxxx X. XxXxxxx, Esq. as Escrow Agent, who will hold them in
escrow until funds have been wired to the Company or its Counsel at which time
the Escrow Agent shall then have the Debentures delivered to the Purchaser, per
the Purchaser's instructions.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Debentures.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Debentures,
and as of the date of the conversion and exercise thereof, as if made on and as
of such date and shall survive the execution and delivery of this Subscription
Agreement and the purchase of the Debentures.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE DEBENTURES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF ANY MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee may, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(g) THE DEBENTURES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(h) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. Litigation.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Holder shall be brought and maintained exclusively in
the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Holder entering into this agreement.
(c) Submission To Jurisdiction . Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be
deemed to refer to the masculine, feminine, impersonal, singular or plural, as
the identity of the person or persons may require.
(b) Neither this Subscription Agreement nor any provision hereof
shall be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 000 Xxxx 00xx Xxxxxx, Xxxxx 00X, Xxx
Xxxx, Xxx Xxxx 00000 with a copy by facsimile and mail to Xxxx X. Xxxxx, P.C.,
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000xxx (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions 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 provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, C, D and
E attached hereto and made a part hereof, constitute 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 hereto. An executed facsimile
copy of the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
Investor Name: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Debentures described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Debentures
is exempt from registration under the Securities Act of 1933, as amended.
Further, the undersigned CORPORATION understands that the offering is required
to be reported to the Securities and Exchange Commission, NASDAQ and to various
state securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE
CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in
excess of $5,000,000; (b) was not formed for the specific purpose of acquiring
the Debentures and (c) has its principal place of business in ___________.
2. Each of the shareholders of the undersigned
CORPORATION is able to certify that such shareholder meets at least one of the
following three conditions:
the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse exceeds $1,000,000; or the
shareholder is a natural person who had an individual income* in excess
of $200,000 in each of 1996 and 1997 and who reasonably expects an individual
income in excess of $200,000 in 1998; or Each of the shareholders of the
undersigned CORPORATION is able to certify that such shareholder is a natural
person who, together with his or her spouse, has had a joint income in excess
of $300,000 in each of 1996 and 1997 and who reasonably expects a joint income
in excess of $300,000 during 1998; and the undersigned CORPORATION has its
principal place of business in ___________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to XXX or Xxxxx retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(a) a bank as defined in Section 3(a)(2) of the
Securities Act; or
(b) a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
(d) an insurance company as defined in Section
2(13) of the Securities Act; or
(e) An investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2 (a)(48) of the Investment Company Act of 1940; or
(f) a small business investment company licensed
by the U.S. Small Business Administration under Section 301 (c) or (d) of the
Small Business Investment Act of 1958; or
(g) a private business development company as
defined in Section 202(a) (22) of the Investment Advisors Act of 1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) That the CORPORATION'S purchase of the Debentures will be
solely for the CORPORATION'S own account and not for the account of any other
person or entity; and
(b) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification number as set forth
in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(a) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
----------------------------------------------------------------
Address for Correspondence (if different): SAME
(Number and Street)
----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:__________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF
THE CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
Your signature on this Corporation Signature Page evidences the
agreement by the Purchaser to be bound by the Questionnaire and the Subscription
Agreement.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate and (b) the Purchaser will notify
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs prior to the acceptance of the undersigned Purchaser's
subscription and will promptly send SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that
he has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Debentures and sign this Subscription Agreement
on behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Debentures and enter into this Subscription
Agreement.
-------------------------- --------------------------
Amount of Debentures subscribed for Date
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title:_____________________
(Please Type or Print)
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of __________, 1998
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Xxxxx X. Xxxxxxx, its Chairman and President
duly authorized
Exhibit D
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert
the Debentures
The undersigned hereby irrevocably elects, as of ______________, 199_
to convert $__________ of Convertible Debentures into Common Stock of SWISSRAY
INTERNATIONAL, INC.(the "Company") according to the conditions set forth in the
Subscription Agreement dated September ____, 1998.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
------------------------------------------------------------
Phone______________________ Fax___________________________
Exhibit E
_______________, 1998
Purchasers of [Company] [Describe Securities]
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a corporation incorporated under
the laws of the State of _________ (the "Company"), in connection with the
proposed issuance and sale of convertible debentures (the "Securities") pursuant
to the Distribution Agreement and the related Subscription Agreement (including
all Exhibits and Appendices thereto) (collectively the "Agreements").
In connection with rendering the opinions set forth herein, we have
examined drafts of the Agreement, the Company's Certificate of Incorporation,
and its Bylaws, as amended to date [other documents - describe], the proceedings
of the Company's Board of Directors taken in connection with entering into the
Agreements, and such other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the following: (i) that
each of the Agreements has been executed by each of the parties thereto in the
same form as the forms which we have examined, (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies, (iii) that each of the Agreements
has been duly and validly authorized, executed and delivered by the party or
parties thereto other than the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the party or parties thereto
other than the Company, enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon the subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties, maintains employees
or conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and has all
requisite corporate power and authority to own its properties and conduct its
business.
