SUBSCRIPTION AGREEMENT
Exhibit
4.1
THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of November ___, 2009, by and between Mass Hysteria Entertainment
Company, Inc., a Nevada corporation (the “Company”), and Xxxxxx Xxxxxx
(the “Subscriber”).
WHEREAS, the Company and the
Subscriber are executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “1933 Act”).
WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscriber, as provided herein, and such Subscriber
shall purchase (i) for up to $200,000 (the “Purchase Price”) of shares of
the Company’s Common Stock, $0.001 par value (the “Common Stock”) at a per share
purchase price of $0.20 per share (the “Offering”). The
shares of Common Stock issuable upon this Offering (the “Shares” or the “Securities.”).
NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscriber hereby agree as follows:
1. Closing
Date. The “Closing Date” shall be the
date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Xxxxxx &
Jaclin, LLP, 000 Xxxxx 0 Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxxxx 00000, upon the
satisfaction or waiver of all conditions to closing set forth in this
Agreement. Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, Subscriber shall purchase
and the Company shall sell to Subscriber shares of Common Stock in the aggregate
Purchase Price of up to $200,000 as described in Section 2 of this
Agreement.
2. Purchase of Common
Stock.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement, on
the Closing Date, the Subscriber shall purchase and the Company shall sell to
the Subscriber shares of Common Stock in the Principal Amount designated on the
signature page hereto for such Subscriber’s Purchase Price indicated
thereon.
3. Allocation of Purchase
Price. The Purchase Price and number of Shares issued to
the subscriber will be allocated among the Subscriber pursuant and in the
amounts designated on the signature page hereto for such Subscriber’s Purchase
Price indicated thereon.
4. Subscriber Representations
and Warranties. The Subscriber hereby represents and warrants
to and agrees with the Company that:
(a) Organization and Standing of
the Subscriber. If such Subscriber is an entity, such Subscriber is a
corporation, partnership or other entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.
(b) Authorization and
Power. Such Subscriber has the requisite power and authority
to enter into and perform this Agreement and the other Transaction Documents (as
defined herein) and to purchase the Notes being sold to it
hereunder. The execution, delivery and performance of this Agreement
and the other Transaction Documents by such Subscriber and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate or partnership action, and no further consent or
authorization of such Subscriber or its Board of Directors, stockholders,
partners, members, as the case may be, is required. This Agreement
and the other Transaction Documents have been duly authorized, executed and
delivered by such Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of such Subscriber enforceable
against such Subscriber in accordance with the terms
thereof.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by such
Subscriber of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Subscriber’s
charter documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Subscriber). Such Subscriber is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents or to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information
on Company. Such Subscriber has been furnished with or
has had access to the XXXXX Website of the Commission to the Company's Form 10-Q
filed on May 20, 2009 for the quarter ended March 31, 2009, together with all
other filings made with the Commission available at the XXXXX website until five
days before the Closing Date (hereinafter referred to collectively as the
"Reports"). In addition, such Subscriber may have received in
writing from the Company such other information concerning its operations,
financial condition and other matters as such
Subscriber has requested in writing, identified thereon as Other Written
Information (such other information is collectively, the "Other Written
Information"), and considered all factors such
Subscriber deems material in deciding on the advisability of investing in the
Securities. Such Subscriber has relied on the Reports and Other
Written Information in making its investment decision.
(e) Information on
Subscriber. Subscriber is, and will be at the time of
the issuance of the Shares, an "accredited investor", as such term is defined in
Regulation D promulgated by the Commission under 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 such 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. Such Subscriber has the
authority and is duly and legally qualified to purchase and own the
Securities. Such 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 such Subscriber is accurate.
(f) Purchase of Shares of
Common Stock. On the Closing Date, such Subscriber will
purchase the Shares of Common Stock as principal for its own account for
investment only and not with a view toward, or for resale in connection with,
the public sale or any distribution thereof.
