EXHIBIT 4.3
-----------
SUBSCRIPTION AGREEMENT
----------------------
Dear Subscriber:
You, together with other subscribers (each a "Subscriber") hereby agree to
purchase, and Xechem International, Inc., a Delaware corporation (the
"Company"), hereby agrees to issue and to sell to the Subscriber, an unsecured
subordinated Convertible Note (the "Note") convertible in accordance with the
terms thereof into shares of the Company's $.00001 par value common stock (the
"Company Shares") and common stock purchase warrants ("Warrants") for the
aggregate consideration as set forth on the signature page hereof ("Purchase
Price"). The form of Note is annexed hereto as EXHIBIT A. (The Company Shares
included in the Securities (as hereinafter defined) are sometimes referred to
herein as the "Shares", "Common Shares" or "Common Stock"). (The Notes, the
Company Shares, Warrants, and the Common Stock 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 the Note and Warrants against payment, by federal funds wire transfer of
the Purchase Price.
The following terms and conditions shall apply to this subscription.
1. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. The Subscriber
hereby represents and warrants to and agrees with the Company that:
(a) INFORMATION ON COMPANY. The Subscriber has been furnished
with the Company's Form 10-KSB for the year ended December 31, 2001 as filed
with the Securities and Exchange Commission (the "Commission") together with all
subsequently filed forms 10-QSB, 8-K, and other publicly available filings made
with the Commission (hereinafter referred to collectively 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 in writing (such information in writing is
collectively, the "Other Written Information"), and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities.
(b) INFORMATION ON SUBSCRIBER. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended (the "1933 Act"), is experienced in
investments and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment. The
Subscriber has the authority and is duly and legally qualified to purchase and
own the Securities. The Subscriber is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof. The information
set forth on the signature page hereto regarding the Subscriber is accurate.
(c) PURCHASE OF NOTE AND WARRANTS. On the Closing Date, the
Subscriber will purchase the Note and Warrants for its own account and not with
a view to any distribution thereof.
(d) COMPLIANCE WITH SECURITIES ACT. The Subscriber understands
and agrees that the Securities have not been registered under the 1933 Act, by
reason of their issuance in a transaction that does not require registration
under the 1933 Act (based in part on the accuracy of the representations and
warranties of Subscriber contained herein), and that such Securities must be
held unless a subsequent disposition is registered under the 1933 Act or is
exempt from such registration.
(e) COMPANY SHARES LEGEND. The Company Shares, and the shares of
common stock issuable upon the exercise of the Warrants, shall bear the
following legend, unless same shall have been included in an effective
registration statement under the 1933 Act:
"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 UNDER SUCH SECURITIES ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO XECHEM INTERNATIONAL,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) WARRANTS LEGEND. The Warrants shall bear the following
legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XECHEM INTERNATIONAL, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
(g) Note Legend. The Note shall bear the following legend:
-----------
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
2
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XECHEM INTERNATIONAL, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
(h) COMMUNICATION OF OFFER. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
(i) CORRECTNESS OF REPRESENTATIONS. The Subscriber represents
that the foregoing representations and warranties are true and correct as of the
date hereof and, unless the 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 subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the respective jurisdictions of their incorporation and have the
requisite corporate power to own their properties and to carry on their business
as now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a material adverse effect on the
business, operations or financial condition of the Company.
(b) OUTSTANDING STOCK. All issued and outstanding shares of
capital stock of the Company and each of its subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) AUTHORITY; ENFORCEABILITY. This Agreement, the Warrant and
other agreements delivered together with this Agreement or in connection
herewith have been duly authorized, executed and delivered by the Company and
are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and the Company
has full corporate power and authority necessary to enter into this Agreement,
Warrant and such other agreements and to perform its obligations hereunder and
under all other agreements entered into by the Company relating hereto.
(d) ADDITIONAL ISSUANCES. Except as set forth on Schedule 2(d),
there are no outstanding agreements or preemptive or similar rights affecting
the Company's common stock or equity and no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of any shares
of common stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company except as described in the Reports or Other Written
Information.
