SUBSCRIPTION AGREEMENT
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Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Integrated Spatial
Information Solutions, Inc., a Colorado corporation (the "Company") hereby
agrees to issue and to sell to the Subscriber, the number of shares of Series A
6% Cumulative Convertible Preferred Stock $.001 Par Value (the "Preferred
Stock") convertible in accordance with the terms thereof into shares of the
Company's no par value common stock (the "Company Shares") as set forth on the
signature page hereof for the aggregate consideration as set forth on the
signature page hereof. The Certificate of Designation of the Rights of the
Preferred Stock is annexed hereto as Exhibit A ("Certificate of Designation").
(The Company Shares are sometimes referred to herein as the "Shares" or "Common
Stock"). (The Preferred Stock, the Company Shares, Warrants issuable to the
Placement Agents, identified on Schedule B hereto, and the Company Shares
issuable upon exercise of the Warrants are collectively referred to herein as,
the "Securities"). Upon acceptance of this Agreement by the Subscriber, the
Company shall issue and deliver to the Subscriber the Preferred Stock against
payment, by federal funds (U.S.) wire transfer of the purchase price of the
Preferred Stock. This Subscription Agreement relates to the offering of a
maximum of 2,000 shares of Preferred Stock.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with and
has read the Company's Form 10-KSB for the year ended September 30, 1997 and
subsequent Forms 10-QSB and 8-K, each as filed with the U.S. Securities and
Exchange Commission (the "Commission") (collectively, with exhibits thereto,
hereinafter referred to as the "Reports"). In addition, the Subscriber has
received from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested, and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended, is experienced in investments and
business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof.
(c) Purchase of Company Shares. On the Closing Date, the Subscriber
will purchase the Company Shares for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and
agrees that the Securities have not been registered under the Securities Act of
1933, as amended (the "1933 Act") by reason of their issuance in a transaction
that does not require registration under the 1933 Act, and that such Securities
must be held unless a subsequent disposition is registered under the 1933 Act or
is exempt from such registration. The Subscriber agrees that if, in the future,
the Subscriber should decide to dispose of any of the Securities acquired by it
pursuant to this Agreement, the Subscriber will do so only pursuant to a
registration statement or by disposition exempt from registration requirements
under the 1933 Act.
(e) Preferred Stock and Company Shares Legend. The Preferred Stock,
Company Shares and the shares of Common Stock issuable upon the exercise of the
Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO INTEGRATED SPATIAL INFORMATION SOLUTIONS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Warrants which the Placement Agents are
receiving pursuant to this Agreement shall bear the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO INTEGRATED SPATIAL
INFORMATION SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
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(g) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), shall be true and correct as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its wholly-owned
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its wholly-owned subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a material adverse effect on the
business, operations or prospects or condition (financial or otherwise) of the
Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its wholly-owned subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder and all other agreements entered into by the Company relating hereto.
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company, except as described
in the Reports or Other Written Information.
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(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 or NASDAQ or the Company's Shareholders is
required for execution of this Agreement, including, without limitation issuance
and sale of the Securities, or the performance of the Company's obligations
hereunder, except as may be required under NASDAQ Marketplace Rule
4310(c)(25)(H).
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations under
this Agreement by the Company will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice of the lapse of time or
both would be reasonably likely to constitute a default) under (A) the articles
of incorporation, charter or bylaws of the Company, or any of its affiliates,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company, or any of its affiliates
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates or over the properties or assets of
the Company, or any of its affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company, or any of its affiliates is a party, by which
the Company, or any of its affiliates is bound, or to which any of the
properties of the Company, or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, or any of
its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the Closing Date, as hereinafter defined, and the
date the Warrants are exercised according to their terms, as the case may be,
the Securities will be duly and validly issued, fully paid and nonassessable,
and if registered pursuant to the 1933 Act, free trading and unrestricted;
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(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;
(iv) will not subject the holders thereof to personal liability
by reason of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, or which was
not disclosed in the Reports and Other Written Information.