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(g) Compliance with
Securities Act. Such Subscriber understands and agrees
that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of the
Subscriber contained herein), and that such
Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration. In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into lawful
hedging transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties who in turn may
dispose of these Securities.
(h) Shares of Common Stock
Legend. The Shares of Common Stock shall bear the following or
similar legend:
"THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."
(i) Communication of
Offer. The offer to sell the Securities was directly
communicated to such Subscriber by the Company. At no time was such
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.
(j) Restricted
Securities. Such Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless pursuant to an effective registration statement under
the 1933 Act, or unless an exemption from registration is
available. Notwithstanding anything to the contrary contained in this
Agreement, such Subscriber may transfer (without restriction and without the
need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an “accredited investor” under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or
entity means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such person or
entity. Affiliate includes each Subsidiary of the
Company. For purposes of this definition, “control” means the power to
direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
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(k) No Governmental
Review. Such Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Shares nor have such authorities passed
upon or endorsed the merits of the offering of the Shares.
(l) Correctness of
Representations. Such Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless such Subscriber otherwise notifies the
Company prior to the Closing Date shall be true and correct as of the Closing
Date.
(m) Acknowledgement of Going
Concern. Such Subscriber recognizes and acknowledges that the
Company is a “going concern” as disclosed in its Reports and Other Written
Information and as reported by its auditor and may be unable to meet its
financial obligations over the next twelve months.
(n) Survival. The
foregoing representations and warranties shall survive the Closing
Date.
5. Company Representations and
Warranties. The Company represents and warrants to and agrees
with the subscriber that:
(a) Due
Incorporation. The Company is a corporation or other entity
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has the
requisite corporate power to own its properties and to carry on its business as
presently conducted. The Company 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. For purposes of
this Agreement, a “Material
Adverse Effect” shall mean a material adverse effect on the financial
condition, results of operations, prospects, properties or business of the
Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 30% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity. As of the Closing Date, all of the
Company’s Subsidiaries and the Company’s ownership interest therein is set forth
on Schedule
5(a).
(b) Outstanding
Stock. All issued and outstanding shares of capital stock and
equity interests in the Company have been duly authorized and validly issued and
are fully paid and non-assessable.
(c) Authority;
Enforceability. This Agreement, the Shares, and any other
agreements delivered together with this Agreement or in connection herewith
(collectively “Transaction
Documents”) have been duly authorized, executed and delivered by the
Company and/or Subsidiaries and are valid and binding agreements of the Company
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. The Company has full corporate power
and authority necessary to enter into and deliver the Transaction Documents and
to perform its obligations thereunder.
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(d) Capitalization and
Additional Issuances. The authorized and outstanding
capital stock of the Company and Subsidiaries on a fully diluted basis as of the
date of this Agreement and the Closing Date (not including the Securities) are
set forth on Schedule
5(d). Except as set forth on Schedule 5(d), there are no
options, warrants, or rights to subscribe to, securities, rights, understandings
or obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock or other equity interest of the
Company or any of the Subsidiaries. The only officer, director,
employee and consultant stock option or stock incentive plan or similar plan
currently in effect or contemplated by the Company is described on Schedule
5(d). There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock.
(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 OTC Bulletin Board (the “Bulletin Board”) or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities. The Transaction Documents and
the Company’s performance of its obligations thereunder has been unanimously
approved by the Company’s Board of Directors. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority in the world, including
without limitation, the United States, or elsewhere is required by the Company
or any Affiliate of the Company in connection with the consummation of the
transactions contemplated by this Agreement, except as would not otherwise have
a Material Adverse Effect or the consummation of any of the other agreements,
covenants or commitments of the Company or any Subsidiary contemplated by the
other Transaction Documents. Any such qualifications and filings will, in the
case of qualifications, be effective on the Closing and will, in the case of
filings, be made within the time prescribed by law.