3
(e) CONSENTS. No consent, approval, authorization or order of
any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the National Association of Securities
Dealers, Inc. ("NASD"), Nasdaq or the Company's Shareholders is required for
execution of this Agreement, and all other agreements entered into by the
Company relating thereto, including, without limitation, the issuance and sale
of the Securities, and the performance of the Company's obligations hereunder
and under all such other agreements.
(f) NO VIOLATION OR CONFLICT. Assuming the representations and
warranties of the 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 the Company's
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the
lapse of time or both would be reasonably likely to constitute a default)
under (A) the certificate of incorporation, charter or bylaws of the
Company, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company of any
court, governmental agency or body, or arbitrator having jurisdiction over
the Company or any of its 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 except
the violation, conflict, breach, or default of which would not have a
material adverse effect on the Company; or
(ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the
Company, its subsidiaries or any of its affiliates.
(g) The Securities. The Securities upon issuance:
--------------
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions
upon transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and
on the date of issuance and on the Closing Date, as hereinafter defined,
and the date the Note is converted, and the Warrants are exercised, the
Securities will be duly and validly issued, fully paid and nonassessable
(and if registered pursuant to the 1933 Act, and resold pursuant to an
effective registration statement will be free trading and unrestricted,
provided that the Subscriber complies with the Prospectus delivery
requirements);
(iii)will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company; and
4
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
(h) LITIGATION. There is no pending or, to the best knowledge of
the Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its affiliates that would affect the execution by the Company
or the performance by the Company of its obligations under this Agreement, and
all other agreements entered into by the Company relating hereto. Except as
disclosed in the Reports or Other Written Information, there is no pending or,
to the best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined could have a material adverse effect on the Company.
(i) REPORTING COMPANY. The Company is a publicly-held company
subject to reporting obligations pursuant to Sections 15(d) and 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of
common shares registered pursuant to Section 12(g) of the 1934 Act. The
Company's common stock is listed for trading on the OTC Bulletin Board
("Bulletin Board"). Pursuant to the provisions of the 1934 Act, the Company has
filed all reports and other materials required to be filed thereunder with the
Securities and Exchange Commission during the preceding twelve months.
(j) NO MARKET MANIPULATION. The Company has not taken, and will
not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the common stock of the Company to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be issued or
resold.
(k) INFORMATION CONCERNING COMPANY. The Reports 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 included in the
Reports, and except as modified in the Other Written Information or in the
Schedule hereto, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports 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 in light of the circumstances when made.
(l) DILUTION. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have a potential dilutive effect. The board of directors
of the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the Note
and exercise of the Warrants is binding upon the Company and enforceable, except
as otherwise described in this Subscription Agreement or the Note, regardless of
the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
5
(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, resale or delivery of the Securities,
except as may be required by federal securities laws.
(n) DEFAULTS. Neither the Company nor any of its subsidiaries is
in violation of its Certificate of Incorporation or ByLaws. Neither the Company
nor any of its subsidiaries is (i) in default under or in violation of any other
material agreement or instrument to which it is a party or by which it or any of
its properties are bound or affected, which default or violation would have a
material adverse effect on the Company, (ii) in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to its
knowledge in violation of any statute, rule or regulation of any governmental
authority which violation would have a material adverse effect on the Company.
(o) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board nor will the Company or any of its affiliates or subsidiaries
take any action or steps that would cause the offering of the Securities to be
integrated with other offerings. The Company has not conducted and will not
conduct any offer other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.
(p) NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with the offer or sale of
the Securities.
(q) LISTING. The Company's common stock is quoted on, and listed
for trading on the Bulletin Board. The Company has not received any oral or
written notice that its Common Stock will be delisted from the Bulletin Board or
that the Company's common stock does not meet all requirements for the
continuation of such listing.
(r) NO UNDISCLOSED LIABILITIES. The Company has no liabilities
or obligations which are material, individually or in the aggregate, which are
not disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since December 31,
2001 and which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company's financial condition.