2. The authorized capital stock of the Company consists of
_______ shares of Common Stock, ________ par value per share, ("Common Stock")
and ______________ Preferred Stock, par value $________ per share; [describe
classes if applicable]
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended and the Company has
timely filed all the material required to be filed pursuant to Sections 13(a) or
15(d) of such Act for a period of at least twelve months preceding the date
hereof;
4. When duly countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the conversion of the
Securities] as described in the Agreements represented thereby will be duly
authorized and validly issued, fully paid and nonassessable;
5 The Company has the requisite corporate power and authority to enter
into the Agreements and to sell and deliver the Securities and the Common Stock
to be issued upon the conversion of the Securities as described in the
Agreements; each of the Agreements has been duly and validly authorized by all
necessary corporate action by the Company to our knowledge, no approval of any
governmental or other body is required for the execution and delivery of each of
the Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly executed
and delivered by and on behalf of the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting creditors rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no opinion is expressed;
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance of
its obligations thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is party or by which it or any of its property
is bound, (iii) any applicable statute or regulation or as other, (iv) or any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property.
7. The issuance of Common Stock upon conversion of the debentures
in accordance with the terms and conditions of the Agreements, will not violate
the applicable listing agreement between the Company and any securities exchange
or market on which the Company's securities are listed.
8. To the best of our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceedings against the
Company [except as described in Exhibit A hereto].
9. The Company complies with the eligibility requirements for the
use of Form S-3, under the Securities Act of 1933, as amended.
Note: Use this where Registration Rights were included in the offering and the
Company is S-3 eligible.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is based solely upon the laws of the United States and
the State of _____________ and does not include an interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws of other states, we
have assumed that such laws are identical in all respects to the laws of the
State of ___________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
By: _____________________
AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT TO SUBSCRIPTION AGREEMENT ("Amendment") is made as of March 17,
1999, by and between DOMINION CAPITAL FUND, LTD. ("Purchaser") and SWISSRAY
INTERNATIONAL, INC. (the "Company"), (Collectively the "Parties").
WHEREAS, the Parties entered into a Subscription Agreement dated on or about
September 28, 1998, relating to a Regulation D private placement offering in the
aggregate amount of $2,940,000 (the "Offering") of which Purchaser subscribed
for $1,440,000 of the Company's convertible debentures; and
WHEREAS, in connection with said Offering, the parties desire to correct and
amend a certain section in the Subscription Agreement which contained a
typographical error and was overlooked by the Parties at the time the Offering
closed.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree to amend the Subscription Agreement as follows:
AMENDMENT.
A. Section 1, SUBSCRIPTION, Subsection (a) is hereby corrected and
amended to read as follows:
The undersigned hereby irrevocably subscribes for and agrees to
purchase $1,440,000 of the Company's Debentures. The Debentures shall
pay an 5% cumulative interest payable annually, in cash or in freely
trading Common Stock of the Company, at the Company's option, at the
time of each conversion. If paid in Common Stock, the number of shares
of the Company's Common Stock to be received shall be determined by
dividing the dollar amount of the dividend by the then applicable
Market Price, as of the interest payment date. "Market Price" shall
mean 82% of the 10-day average closing bid price, as reported by
Bloomberg, LP, for the ten (10) consecutive trading days immediately
preceding the date of conversion (the "Conversion Price"). If the
interest is to be paid in cash, the Company shall make such payment
within 5 business days of the date of conversion. If the interest is to
be paid in Common Stock, said Common Stock shall be delivered to the
Purchaser, or per Purchaser's instructions, within 5 business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of two years from the date of issuance at which
time all Debentures outstanding will be automatically converted based
upon the formula set forth in Section 4(d). The closing shall be deemed
to have occurred on the date the funds are received by the Company or
its designated attorney (the "Closing Date").
B. Section 4, TERMS OF CONVERSION, Subsection (d)(i) Conversion
Rate is hereby corrected and amended to read as follows:
Purchaser is entitled, at its option, to convert the face amount of
each Debenture, plus accrued interest, anytime following the Closing
Date, at 82% of the 10 day average closing bid price, as reported by
Bloomberg, LP for the 10 consecutive trading days immediately
preceding the applicable Conversion Date (the "Conversion Price"). No
fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest whole share.
C. SECTION 5 LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP is hereby
corrected and amended to read as follows:
The Purchaser is limited in the amount of Debenture it may convert and
own. Other than the mandatory conversion provisions contained in this
Agreement, which are not limited by the following, in no event except
(i) with respect to a conversion pursuant to redemption by the Company
or (ii) if there is (a) a public announcement that 50% or more of the
Company is being acquired, (b) a public announcement that the Company
is being merged, or (c) a change in control, shall the Purchaser be
entitled to convert any Debentures to the extent that, after such
conversion, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of the Debentures or
unexercised Warrants), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which
the determination of this proviso is being made, would result in
beneficial ownership by the Purchaser and its affiliates of more than
4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Purchaser upon such conversion).
For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), except as otherwise provided in clause (1) of such proviso. The
Purchaser further agrees that if the Purchaser transfers or assigns any
of the Debentures to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this
Section as if such transferee or assignee were a signatory to the
Subscription Agreement. Furthermore, the Company shall not process any
conversions that would result in beneficial ownership by the Purchaser
and its affiliates of more than 4.9% of the outstanding shares of
Common Stock of the Company.
II. EFFECTIVE DATE/PRIOR NEGOTIATIONS.
This amendment shall relate back to and be effective as of the closing
date of the Offering. This amendment is intended to correct and amend the
Subscription Agreement to conform to the Parties understanding of the terms of
the offering as negotiated by the Parties.
III. FACSIMILE AS ORIGINAL.
This Amendment may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Amendment shall be effective as
an original.
SWISSRAY INTERNATIONAL, INC.