(i) Reporting Company. The Company is a publicly- held company whose
common stock is (and has been for the past 90 days) registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). The Company's Common Stock is listed for trading on the NASDAQ SmallCap
Market pursuant to a temporary exemption from the listing requirements, and is
subject to delisting if the Company does not meet the listing requirements.
Pursuant to the provisions of the 1934 Act, the Company has timely filed all
reports and other materials required to be filed thereunder with the Securities
and Exchange Commission during the preceding twelve months.
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the Company
Shares or affect the price at which the Securities may be issued.
(k) Information Concerning Company. The Reports and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the financial
statements set forth in the Reports, and except as modified in the Other Written
Information, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports and Other Written Information do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(l) Dilution. The number of Shares issuable upon conversion (as
hereinafter defined) may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to conversion of the Preferred Stock.
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The Company's executive officers and directors have studied and fully understand
the nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company.
(m) Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of the Securities at such time as the
Securities are registered for public sale or an exemption from registration is
available.
(n) Defaults. Neither the Company nor any of its wholly-owned
subsidiaries is in violation of its Certificate of Incorporation or ByLaws.
Except as described in the Reports and Other Written Information, neither the
Company nor any of its subsidiaries is (i) in default under or in violation of
any other material agreement or instrument to which it is a party or by which it
or any of its properties are bound or affected, which default or violation would
have a material adverse effect on the Company, (ii) in default with respect to
any order of any court, arbitrator or governmental body or subject to or party
to any order of any court or governmental authority arising out of any action,
suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its knowledge in violation of any statute, rule or regulation of any
governmental authority material to its business.
(o) No Integrated Offering. Neither the Comany, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
The NASDAQ SmallCap Market ("NASDAQ SmallCap"), as applicable, nor will the
Company or any of its subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings. The Company
has not conducted and will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the issuance of the Securities
solely for purposes of Rule 4460(i) of the NASDAQ Stock Market, Inc.'s
Marketplace Rules.
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(p) Use of Proceeds. The proceeds of the Subscriber funds to be
released to the Company will be used for working capital, general corporate
purposes and for expenses of this offering.
(q) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with the offer or sale of
the Securities.
(r) Listing. The Company's common stock is quoted on, and listed for
trading on NASDAQ SmallCap pursuant to a temporary exception to the listing
requirements. The Company has received notice from NASDAQ that its Common Stock
will be delisted from NASDAQ unless the Company meets all requirements for the
continuation of such listing.
(s) S-3 Eligibility. The Company currently meets, and will take all
necessary action to continue to meet, the "registrant eligibility" requirements
set forth in the general instructions to Form S-3.
(t) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects and, unless the Company otherwise notifies the
Subscriber prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C. The Company will provide such
other legal opinions in the future as are reasonably necessary for the
conversion of the Preferred Stock.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Sections 1(e) and
1(f) above at such time as (a) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Act, or (b) the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and provide legal opinions
necessary to allow such resales.
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5. Redemption. The Company may not redeem the Securities without the
consent of the holder of the Securities.
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its fee of $25,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $2,000,000 and acting as Escrow Agent. The Company
will pay a cash commission of twelve percent (12%) of the Purchase Price
designated on the signature page hereto to certain Placement Agents identified
on Schedule B hereto. The commission is payable only when, as, and if the
corresponding subscription amount is released from escrow and received by the
Company. The commissions and legal fees will be payable out of funds held
pursuant to a Funds Escrow Agreement to be entered into by the Company and
Subscriber. The Company will also issue and deliver to the Placement Agents as
additional compensation the Warrants designated on Schedule B hereto. The
Warrants will be issued to the Placement Agents only when, as, and if the
corresponding subscription amount is released from escrow and received by the
Company. All the representations, covenants, warranties and undertakings,
including but not limited to registration rights made or granted to or for the
benefit of the Subscriber are hereby also made and granted to the Placement
Agents in respect of the Warrants and Common Stock issuable upon exercise of the
Warrants.