(f) No Violation or
Conflict. Assuming the representations and warranties of the
Subscriber in Section 4 are true and correct, neither the issuance nor 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 articles or 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 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;
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 except
in favor of Subscriber as described herein; or
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(iii) result
in the activation of any anti-dilution rights or a reset or repricing of any
debt, equity or security instrument of any creditor or equity holder of the
Company, or the holder of the right to receive any debt, equity or security
instrument of the Company nor result in the acceleration of the due date of any
obligation of the Company; or
(iv) result in
the triggering of any piggy-back or other registration rights of any person or
entity holding securities of the Company or having the right to receive
securities of the Company.
(g) The
Shares. The Shares upon issuance:
(i) are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject only to restrictions upon transfer under the 1933 Act and
any applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the dates of issuance of
the Shares, such Shares will be duly and validly issued, fully paid and
non-assessable, and if registered pursuant to the 1933 Act and resold pursuant
to an effective registration statement or exempt from registration will be free
trading, unrestricted and unlegended;
(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 or rights to acquire
securities of the Company; and
(iv) will
not subject the holders thereof to personal liability by reason of being such
holders.
(h) Litigation. There
is no pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the complete and timely performance
by the Company of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or 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 would have a Material Adverse
Effect.
(i) No Market
Manipulation. The Company and its Affiliates have 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 to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or
resold.
(j) 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 December 31, 2008 and except as
modified in the Reports and Other Written Information or in the Schedules
hereto, there has been no Material Adverse Effect relating to the Company's
business, financial condition or affairs. The Reports and Other Written
Information including the financial statements included therein 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, taken
as a whole, not misleading in light of the circumstances and when
made.
(k) Defaults. The
Company is not in violation of its articles of incorporation or
bylaws. The Company is (i) not 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
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have a
Material Adverse Effect, (ii) not 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) not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.
(l) 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 of the Company nor solicited
any offers to buy any security of the Company 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. No prior offering
will impair the exemptions relied upon in this Offering or the Company’s ability
to timely comply with its obligations hereunder. Neither the Company
nor any of its Affiliates will take any action or steps that would cause the
offer or issuance of the Securities to be integrated with other offerings which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder. The Company
will not conduct any offering other than the transactions contemplated hereby
that may be integrated with the offer or issuance of the Securities that would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder.
(m) No General
Solicitation. Neither the Company, nor any of its Affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
(n) No Undisclosed
Liabilities. The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company businesses since December 31, 2008 and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule 5(n).
(o) No Undisclosed Events or
Circumstances. Since December 31, 2008, except as disclosed in
the Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(p) Banking. Schedule 5(p) contains a list
of all financial institutions at which the Company and Subsidiaries maintains
deposit, checking and other accounts. The list includes the accurate
addresses of such financial institution and account numbers of such
accounts.
(q) Dilution. The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company’s equity or rights to receive equity of the Company. The
board of directors of the Company has concluded, in its good faith business
judgment that the issuance of the Shares is in the best interests of the
Company. The Company specifically acknowledges that its obligation to
issue the Shares 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 or parties entitled to receive equity of the
Company.
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(r) No Disagreements with
Accountants and Lawyers. Other than the opinion regarding the
Company’s ability to continue as a “going concern,” as disclosed in the
Company’s Reports, there are no material disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise between the Company
and the accountants and lawyers previously and presently employed by the
Company, including but not limited to disputes or conflicts over payment owed to
such accountants and lawyers, nor have there been any such disagreements during
the two years prior to the Closing Date.
(s) Investment
Company. Neither the Company nor any Affiliate of the
Company is an “investment company” within the meaning of the Investment Company
Act of 1940, as amended.
(t) Foreign Corrupt
Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
(u) Reporting Company/Shell
Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934
Act") and has a class of Common Stock registered pursuant to Section
12(g) of the 1934 Act. 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 Commission during the preceding twelve
months. As of the Closing Date, the Company is a “start-up” company
as referred to in Footnote 172 to Rule 144 and, therefore, not considered a
“shell company” as those terms are employed in Rule 144(i) under the 1933
Act.