(s) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31,
2001, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under
6
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(t) CAPITALIZATION. The authorized and outstanding capital stock
of the Company as of the date of this Agreement and the Closing Date are set
forth in the financial statements included in the Reports. Except as set forth
in the Reports and Other Written Information and Schedule 2(t), there are no
options, warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company. All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and nonassessable.
(u) S-3 ELIGIBILITY. The Company currently meets, and will use
its best efforts to take all necessary action to continue to meet, the
"registrant requirements" set forth in the general instruction 1A to Form S-3.
(v) 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 reasonably 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 B. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the conversion of the Note and exercise
of the Warrants.
4. REISSUANCE OF SECURITIES. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to and disposes of such Securities pursuant to Rule 144(d) and/or Rule 144(k)
under the 1933 Act in the opinion of counsel reasonably satisfactory to the
Company, or (b) upon resale subject to an effective registration statement after
the Securities are registered under the 0000 Xxx. The Company agrees to
cooperate with the Subscriber in connection with all resales pursuant to Rule
144(d) and Rule 144(k) and provide legal opinions necessary to allow such
resales provided the Company and its counsel receive reasonably requested
written representations from the Subscriber and selling broker, if any. Provided
the Subscriber provides required certifications and representation letters, if
any, if the Company unreasonably fails to remove any legend as required by this
Section 4 (a "Legend Removal Failure"), then beginning on the tenth (10th) day
following the date that the Subscriber has requested the removal of the legend
and delivered all items reasonably required by the Company to be delivered by
the Subscriber, the Company continues to fail to remove such legend, the Company
shall pay to each Subscriber or assignee holding shares, subject to a Legend
Removal Failure, as liquidated damages and not a penalty an
7
amount equal to one percent (1%) of the Purchase Price of the shares subject to
a Legend Removal Failure per day that such failure continues. If during any
twelve (12) month period, the Company fails to remove any legend as required by
this Section 4 for an aggregate of thirty (30) days, each Subscriber or assignee
holding Securities subject to a Legend Removal Failure may, at its option,
require the Company to purchase all or any portion of the Securities subject to
a Legend Removal Failure held by such Subscriber or assignee at a price per
share equal to 120% of the applicable Purchase Price.
5. Warrants.
--------
(a) The Company will also issue and deliver on the Closing Date
to the Subscriber four million (4,000,000) Warrants for each one hundred
thousand dollars ($100,000) of Purchase Price. A form of Warrant is annexed
hereto as EXHIBIT C. The per share "Purchase Price" of Common Stock as defined
in the Warrant shall be _____% of the closing price of the Common Stock on the
Bulletin Board on the trading day immediately preceding the Closing Date. The
Warrants shall be exercisable for five years after the Issue Date (as defined in
the Warrant).
(b) All the representations, covenants, warranties,
undertakings, remedies, liquidated damages, indemnification, rights in Section 9
hereof, and other rights 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 Subscribers in respect of the Warrants and Company Shares
issuable upon exercise of the Warrants.
6. Fees.
----
(a) The Company shall pay to counsel to the Subscribers its fees
of $15,000 for services rendered to the Subscribers in connection with this
Agreement for aggregate subscription amounts of up to $1,300,000 of principal
amount of Notes (the "Offering") and acting as escrow agent for the Offering.
The Company will pay to Bi Coastal Consulting Corp. (the "Finder") a cash fee
equal to ten percent (10%) of the Purchase Price of the Notes ("Finder's Fee").
The Finder's Fee in connection with the Offering must be paid on the Closing
Date. The legal fees and Finder's Fee will be payable out of funds held pursuant
to a Funds Escrow Agreement to be entered into by the Company, Subscriber and
Escrow Agent.
(b) The Company on the one hand, and the Subscriber on the other
hand, agree to indemnify the other against and hold the other harmless from any
and all liabilities to any other persons claiming brokerage commissions or
finder's fees other than Bi Coastal Consulting Corp. on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. The Company and the Subscriber represent to
each other that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the offering described in
the Subscription Agreement.