7.1. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it receives
notice of issuance by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the common stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) The Company shall promptly secure the listing of the Company
Shares and Common Stock issuable upon the exercise of the Warrants upon each
national securities exchange, or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain such listing so long as any other shares of Common Stock
shall be so listed, Company will use its best efforts to maintain the listing
and trading of its Common Stock on NASDAQ SmallCap, and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers ("NASD") and
such exchanges, as applicable. The Company shall promptly provide to each
Purchaser copies of any notices it receives regarding the continued eligibility
of the Common Stock for listing on such exchanges or quotation systems, or any
other exchange or quotation system on which the Common Stock is then listed.
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(c) The Company shall notify the SEC, NASD 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 Subscriber
and promptly provide copies thereof to Subscriber.
(d) Until at least two (2) years after the effectiveness of the
Registration Statement on Form S-3 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will use its reasonable
efforts (i) to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, (ii) to comply in all respects with
its reporting and filing obligations under such Exchange Act, and (iii) to
comply with all requirements related to any registration statement filed
pursuant to this Agreement. The Company will not take any action or file any
document (whether or not permitted by the Act or the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Acts, except as permitted
herein, until the later of (i) two (2) years after the effective date of the
Registration Statement on Form S-3 or such other Registration Statement
described in Section 10.1(iv) hereof, or (ii) the sale by the Subscribers of all
the shares of common stock issuable by the Company pursuant to this Agreement.
Until at least one (1) year after the Warrants have been exercised, the Company
will use its commercial best efforts to continue the listing or trading of its
Common Stock on NASDAQ SmallCap and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD and NASDAQ.
(e) The Company and Subscriber agree that until the Company either
obtains shareholder approval of the issuance of the Shares, or an exemption from
NASDAQ's corporate governance rules as they may apply to the Shares (the
"Approval"), the Subscriber may not receive more than the number of Shares
designated on the signature page hereof ("Section 7.2(e) Shares"). The Company
represents that this number together with the aggregate of such amounts
designated for all investors in the $2,000,000 offering to which this
Subscription Agreement relates, is not greater than 19.99% of the shares of
Company's common stock outstanding on the Closing Date. The Company undertakes
to obtain the approval of its shareholders, if necessary, required pursuant to
the NASDAQ's corporate governance rules to allow conversion of all the Preferred
Stock and dividends and exercise of all the Warrants. The Company covenants to
obtain the shareholder approval, if necessary, no later than 60 days from the
effective date of the Registration Statement described in Section 10.1(iv)
hereof. Failure to obtain shareholder approval, if required, on or before such
date shall be deemed an Event of Default pursuant to Section 7 of the
Certificate of Designation, but only to the extent of the Preferred Stock that
may not be converted or Warrants that may not be exercised due to the Company's
failure to obtain such shareholder approval.
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(f) The Company undertakes to use the proceeds of the Subscribers
funds to implement its acquisition strategy, working capital and expenses of
this offering.
(g) The Company covenants and agrees with the Subscriber that it shall
employ not less than 2.5 percent of the Purchase Price to initiate and conduct
an aggressive investor relations strategy. The Company further agrees to
promptly inform all the Placement Agents as to its compliance with this
undertaking.
7.2. Covenants of Subscriber. The Subscriber covenants and agrees with the
Company that the Subscriber will provide for itself and any beneficial holder of
the Securities, information and documents reasonably required by the Company for
the Company to comply with its governmental and regulatory obligations including
but not limited to the Securities and Exchange Commission, blue sky and NASDAQ
requirements.
8. Covenants of the Company and Subscriber Regarding Idemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber against any claim, cost, expense, liability, obligation, loss
or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon Subscriber which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or Reports or other
Written Information; or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (a) any misrepresentation by Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder.
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9.1. Conversion.
(a) The Preferred Stock will be convertible according to the procedure
set forth in the Certificate of Designation.