(v) Listing. The
Company's Common Stock is quoted on the Bulletin Board under the symbol
MDHI. The Company has not received any oral or written notice that
its Common Stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its Common Stock does not meet all requirements for the
continuation of such quotation. The Company satisfies all the
requirements for the continued quotation of its Common Stock on the Bulletin
Board.
(w) Transfer
Agent. The Company’s transfer agent is a participant in
the Depository Trust Company Automated Securities Transfer Program. The name,
address, telephone number, fax number, contact person and email address of the
Company transfer agent is set forth on Schedule 5(w)
hereto.
(x) Company Predecessor and
Subsidiaries. The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (k), (n), (o),
(p), (r), (s) and (t) of this Agreement, as same relate or could be applicable
to each Subsidiary. All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Sections 9(g) through 9(l) shall relate, apply and refer to the Company and its
predecessors and successors. The Company represents that it owns all
of the equity of the Subsidiaries and rights to receive equity of the
Subsidiaries identified on Schedule 5(a), free and clear
of all liens, encumbrances and claims, except as set forth on Schedule 5(a). No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries. The Company further represents that the
Subsidiaries have not been known by any other name for the prior five
years.
(y) 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; provided, that, if such representation or warranty is made
as of a different date, in which case such representation or warranty shall be
true as of such date.
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(z) Survival. The
foregoing representations and warranties shall survive the Closing
Date.
6. Regulation D Offering/Legal
Opinion. The offer and issuance of the Shares to the
Subscriber is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion reasonably acceptable to the
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by Subscriber.
The Company will provide, at the Company's expense, such other legal opinions,
if any, as are reasonably necessary in the subscriber’s opinion for the issuance
and resale of the Common Stock pursuant to an effective registration statement,
Rule 144 under the 1933 Act or an exemption from registration.
7. Covenants of the
Company. The Company covenants and agrees with the Subscriber
as follows:
(a) Stop
Orders. Subject to the prior notice requirement described in
Section 9(n), the Company will advise the Subscriber, within twenty-four hours
after it receives notice of issuance by the 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. The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the
Subscriber.
(b) Listing/Quotation. The
Company shall promptly secure the quotation or listing of the Shares upon each
national securities exchange, or automated quotation system upon the Company’s
Common Stock is quoted or listed and upon which such Shares are or become
eligible for quotation or listing (subject to official notice of issuance) and
shall maintain same so long as any Subscriber still owns Shares. The
Company will maintain the quotation or listing of its Common Stock on the
American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq
Global Select Market, Bulletin Board, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or market for the
Common Stock (the “Principal
Market”), and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market,
as applicable. The Company will provide Subscriber with copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market. As of the date of this
Agreement and the Closing Date, the Bulletin Board is and will be the Principal
Market.
(c) Market
Regulations. If required, the Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscriber and promptly provide copies thereof
to the Subscriber.
(d) Filing
Requirements. From the date of this Agreement and until the
last to occur of (i) two (2) years after the Closing Date, (ii) until all the
Shares have been resold or transferred by the Subscriber pursuant to a
registration statement or pursuant to Rule 144(b)(1)(i), or (iii) the Subscriber
no longer owns the Shares (the date of such latest occurrence being the “End Date”), the Company will
(A) cause its Common Stock to continue to be registered under Section 12(b) or
12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are
9
applicable
to an issuer with a class of shares registered pursuant to Section 12(g) of the
1934 Act, if the Company is not subject to such reporting requirements, and (D)
comply with all requirements related to any registration statement filed
pursuant to this Agreement. The Company will use its best efforts not
to take any action or file any document (whether or not permitted by the 1933
Act or the 1934 Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said acts until the End Date. Until the End Date, the Company
will continue the listing or quotation of the Common Stock on a Principal Market
and will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The
Company agrees to timely file a Form D with respect to the Securities if
required under Regulation D and to provide a copy thereof to the subscriber
promptly after such filing.