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
8
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 Notes are outstanding. The
Company will maintain the listing of its Common Stock on the Nasdaq SmallCap
Market, Nasdaq National Market System, NASD OTC Bulletin Board, or New York
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "Principal Market")), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will provide the
Subscriber copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any Principal Market.
(c) The Company shall notify the Commission, NASD, the Principal
Market and applicable state authorities, in accordance with their requirements,
if any, 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) From the Closing Date and 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
(i) cause its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, (ii) comply in all respects with its reporting and
filing obligations under the Exchange Act, (iii) comply with all reporting
requirements that are applicable to an issuer with a class of Shares registered
pursuant to Section 12(g) of the Exchange Act, and (iv) comply with all
requirements related to any registration statement filed pursuant to this
Agreement. The Company will use its best efforts not to take any action or file
any document (whether or not permitted by the Act or the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Acts until the later of
two (2) years after the actual effective date of the Registration Statement on
Form S-3 or such other Registration Statement described in Section 10.1(iv)
hereof. Until the earlier of the resale of the Company Shares by the Subscriber
or at least two (2) years after the Warrants have been exercised, the Company
will use its best efforts to continue the listing of the Common Stock on the
Bulletin Board and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of Bulletin Board.
9
(e) Except as set forth on SCHEDULE 7(E), the Purchase Price may
not and will not be used for accrued and unpaid officer and director salaries,
payment of financing related debt, redemption of outstanding redeemable notes or
equity instruments of the Company nor non-trade obligations outstanding on the
Closing Date.
(f) The Company undertakes to reserve, pro rata on behalf of
each holder of a Note or Warrant, from its authorized but unissued common stock,
at all times that Notes or Warrants remain outstanding, a number of common
shares equal to not less than the amount of common shares necessary to allow
each such holder to be able to convert all such outstanding Notes, and one
common share for each common share issuable upon exercise of the Warrants.
8. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING
INDEMNIFICATION.
(a) The Company agrees to indemnify, hold harmless, reimburse
and defend Subscriber, Subscriber's officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon Subscriber or any such person which results,
arises out of or is based upon (i) any material misrepresentation by Company or
breach of any warranty by Company in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii)
after any applicable notice and/or cure periods, any breach or default in
performance by the Company of any covenant or undertaking to be performed by the
Company hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers, directors, agents,
affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by Subscriber in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by Subscriber of any covenant or
undertaking to be performed by Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 8(a) and 8(b) above.
9.1. Conversion of Note.
------------------
(a) Upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue stock certificates in the name of Subscriber (or its nominee) or
such other persons as
10
designated by Subscriber and in such denominations to be specified at conversion
representing the number of shares of common stock issuable upon such conversion.
The Company warrants that no instructions other than these instructions have
been or will be given to the transfer agent of the Company's Common Stock and
that, unless waived by the Subscriber, the Shares will be unlegended,
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Company Shares provided the Shares are
being sold pursuant to an effective registration statement covering the Shares
or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying an executed and
completed Notice of Conversion (a form of which is annexed to EXHIBIT A hereto)
to the Company via confirmed telecopier transmission or otherwise pursuant to
Section 11(a) of this Agreement. The Subscriber will not be required to
surrender the Note until the Note has been fully converted or satisfied. Each
date on which a Notice of Conversion is telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date. The Company will
or cause the transfer agent to transmit the Company's Common Stock certificates
representing the Shares issuable upon conversion of the Note to the Subscriber
via express courier for receipt by such Subscriber within three (3) business
days after receipt by the Company of the Notice of Conversion (the "Delivery
Date"). In the event the Shares are electronically transferable, then delivery
of the Shares must be made by electronic transfer provided request for such
electronic transfer has been made by the Subscriber. A Note representing the
balance of the Note not so converted will be provided by the Company to the
Subscriber, if requested by Subscriber provided an original Note is delivered to
the Company. To the extent that a Subscriber elects not to surrender a Note for
reissuance upon partial payment or conversion, the Subscriber hereby indemnifies
the Company against any and all loss or damage attributable to a third-party
claim in an amount in excess of the actual amount then due under the Note.