(b) The Preferred Stock and accrued dividends will be convertible into
Company Shares at the Subscriber's, or then Holder's election at the Conversion
Price which is the lesser of (i) 105% of the five day average closing bid price
of the Common Stock ending on the trading day before the Closing Date, or (ii)
80% of the average of the three lowest closing bid prices of the Common Stock
for the ten trading days prior to, but not including the Conversion Date (as
defined in the Certificate of Designation) ("Look-Back Period"). The Look-Back
Period will be increased by two trading days for each thirty calendar days
commencing 150 days after the Closing Date, up to a maximum of a twenty (20) day
Lock- Back Period.
(c) The Company understands that a delay in the delivery of the Shares
and Preferred Stock certificates representing the unconverted balance of a
Preferred Stock certificate tendered for conversion beyond the date described
for such delivery set forth in the Certificate of Designation ("Delivery Date")
or Mandatory Conversion Date (as that term is employed in the Certificate of
Designation), or late delivery of a Mandatory Redemption Payment (as defined
herein), as the case may be, could result in economic loss to the Subscriber. As
compensation to the Subscriber for such loss, the Company agrees to pay late
payments to the Subscriber for late delivery of Shares upon Conversion and late
delivery of a Preferred Stock certificate for the unconverted portion of a
Preferred Stock certificate or late delivery of a Mandatory Redemption Payment
in the amount of $100 per business day after the Delivery Date for each $10,000
of Stated Value of Preferred Stock being converted and Preferred Stock
certificate remaining undelivered or Mandatory Redemption Payment not paid. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Subscriber, in the event that the Company fails
for any reason to effect delivery of the Shares within three business days after
the Delivery Date, the Subscriber will be entitled to revoke the relevant Notice
of Conversion by delivery in a notice to such effect to the Company whereupon
the Company and the Subscriber shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation, except
that late payment charges described above shall be payable through the date
notice of revocation is given to the Company.
(d) Nothing contained herein or in any document referred to herein
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 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.
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9.2. Mandatory Redemption. In the event the Company may not issue Shares on
a Delivery Date because such issuance and delivery would be contrary to NASDAQ's
Corporate Governance Rules, or for any other reason, then the Company must pay
to the Subscriber on the Delivery Date a sum of money determined by multiplying
the number of Shares otherwise deliverable, by the average closing bid prices of
the Shares on the NASDAQ SmallCap Market or such other securities exchange or
other securities market on which the Common Stock is then being traded for the
most recent trading day preceding the Conversion Date ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Shares otherwise deliverable. Upon receipt of the
Mandatory Redemption Payment, the corresponding Preferred Stock will be
cancelled and no longer outstanding, and if the Holder or Escrow Agent is in
possession of the corresponding Preferred Stock, same will be returned to the
Company.
9.3. Maximum Conversion. The Company and Subscriber shall not be entitled
to convert that amount of the Preferred Stock in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Subscriber and its affiliates
on a Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Preferred Stock with respect to which the
determination of this proviso is being made on a Conversion Date, which would
result in beneficial ownership by the Subscriber and its affiliates of more than
9.99% of the outstanding shares of Common Stock of the Company. For the purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder, except as otherwise provided
in clause (i) of such proviso.
10. Registration Rights; Procedure; Indemnification.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Company Shares and the Warrants.
(i) On one occasion, for a period commencing 21 days after the
Closing Date, but not later than three years from the date hereof, the Company,
upon a written request therefor from any record holder or holders of more than
50% of the aggregate of the Company's Shares issuable upon Conversion of the
Preferred Stock (the Securities and securities issued or issuable by virtue of
ownership of the Securities being, the "Registrable Securities"), shall prepare
and file with the SEC a registration statement under the Act covering the
Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration statement.
In addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 10.1. As a condition precedent to the
inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The obligation
of the Company under this Section 10.1(i) shall be limited to one registration
statement.