(e) Use of
Proceeds. The proceeds of the Offering will be employed
by the Company for expenses of the Offering, and general working
capital. Except as described on Schedule 9(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 notes or
equity instruments of the Company nor non-trade obligations outstanding on a
Closing Date. For so long as any Note is outstanding, the Company
will not prepay any financing related debt obligations, except equipment
payments or in the event such payments are made in the ordinary course of
business, nor redeem any equity instruments of the Company without the prior
consent of the Subscriber.
(f) DTC
Program. At all times that the Common Stock is outstanding,
the Company will employ as the transfer agent for the Common Stock, a
participant in the Depository Trust Company Automated Securities Transfer
Program.
(g) Taxes. From
the date of this Agreement and until the End Date, the Company will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
(h) Insurance. As
reasonably necessary as determined by the Company, from the date of this
Agreement and until the End Date, the Company will keep its assets which are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company’s line of business and location, in amounts
and to the extent and in the manner customary for companies in similar
businesses similarly situated and located and to the extent available on
commercially reasonable terms.
(i) Books and
Records. From the date of this Agreement and until the End
Date, the Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
(j) Governmental
Authorities. From the date of this Agreement and until
the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.
10
(k) Intellectual
Property. From the date of this Agreement and until the End
Date, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for
value. Schedule
9(l) hereto identifies all of the intellectual property owned by the
Company and Subsidiaries.
(l) Properties. From
the date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases and claims to which it is a party
or under which it occupies or has rights to property if the breach of such
provision could reasonably be expected to have a Material Adverse
Effect. The Company will not abandon any of its assets except for
those assets which have negligible or marginal value or for which it is prudent
to do so under the circumstances.
(m) Confidentiality/Public
Announcement. From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K and
the registration statement or statements regarding the Subscriber’s Securities
or in correspondence with the SEC regarding same, it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by a Subscriber or only to the extent required by law and then only upon
not less than three days prior notice to Subscriber. In any event and
subject to the foregoing, the Company undertakes to file a Form 8-K describing
the Offering not later than the fourth (4th)
business day after the Closing Date. Prior to the Closing Date, such
Form 8-K will be provided to Subscriber for their review and
approval. In the Form 8-K, the Company will specifically disclose the
nature of the Offering and amount of Common Stock outstanding immediately after
the Closing. Upon delivery by the Company to the
Subscriber after the Closing Date of any notice or information, in writing,
electronically or otherwise, and while Shares are held by Subscriber, unless
the Company has in good faith determined that the matters relating to
such notice do not constitute material, nonpublic information relating
to the Company or Subsidiaries, the Company shall within
one business day after any such delivery publicly disclose such
material, nonpublic information on a
Report on Form 8-K. In the event that
the Company believes that a notice or communication to
Subscriber contains material, nonpublic information relating to the Company or
Subsidiaries, the Company shall so indicate to Subscriber prior to delivery of
such notice or information. Subscriber will be granted sufficient
time to notify the Company that such Subscriber elects not to receive such
information. In such case, the Company will not deliver such
information to Subscriber. In the absence of any such
indication, Subscriber shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or
Subsidiaries.
(n) Non-Public
Information. The Company covenants
and agrees that except for the Reports, Other Written Information and schedules
and exhibits to this Agreement and the Transaction Documents, which information
the Company undertakes to publicly disclose on the Form 8-K described in Section
9(n) above, neither it nor any other person acting on its behalf will at any
time provide any Subscriber or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Subscriber shall have agreed in writing to accept such
information. The Company understands and confirms that the subscriber
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
(o) Negative
Covenants. So long as a Note is outstanding, without the
consent of the Subscriber, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:
11
(i) create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for: (A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; and (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a “Permitted Lien”).
(ii) amend
its certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscriber (an increase in the
amount of authorized shares and an increase in the number of directors will not
be deemed adverse to the rights of the Subscriber);
(iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the Transaction Documents.