(c) The Company understands that a delay in the delivery of the
Shares in the form required pursuant to Section 9 hereof, or the Mandatory
Redemption Amount described in Section 9.2 hereof, beyond the Delivery Date or
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay late payments to the Subscriber for late
issuance of Shares in the form required pursuant to Section 9 hereof upon
Conversion of the Note or late payment of the Mandatory Redemption Amount, in
the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Note principal
amount being converted or redeemed. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand. Furthermore, in
addition to any other remedies which may be available to the Subscriber, in the
event that the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment Date, the
Subscriber will be entitled to revoke all or part of the relevant Notice of
Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and the
Subscriber shall each be restored
11
to their respective positions immediately prior to the delivery of such notice,
except that late payment charges described above shall be payable through the
date notice of revocation or rescission is given to the Company.
(d) Nothing contained herein or in any document referred to
herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.
9.2. MANDATORY REDEMPTION AT SUBSCRIBER'S ELECTION. In the event the
Company fails to timely deliver Shares on a Delivery Date, or upon the
occurrence of any other Event of Default (as defined in the Note) or for any
reason other than pursuant to the limitations set forth in Section 9.3 hereof,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber or on the Delivery Date (if
requested by the Subscriber) a sum of money determined by (i) multiplying up to
the outstanding principal amount of the Note designated by the Subscriber by
130%, or (ii) multiplying the number of Shares otherwise deliverable upon
conversion of an amount of Note principal and/or interest designated by the
Subscriber (with the date of giving of such designation being a Deemed
Conversion Date) at the Conversion Price by the highest closing price of the
Common Stock on the principal market from the Deemed Conversion Date until the
day prior to the receipt of the Mandatory Redemption Payment, whichever is
greater ("Mandatory Redemption Payment"). The Mandatory Redemption Payment must
be received by the Subscriber on the same date as the Company Shares otherwise
deliverable or within ten (10) business days after request, whichever is sooner
("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption
Payment, the corresponding Note principal will be deemed paid and no longer
outstanding.
9.3. MAXIMUM CONVERSION. The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of common stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of common stock of the Company on such Conversion Date.
For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99% and aggregate conversion by the Subscriber may exceed
9.99%. The Subscriber may void the conversion limitation described in this
Section 9.3 upon 75 days prior written notice to the Company. The Subscriber may
allocate which of the equity of the Company deemed beneficially owned by the
Subscriber shall be included in the 9.99% amount described above and which shall
be allocated to the excess above 9.99%.
12
9.4. INJUNCTION - POSTING OF BOND. In the event a Subscriber shall
elect to convert a Note or part thereof, the Company may not refuse conversion
based on any claim that such Subscriber or any one associated or affiliated with
such Subscriber has been engaged in any violation of law, or for any other
reason, unless, an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of said Note shall have been sought and
obtained and the Company posts a surety bond for the benefit of such Subscriber
in the amount of 130% of the amount of the Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment.
9.5. BUY-IN. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if ten (10) days
after the Delivery Date the Subscriber purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Subscriber of the Common Stock which the Subscriber anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In. The delivery date by which
Common Stock must be delivered pursuant to this Section 9.5 shall be tolled for
the amount of days that the Subscriber does not deliver information reasonably
requested by the Company's transfer agent.
9.6 ADJUSTMENTS. The Conversion Price and amount of Shares issuable
upon conversion of the Notes shall be adjusted to offset the effect of stock
splits, stock dividends and pro rata distributions of property or equity
interests to the Company's shareholders.
9.7. REDEMPTION. The Company may not redeem or call the Note without
the consent of the holder of the Note.