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(ii) If the Company at any time proposes to register any of its
securities under the Act for sale to the public, whether for its own account or
for the account of other security holders or both, except with respect to
registration statements on Forms X-0, X-0 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the Subscriber
or Holder pursuant to an effective registration statement, each such time it
will give at least 10 days' prior written notice to the record holder of the
Registrable Securities of its intention so to do. Upon the written request of
the holder, received by the Company within 10 days after the giving of any such
notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the "Seller"). In
the event that any registration pursuant to this Section 10.1(ii) shall be, in
whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the forgoing
provisions, the Company may withdraw any registration statement referred to in
this Section 10.1(ii) without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account, such written request shall
be deemed to have been given pursuant to Section 10.1(ii) rather than Section
10.1(i), and the rights of the holders of Registrable Securities covered by such
written request shall be governed by Section 10.1(ii) except that the Company or
underwriter, if any, may not withdraw such registration or limit the amount of
Registrable Securities included in such registration.
(iv) The Company shall file with the Commission, within twenty
(20) days of the Closing Date ("Filing Date"), and use its reasonable commercial
efforts to cause to be declared effective a Form S-3 registration statement (or
13
such other form that it is eligible to use) in order to register the Registrable
Securities and all Shares issuable by virtue of the Preferred Stock for resale
and distribution under the Act. The registration statement described in this
paragraph must be declared effective by the Commission within 90 days of the
Filing Date. The Registrable Securities shall be reserved and set aside
exclusively for the benefit of the Subscriber and Placement Agents, as the case
may be, and not issued, employed or reserved for anyone other than the
Subscriber and Placement Agents, as the case may be. Such registration statement
will be promptly amended or additional registration statements will be promptly
filed by the Company as necessary to register additional Company Shares to allow
conversion of all the Preferred Stock and dividends.
Sixty-five percent (65%) of the Purchase Price, as set forth on
the signature page of this Subscription Agreement shall be held in escrow
pursuant to the Funds Escrow Agreement annexed hereto as Exhibit D until the
acceptance for filing by the Securities and Exchange Commission of the
registration statement described in this Section 10.1(iv) and the declaration of
effectiveness by the Securities and Exchange Commission of such Registration
Statement and if required, obtainment of the Approval described in Section
7.1(e) hereof ("Registration Escrow").
In the event the registration statement relating to the
Registrable Securities is not accepted for filing by the Securities and Exchange
Commission within 20 days from the Closing Date or if the Registration Statement
is not declared effective by the Securities and Exchange Commission within 90
days of the Filing Date, then the Registration Escrow shall be employed as a
non-exclusive remedy, to pay the damages described in Sections 7.1(e) and
10.2(j) of this Subscription Agreement.
In the event the Registration Statement is not accepted for
filing by the Securities and Exchange Commission within 20 days of the Closing
Date, unless otherwise agreed to in writing by the Subscriber, or if the
Approval described in Section 7.1(e) hereof, if required, is not obtained by
such date, then forty-one and one-quarter percent (41.25%) of the Purchase Price
shall be released to the Subscriber. In the event the Registration Statement is
accepted for filing by the Securities and Exchange Commission within 20 days of
the Closing Date, then forty-one and one-quarter percent (41.25%) of the
Purchase Price shall be released to the Company and forty-one and one-quarter
percent (41.25%) of the Preferred Stock shall be released to the Subscriber.
In the event the Registration Statement is not declared effective
within 90 days of the Filing Date, or if the Approval described in Section
7.1(e) hereof, if required, is not obtained within 60 days from the effective
date of the Registration Stateent, unless otherwise agreed to in writing by the
14
Subscriber, then twenty-three and three-quarter percent (23.75%) of the Purchase
Price shall be released to the Subscriber. In the event the Registration
Statement is declared effective within 90 days of the Filing Date, then 14 days
after the effective date, twenty- three and three-quarter percent (23.75%) of
the Purchase Price shall be released to the Company and twenty-three and
three-quarter percent (23.75%) of the Preferred Stock shall be released to the
Subscriber.