(iv) engage
in any transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than (i) for payment of salary, or fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company; or
(v) prepay
or redeem any financing related debt or past due obligations or securities
outstanding as of the Closing Date, or past due obligations (except with respect
to vendor obligations, any such obligations which in management’s good faith,
reasonable judgment must be repaid to avoid disruption of the Company’s
businesses.
The
Company agrees to provide Subscriber not less than ten (10) days notice prior to
becoming obligated to or effectuating a Permitted Lien or Excepted
Issuance.
(p) Notices. For
so long as the Subscriber hold any Securities, the Company will maintain a
United States address and United States fax number for notice purposes under the
Transaction Documents.
12
(q) Transactions With
Insiders. So long as the Note is outstanding, the Company
shall not, and shall cause each of its subsidiaries not to, enter into, amend,
modify or supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement relating to
the sale, transfer or assignment of any of the Company’s tangible or intangible
assets with any of its Insiders (as defined below)(or any persons who were
Insiders at any time during the previous two (2) years), or any Affiliates (as
defined below) thereof, or with any individual related by blood, marriage, or
adoption to any such individual. Affiliate for purposes of this
Section 9(u) means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or
“Controls” for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity. For purposes hereof, “Insiders” shall mean any officer,
director or manager of the Company, including but not limited to the Company’s
president, chief executive officer, chief financial officer and chief operations
officer, and any of their affiliates or family members.
(r) Blackout. The
Company undertakes and covenants that without the consent of the Subscriber,
until the end of the Exclusion Period, the Company will not enter into any
acquisition, merger, exchange or sale or other transaction or fail to take any
action that could have the effect of delaying the effectiveness of any pending
registration statement beyond the effective date, or causing an already
effective registration statement to no longer be effective or current for a
period of forty-five or more days in the aggregate during any three hundred and
sixty-five day period.
8. Covenants of the Company
Regarding Indemnification.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the Subscriber,
the Subscriber’ officers, directors, agents, Affiliates, members, managers,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Company or breach of any representation or warranty by Company in this Agreement
or in any Exhibits or Schedules attached hereto in any Transaction Document, or
other agreement delivered pursuant hereto or in connection herewith, now or
after the date hereof; 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 Subscriber relating hereto.
(b) In
no event shall the liability of the Subscriber or permitted successor hereunder
or under any Transaction Document or other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
actually received by such Subscriber or successor upon the sale of
Securities.
9. Additional Post-Closing
Obligations.
9.1. Piggy-Back
Registrations. If at any time until two years after the
Closing Date there is not an effective registration statement covering all of
the Shares or the Shares are not saleable under Rule 144, and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its equity securities, but excluding Forms S-4 or
S-8 and similar forms which do not permit such registration, then the Company
shall send to each holder of any of the Securities written notice of such
determination and, if within fifteen calendar days after receipt of such notice,
any such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Shares such holder requests to be
registered, subject to customary
13
underwriter
cutbacks applicable to all holders of registration rights and any cutbacks
in accordance with guidance provided by the Securities and Exchange
Commission (including, but not limited to, Rule 415). The obligations
of the Company under this Section may be waived by any holder of any of the
Securities entitled to registration rights under this Section 10.1. The holders
whose Shares are included or required to be included in such registration
statement are granted the same rights, benefits, liquidated or other damages and
indemnification granted to other holders of securities included in such
registration statement. Notwithstanding anything to the contrary
herein, the registration rights granted hereunder to the holders of Securities
shall not be applicable for such times as such Shares may be sold by the holder
thereof without restriction pursuant to Section 144(b)(1) of the 1933
Act. In no event shall the liability of any holder of Securities or
permitted successor in connection with any Shares included in any such
registration statement be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of the Shares sold
pursuant to such registration or such lesser amount applicable to other holders
of Securities included in such registration statement. All expenses incurred by
the Company in complying with Section 11, including, without limitation, all
registration and filing fees, printing expenses (if required), 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 NASD,
transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
registrable securities are called "Selling
Expenses." The Company will pay all Registration Expenses in
connection with the registration statement under Section 11. Selling
Expenses in connection with each registration statement under Section 11 shall
be borne by the holder and will be apportioned among such holders in proportion
to the number of Shares included therein for a holder relative to all the
Securities included therein for all selling holders, or as all holders may
agree.