10.1.REGISTRATION RIGHTS. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 91 days after the
Closing Date, but not later than three years after the Closing Date ("Request
Date"), the Company, upon a written request therefor from any record holder or
holders of more than 50% of the aggregate of the Company's Shares issued and
issuable upon conversion of the Notes (the Common Stock issued or issuable upon
conversion of the Notes or issuable by virtue of ownership of the Notes, and one
share of Common Stock for each share issuable upon exercise of the Warrants,
collectively the "Registrable Securities"), shall
13
prepare and file with the Commission 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 or included for registration in a pending registration statement. In
addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 10.1(i). As a condition precedent to the
inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The obligation
of the Company under this Section 10.1(i) shall be limited to one registration
statement.
(ii) If the Company at any time proposes to register any of its
securities under the 1933 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 25 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 15 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 foregoing provisions, or Section 10.4 hereof, the
Company may withdraw or delay or suffer a delay of any registration statement
referred to in this Section 10.1(ii) without thereby incurring any liability to
the Seller.
(iii)If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account and the Company actually
does file such other registration statement, such written request shall be
deemed to have been given pursuant to Section 10.1(ii) rather than Section
10.1(i), and the rights of the holders of Registrable Securities covered by such
written request shall be governed by Section 10.1(ii).
(iv) The Company shall file with the Commission not later than
thirty (30) days after the Closing Date (the "Filing Date"), and use its
reasonable commercial efforts to cause to be declared effective within ninety
(90) days after the Closing Date, a
14
Form S-3 registration statement (or such other form that it is eligible to use)
in order to register the Registrable Securities for issuance to the Subscriber
and distribution under the Act. The registration statement described in this
paragraph must be declared effective by the Commission no later than ninety (90)
days after the Closing Date ("Effective Date"). The Company will register a
number of shares of Common Stock in the aforedescribed registration statement
that is equal to the number of Company Shares issuable at the Conversion Price
in effect at the Closing Date, or actual filing date of the registration
statement or any amendment thereto assuming conversion of 100% of the Notes
(whichever results in the greatest number of Company shares) and one share of
common stock for each of the shares issuable upon exercise of the Warrants. Such
registration statement will immediately be amended or additional registration
statements will be immediately filed by the Company as necessary in order to
register additional Company Shares to allow the unlegended reissuance of all
Common Stock included and issuable by virtue of the Registrable Securities. The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber in proportion to each Subscriber's interest in the
Registrable Securities, and not issued, employed or reserved for anyone other
than the Subscriber. No securities of the Company other than the Registrable
Securities will be included in the registration statement described in this
Section 10.1(iv) except as described on SCHEDULE 10.1.
10.2. Registration Procedures. If and whenever the Company is required
by the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of Registrable Securities ("Sellers") copies of all
filings and Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the latest of: (i) twelve months after the latest Maturity Date of a Note;
(ii) until six months after all the Company Shares are eligible for resale
pursuant to Rule 144(k) of the 1933 Act; or (iii) until such registration
statement has been effective for a period of not less than 365 days, 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, such number of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as such Seller 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 shall
reasonably designate, provided, however, that the Company shall not for any such
purpose be required to qualify
15
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 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, and any
attorney, accountant or other agent retained by the Seller or underwriter, all
publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, attorney,
accountant or agent in connection with such registration statement.