In the event the Company does not comply with the schedule for
registration set forth above, the Company shall not be released from any of its
obligations under this Subscription Agreement or any agreement delivered in
connection herewith including the Company's obligations pursuant to this Section
10 of the Subscription Agreement except that the Company shall no longer be
required to file a registration statement in connection with only those
Securities corresponding to that portion of the Purchase Price released to the
Subscriber and damages shall not accrue to the Subscriber in relation to funds
released to the Subscriber from and after the date that portion of the Purchase
Price is returned to the Subscriber. To the extent any part of the Purchase
Price portion of the Registration Escrow is released to a Subscriber, then that
portion of the Registration Escrow may, at the Subscriber's election, first be
applied in satisfaction of payment by the Company of sums payable to such
Subscriber pursuant to Section 10.2(j) and Section 7.1(e) hereof.
(v) The funds portion of the Registration Escrow will be released
to the Subscriber if the shareholder approval or NASDAQ exemption described in
Section 7.1(e) hereof, if required, is not obtained as specified in this
Agreement, or if the Escrow Agent has not received the corresponding portion of
the Preferred Stock. In the event the Preferred Stock corresponding to the funds
portion of the Registration Escrow is not delivered to the Escrow Agent within
fourteen (14) days of the filing date of the Registration Statement or effective
date of the Registration Statement, as the case may be, then the corresponding
funds portion of the Registration Escrow will be released to the Subscriber. In
no event will any funds be released to the Company unless and until such time as
the Approval described in Section 7.1(e) hereof is obtained in relation to only
that amount of Preferred Stock convertible into Shares which would otherwise be
releasable has such Preferred Stock been converted on the Filing Date or
effective date, as the case may be, at the Conversion Rate that would be in
effect on such date.
(vi) Upon the occurrence of an Event of Default as described in
the Certificate of Designation, or in the event the Company's Shares are not
listed for trading on the NASDAQ SmallCap Market or if the Company is not in
compliance with the listing requirements of the NASDAQ SmallCap Market on either
the filing date of the Registration Statement or the effective date of the
Registration Statement, of if the highest closing bid price of the Common Stock
as reported on NASDAQ SmallCap Market is less than $.87 for any day during the
15
seven trading days prior to the filing date of the Registration Statement or the
effective date of the Registration Statement, then any Subscriber funds still
held in escrow on such date will be returned to the Subscriber, upon
Subscriber's election, and the Subscriber will have no obligation to purchase
any Preferred Stock from the Company. In such event, the Company will pay to the
Subscriber within five business days of such filing or effective date or the
occurrence of the Event of Default a sum of money equal to 8% on an annualized
basis of the Subscriber funds returned to the Subscriber.
(vii) A sum of money equal to five percent (5%) of the Purchase
Price will be retained in escrow by the Escrow Agent pursuant to the Funds
Escrow Agreement until all the Preferred Stock and accrued dividends have been
converted into free-trading Company Shares or otherwise redeemed ("Expense
Escrow"). This portion of the escrow deposit will be retained for the exclusive
use of the Subscriber to compensate Subscriber for any costs and expenses
associated with the Subscriber's enforcement of any of the Company's obligations
or Subscriber's rights under this Subscription Agreement or other agreements or
document referred to herein.
(viii) Commissions and legal fees described in Section 6 hereof
will be deducted from funds releasable to the Company and paid by the Escrow
Agent to the Placement Agents. The Warrants deliverable to the Placement Agents
will be deposited in escrow with the Escrow Agent and released proportionately
as funds are released to the Company. A corresponding number of Warrants will be
released to the Company as Subscriber funds are released from escrow and
delivered to the Subscriber.