9.2. Delivery of Unlegended
Shares.
(a) Within
three (3) business days (such third business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable and if required, have been satisfied, (iii) the original
share certificates representing the shares of Common Stock that have been sold,
and (iv) in the case of sales under Rule 144, customary representation letters
of the Subscriber and, if required, Subscriber’s broker regarding compliance
with the requirements of Rule 144, the Company at its expense, (y) shall
deliver, and shall cause legal counsel selected by the Company to deliver to its
transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legend set forth in Section 4(h) above (the
“Unlegended Shares”);
and (z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted Common Stock certificate, if any, to the Subscriber at the address
specified in the notice of sale, via express courier, by electronic transfer or
otherwise on or before the Unlegended Shares Delivery Date.
(b) In
lieu of delivering physical certificates representing the Unlegended Shares,
upon request of Subscriber, and, if the Company is DTC and/or DWAC eligible, so
long as the certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Unlegended
Shares by crediting the account of Subscriber’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system, if such
transfer agent participates in such DWAC system. Such delivery must
be made on or before the Unlegended Shares Delivery Date.
(c) The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date
could result in economic loss to a Subscriber. As compensation to a
Subscriber for such loss, the Company agrees to pay late payment fees (as
14
liquidated
damages and not as a penalty) to the Subscriber for late delivery of Unlegended
Shares in the amount of $100 per business day after the Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default. If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.2 for an aggregate of thirty
days, then the subscriber or assignee holding Securities subject to such default
may, at its option, require the Company to redeem all or any portion of the
Shares subject to such default at a price per share equal to the greater of (i)
120%, or (ii) a fraction in which the numerator is the highest closing price of
the Common Stock during the aforedescribed thirty day period and the denominator
of which is the lowest conversion price during such thirty day period,
multiplied by the price paid by Subscriber for such Common Stock (“Unlegended Redemption
Amount”). The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.
(d) In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 9.2 and the Company is required to deliver such Unlegended Shares
pursuant to Section 9.2, the Company may not refuse to deliver Unlegended Shares
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 or temporary restraining order from a court, on
notice, restraining and or enjoining delivery of such Unlegended Shares shall
have been sought and obtained by the Company and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of 120% of the amount of
the aggregate purchase price of the Common Stock which are subject to the
injunction or temporary restraining order, 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 in Subscriber’s favor.
(e)
In addition to any other rights available to Subscriber, if the Company fails to
deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement
and after the Unlegended Shares Delivery Date, the Subscriber or a broker on the
Subscriber’s behalf, purchases (in an open market transaction or otherwise)
shares of common stock to deliver in satisfaction of a sale by such Subscriber
of the shares of Common Stock which the Subscriber was entitled to receive from
the Company (a "Buy-In"), then the Company
shall pay in cash to the Subscriber (in addition to any remedies available to or
elected by the Subscriber) the amount by which (A) the Subscriber's total
purchase price (including brokerage commissions, if any) for the shares of
common stock so purchased exceeds (B) the aggregate purchase price of the shares
of Common Stock delivered to the Company for reissuance as Unlegended
Shares together with interest thereon at a rate of 15% per annum accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest.. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the
Buy-In.
9.3. In
the event commencing six months after the Closing Date and ending twenty-four
months thereafter, the Subscriber is not permitted to resell any of the Shares
without any restrictive legend or if such sales are permitted but subject to
volume limitations or further restrictions on resale as a result of the
unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933 Act or any
successor rule (a “144
Default”), for any reason except for Subscriber’s status as an Affiliate
or “control person” of the Company, or as a result of a change in current
applicable securities laws, then the Company shall pay such Subscriber as
liquidated damages and not as a penalty an amount equal to two percent (2%) for
each thirty days (or such lesser pro-rata amount for any period less than thirty
days) thereafter of the purchase price of the Shares subject to such 144 Default
during the pendency of the 144 Default. Liquidated Damages shall not
be payable pursuant to this Section 9.3 in connection with Shares for such times
as such Shares may be sold by the holder thereof without restriction pursuant to
Section 144(b)(1) of the 1933 Act or pursuant to an effective registration
statement.