10.3. PROVISION OF DOCUMENTS. In connection with each registration
hereunder, the Seller will furnish to the Company in writing such information
and representation letters with respect to itself and the proposed distribution
by it as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws. In connection with each
registration pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten
public offering, the Company and the Seller agree to enter into a written
agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
10.4. NON-REGISTRATION EVENTS. The Company and the Subscriber agree
that the Seller will suffer damages if any registration statement required under
Section 10.1(i) or 10.1(ii) above is not filed within 30 days after written
request by the Holder and not declared effective by the Commission within 90
days after such request [or the Filing Date and Effective Date, respectively, 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 30 days
of such written request, or is not declared effective by the Commission on or
prior to the date that is 90 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 on or before the Filing Date or not declared effective on or before the
sooner of the Effective Date, or within ten business days of receipt by the
Company of a written or oral communication from the Commission that the
registration statement described in Section 10.1(iv) will not be reviewed, or
(iii) any registration statement described in Sections 10.1(i), 10.1(ii) or
10.1(iv) is filed and declared effective but shall thereafter cease to be
effective (without being succeeded immediately by an additional registration
statement
16
filed and declared effective) for a period of time which shall exceed 30 days in
the aggregate per year or more than 20 consecutive calendar days (defined as a
period of 365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses (i), (ii) and (iii) of this
Section 10.4 is referred to herein as a "Non-Registration Event"), then, for so
long as such Non-Registration Event shall continue, the Company shall pay, at
the Subscriber's option, in cash or stock at the applicable Conversion Price, as
Liquidated Damages to each holder of any Registrable Securities an amount equal
to two percent (2%) per month for each month or part thereof during the pendency
of such Non-Registration Event, of the principal of the Notes issued in the
Offering, whether or not converted, owned of record by such holder or issuable
as of or subsequent to the occurrence of such Non-Registration Event. Payments
to be made pursuant to this Section 10.4 shall be due and payable within ten
(10) business days after demand in immediately available funds. In the event a
Mandatory Redemption Payment is demanded from the Company by the Holder pursuant
to Section 9.2 of this Subscription Agreement, then the Liquidated Damages
described in this Section 10.4 shall no longer accrue on the portion of the
Purchase Price underlying the Mandatory Redemption Payment, from and after the
date the Holder receives the Mandatory Redemption Payment.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, and costs of insurance are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Seller, are called "Selling
Expenses". The Seller shall pay the fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. All Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any Registrable Securities
under the Act pursuant to Section 10, the Company will indemnify and hold
harmless the Seller, each officer of the Seller, each director of the Seller,
each underwriter of such Registrable Securities thereunder and each other
person, if any, who controls such Seller or underwriter within the meaning of
the 1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
was registered under the Act pursuant to Section 10, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of
17
the circumstances when made, and will reimburse the Seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable to the Seller to the extent that any such damages
arise out of or are based upon an untrue statement or omission made in any
preliminary prospectus if (i) the Seller failed to send or deliver a copy of the
final prospectus delivered by the Company to the Seller with or prior to the
delivery of written confirmation of the sale by the Seller to the person
asserting the claim from which such damages arise, (ii) the final prospectus
would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (iii) to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Seller, or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the gross proceeds received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party
18
of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 10.6(c) for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected, provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in
the event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.6 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.6; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11. Miscellaneous.
-------------
(a) NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
19
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to Xechem International,
Inc., 000 Xxxxxx Xxxxxx, Xxxxxxxx X, Xxxxx 000, Xxx Xxxxxxxxx, Xxx Xxxxxx 00000,
telecopier number: (000) 000-0000, with a copy by telecopier only to: Xxxxxxx &
Xxxxxxxx, Ltd., 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000, Attn: Xxxxxxxx X.
Xxxxxxxxx, Esq. and Xxxxxx X'Xxxxx, Esq., telecopier number: (000) 000-000-0000,
and (ii) if to the Subscriber, to the name, address and telecopy number set
forth on the signature page hereto, with a copy by telecopier only to Grushko &
Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000,
telecopier number: (000) 000-0000.
(b) CLOSING. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all
conditions to Closing set forth in this Agreement. The closing date shall be the
date that subscriber funds representing the net amount due the Company from the
Purchase Price of the Offering is transmitted by wire transfer or otherwise to
the Company (the "Closing Date").
(c) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
(d) EXECUTION. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(e) LAW GOVERNING THIS AGREEMENT. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. The Company
and Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance
20
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity. Subject to Section
11(e) hereof, each of the Company and Subscriber hereby waives, and agrees not
to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.
(g) CONFIDENTIALITY. The Company agrees that it will not
disclose publicly or privately the identity of the Subscriber unless expressly
agreed to in writing by the Subscriber or only to the extent required by law.
(h) AUTOMATIC TERMINATION. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth (10th) business day following the date this
Agreement is accepted by the Subscriber.
21
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.
XECHEM INTERNATIONAL, INC.
A Delaware Corporation
By:_________________________________
Name: Xxxxxx X. Xxxxxx
Title: President/CEO
Dated: May _____, 2002
22