10.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided), and promptly provide
to the holders of Registrable Securities copies of all filings and Commission
comment letters;
16
(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 for
the period specified in paragraph (a) above and comply with the provisions of
the Act with respect to the disposition of all of the Registrable Securities
covered by such registration statement in accordance with the Seller's intended
method of disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller or, in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non- confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
17
(h) at the request of the Seller, provided a demand for registration
has been made pursuant to Section 10.1(i) or a request for registration has been
made pursuant to Section 10.1(ii), the Registrable Securities will be included
in a registration statement filed pursuant to this Section 10. In the event of a
firm commitment underwritten public offering in which the Registrable Securities
are so included, the lockup, if any, requested by the managing underwriter may
not exceed ninety (90) days after the effective date thereof.
(i) In connection with each registration hereunder, the Seller will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws. In
connection with each registration pursuant to Section 10.1(i) or 10.1(ii)
covering an underwritten public offering, the Company and the Seller agree to
enter into a written agreement with the managing underwriter in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Company's size and
investment stature.
(j) The Company and the Subscriber agree that the Seller will suffer
damages if any registration statement required under Section 10.1(i) or 10.1(ii)
above is not filed within 45 days after request by the Holder and not declared
effective by the Commission within 130 days after such request [or 20 days and
90 days, respectively, after the Closing Date and Filing Date in reference to
the Registration Statement on Form S-3 or such other form described in Section
10.1(iv)], and maintained in the manner and within the time periods contemplated
by Section 10 hereof, and it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if (i) the Registration Statement
described in Sections 10.1(i) or 10.1(ii) is not filed within 45 days of such
request, or is not declared effective by the Commission on or prior to the date
that is 130 days after such request, or (ii) the registration statement on Form
S-3 or such other form described in Section 10.1(iv) is not filed within 20 days
after the Closing Date or not declared effective within 90 days of the Filing
Date, or (iii) any registration statement described in Sections 10.1(i),
10.1(ii) or 10.1(iv) is filed and declared effective but shall thereafter cease
to be effective (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 30 days in the aggregate per year but not more than 20 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 10.2(j) is referred to herein as a
18
"Non- Registration Event"), then, for so long as such Non-Registration Event
shall continue, the Company shall pay in cash as Liquidated Damages to each
holder of any Securities an amount equal to one (1%) percent for the first month
and three (3%) percent for each month thereafter, or part thereof, of the
Purchase Price of the Preferred Stock and Company Shares then owned of record by
such holder as of immediately following the occurrence of such Non- Registration
Event, unless such Non-Registration Event arises from Subscriber's material
default of Subscriber's obligations hereunder. Payments to be made pursuant to
this Section 10.2(j) shall be due and payable immediately upon demand in
immediately available funds. In the event a mandatory redemption of Preferred
Stock is demanded by the Holder of Preferred Stock pursuant to Section 8 of the
Certificate of Designation, then the Liquidated Damages described in this
Section 10.2(j) shall no longer accrue from and after the date the Holder
receives the payment described in Section 8 of the Certificate of Designation.
In the event the Registration Statement described in Section 10.1(iv) above is
declared effective by the Securities and Exchange Commission within 150 days of
the Filing Date, then such Registration Default will not be deemed an Event of
default solely in connection with Subscriber's rights described in Section 8 of
the Certificate of Designation.
10.3. 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 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, fee of one counsel, if any, to represent all the
Sellers, and costs of insurance are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Seller, are called "Selling Expenses". The Seller shall pay the
fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. All Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.4. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the Act pursuant to Section 10, the Company will indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Seller, or such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
19
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, the underwriter or any such controlling person in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the Registrable
Securities sold by the Seller under such registration statement bears to the
total public offering price of all securities sold thereunder, but not in any
event to exceed the gross proceeds received by the Seller from the sale of
Registrable Securities covered by such registration statement.