15
9.4 Adjustment for Trading
Price. If, on the date that is six-months following the
Closing Date (the “Six
Month Anniversary”), the Company’s closing bid price for the immediately
preceding Trading Day (the “Adjustment Date”) is
less than the Per Share Purchase Price, then the Company shall issue additional
shares of its common stock to the Subscriber respecting those Shares that are
then still owned by the Subscriber so that the Per Share Purchase Price of the
Shares purchased and owned by the Subscriber on the Six Month Anniversary is
equal to the closing bid price for the Adjustment Date. The delivery
to the Subscriber of the additional shares of common stock shall be not later
than five Trading Days following the Adjustment Date.
10. Miscellaneous.
(a) Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the
Company, to:
0000
Xxxxxxx Xxxxxx
Xxxxxxx
Xxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
Telephone:
(000) 000-0000
With a
copy by fax only to (which copy shall not constitute notice):
Xxxxxx
& Jaclin LLP
Attn:
Xxxx Xxxxx, Esq.
000 Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
If to the
Subscriber:
[insert]
(b) Entire Agreement;
Assignment. This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a writing
executed by both parties. Neither the Company nor the Subscriber has
relied on any representations not contained or referred to in this Agreement and
the documents delivered herewith. No right or obligation of the
Company shall be assigned without prior notice to and the written consent of the
Subscriber.
16
(c) Counterparts/Execution. This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile
signature and delivered by electronic transmission.
(d) 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 and county of New York. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens. The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in personam jurisdiction of such
courts and hereby irrevocably 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. Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction
Document by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law.
(e) 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 seek an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(d) hereof, the Company hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York 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.
(f) Damages. In
the event the Subscriber is entitled to receive any liquidated damages pursuant
to the Transactions Documents, the Subscriber may elect to receive the greater
of actual damages or such liquidated damages.
(g) Maximum
Payments. 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.
17
(h) Calendar
Days. All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated. The terms
“business days” and “trading days” shall mean days that the New York Stock
Exchange is open for trading for three or more hours. Time periods
shall be determined as if the relevant action, calculation or time period were
occurring in New York City. Any deadline that falls on a non-business
day in any of the Transaction Documents shall be automatically extended to the
next business day and interest, if any, shall be calculated and payable through
such extended period.
(i) Captions: Certain
Definitions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. As used in this Agreement the term
“person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.
(j) Severability. In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.
(k) Successor
Laws. References in the Transaction Documents to laws, rules,
regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms. A
successor rule to Rule 144(b)(1)(i) shall include any rule that would be
available to a non-Affiliate of the Company for the sale of Common Stock not
subject to volume restrictions and after a six month holding
period.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
18
[SIGNATURE PAGE TO SUBSCRIPTION
AGREEMENT]
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
a Nevada
corporation
By:_________________________________
Name:
Title:
Dated:
November ___, 2009
|
SUBSCRIBER
|
PURCHASE
PRICE
|
NUMBER
OF SHARES
|
|
___________________________________________
By:
Xxxxxx Xxxxxx
|
$200,000
|
1,000,000
shares
|
19
LIST OF EXHIBITS AND
SCHEDULES
|
Schedule
5(a)
|
Subsidiaries
|
|
Schedule
5(d)
|
Additional
Issuances / Capitalization
|
|
Schedule
5(n)
|
Undisclosed
Liabilities
|
|
Schedule
5(p)
|
Financial
Institutions
|
|
Schedule
5(w)
|
Transfer
Agent
|
|
Schedule
9(e)
|
Use
of Proceeds
|
|
Schedule
9(l)
|
Intellectual
Property
|