20
(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 10.4(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.4(c) 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 10.4(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.4 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 10.4 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.4; then, and in each such case, the Company and
21
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, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11. (a) Right of First Refusal. Until 120 days after the effective date of
the Registration Statement on Form S-3 described in Section 10.1(iv) hereof, the
Subscriber shall be given not less than ten (10) business days prior written
notice of any proposed sale by the Company of its common stock or other
securities or debt obligations not in connection with mergers, acquisitions or
the acquisition of assets, or as otherwise disclosed in the Other Written
Information. The Subscriber shall have the right during the ten (10) business
days following the notice to agree to purchase an amount of Company Shares in
the same proportion as being purchased in the aggregate offering to which this
Subscription Agreement relates (i.e. $2,000,000 in the aggregate), of those
securities proposed to be issued and sold, in accordance with the terms and
conditions set forth in the notice of sale. In the event such terms and
conditions are modified during the notice period, the Subscriber shall be given
prompt notice of such modification and shall have the right during the original
notice period or for a period of ten (10) business days following the notice of
modification, whichever is longer, to exercise such right. In the event the
right of first refusal described in this Section is exercised by the Subscriber
and the Company thereby receives net proceeds from such exercise, then
commissions and fees will be paid by the Company to the Placement Agents in the
same amounts as specified in the notice of sale.
(b) Offering Restrictions. Until 120 days after the effective date of
the Registration Statement described in Section 10.1(iv) hereof except for
Existing Option Obligations (as defined in the Certificate of Designation), or
as otherwise disclosed in the Other Written Information, the Company will not
issue any equity, or convertible debt or other securities or conduct any public
or private offering without the consent of the Subscriber if such securities
owned or could be convertible into or be free-trading securities prior to all
the Securities.
22
12. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section: (i) if to the Company, to
Integrated Spatial Information Solutions, Inc., Attention: President, 000 X.
Xxxx Xxxxxx, Xxxxxxxxx, XX 00000, telecopier number: (000) 000-0000, and (ii) if
to the Subscriber, to the name, address and telecopy number set forth on the
signature page hereto.
(b) Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Grushko & Xxxxxxx, 000 Xxxxxxxx, Xxxxx 000,
Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions to Closing set
forth in this Agreement. The closing date shall be the date that subscriber
funds representing the net amount due the Company from the Purchase Price are
transmitted by wire transfer to the Company (the "Closing Date"). At the
Closing, thirty-five percent (35%) of the total subscription funds shall be paid
to the Company (less applicable commissions and five percent (5%) of the
Purchase Price as the Expense Escrow), the corresponding thirty-five percent
(35%) of the Preferred Stock shall be released to the Subscriber, and the
corresponding thirty-five percent (35%) of the total commissions and Warrants
shall be released to the Placement Agents. The balance of the documents and
funds shall be placed in escrow as provided in this Agreement.
(c) Entire Agreement; Assignment. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by a writing executed by both parties. No right or
obligation of either party shall be assigned by that party without prior notice
to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York. Both parties and the individuals executing
this Agreement and other agreements on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Agreement or any other
agreement delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
23
(f) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 12(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) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth (10th) business day following the date this
Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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.
INTEGRATED SPATIAL INFORMATION SOLUTIONS, INC.
By:________________________________
Xxxx Xxxxxxxxx, President
Dated: August ____, 1998
Purchase Price: $1,000,000
Preferred Shares Purchased: 1,000 (at $1,000 per share)
Section 7.1(e) Shares: 1,150,000
ACCEPTED: Dated as of August ____, 1998
AUSTOST ANSTALT XXXXXX
(a Lichenstein corporation)
7440 Fuerstentum
Xxxxxxxxxxx
Xxxxxxxxxxx 000
Fax: 000-000-000000000
By:____________________________
Xxxxxx Xxxxx
Director
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.
INTEGRATED SPATIAL INFORMATION SOLUTIONS, INC.
By:________________________________
Xxxx Xxxxxxxxx, President
Dated: August ____, 1998
Purchase Price: $1,000,000
Preferred Shares Purchased: 1,000 (at $1,000 per share)
Section 7.1(e) Shares: 1,150,000
ACCEPTED: Dated as of August ____, 1998
BALMORE FUNDS S.A.
(a X.X.X. xxxxxxxxxxx)
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx
Fax: 000-000-000-0000
By:____________________________
Francois Morax
Director
