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EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR THE SECURITIES COMMISSION OF ANY
STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE
AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS.
6% CONVERTIBLE DEBENTURE
SUBSCRIPTION AGREEMENT
FRESH'N LITE, INC.
THIS AGREEMENT is executed in reliance upon the transaction
exemption afforded by Regulation D as promulgated by the Securities and
Exchange Commission ("SEC"), under the Securities Act of 1933, as amended (the
"Act").
This Agreement has been executed by the undersigned in connection with
the private placement of the 6% Convertible A Debenture (the "A Debentures"),
and the 6% Convertible B Debenture (hereinafter referred to as the "B
Debentures", and together with the A Debentures referred to as the
"Debentures") of FRESH'N LITE, INC. (OTC Bulletin Board symbol "FLTT"), located
at 0000 Xxxx Xxxxxx, Xxxxxxxx, Xxxxx, a corporation organized under the laws of
the State of Texas, USA (hereinafter referred to as the "Company"). The terms
on which the Debentures may be converted into common stock of the Company, $
0.01 par value per share, (the "Common Stock") and the other terms of the
Debentures are set forth in the A Debenture due May 29, 2000 annexed hereto as
Exhibit A, and the B Debenture annexed hereto as Exhibit B. In addition, the
Company will sell to the entities listed on Schedule A annexed hereto (the
"Subscribers" or "Purchasers"), warrants (the "Warrants") to purchase Seventy
Five Thousand (75,000) shares of Common Stock of the Company per One Million
Five Hundred Thousand ($1,500,000) Dollars funded to the Company by the
Subscribers pursuant to this Agreement (such number of shares of Common Stock
underlying the Warrants shall be pro rated for each subscription amount) which
shall be exercisable for a period of five (5) years from the Closing Date (as
defined herein), as per the terms of a separate Common Stock Purchase Warrant
(Exhibit C annexed hereto). This Subscription and, if accepted by the Company,
the offer and sale of the Debentures, Warrants, and the Common Stock underlying
the Warrants and Debentures (collectively the "Securities"), are being made in
reliance upon the provisions of
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Regulation D under the Act. The Closing Dates shall be determined in
accordance with Sections 1.1, 15, and 16 herein.
Each of the Subscribers hereby represents and warrants to, and
agrees with the Company as follows:
Section 1. Agreement to Subscribe; Purchase Price.
1.1 Closings.
(i) First Tranche Closing. The Company will sell
and the Subscribers will buy, in reliance upon the representations and
warranties contained in this Agreement and the A Debentures, and upon
the terms and satisfaction of each of the conditions set forth in
Section 16 below, and in the A Debentures, that principal amount of A
Debentures set forth next to their names on Schedule A for an
aggregate purchase price of One Million Five Hundred Thousand
($1,500,000) U.S. Dollars (the "First Tranche Purchase Price").
(ii) Second Tranche Closing. The Company will
sell and the Subscribers will buy, in reliance upon the
representations and warranties contained in this Agreement and the B
Debentures, and upon the terms and satisfaction of each of the
conditions set forth in Section 16 below, and in the B Debentures,
that principal amount of B Debentures set forth next to their names on
Schedule A for an aggregate purchase price of One Million Five Hundred
Thousand ($1,500,000) U.S. Dollars (the "Second Tranche Purchase
Price").
1.2 Form of Payment. The respective Subscribers shall
pay the applicable Purchase Price by delivering good funds in United States
Dollars by wire transfer to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP, the Escrow Agent,
against delivery of the original Debentures, and Warrants as per a separate
Escrow Agreement, annexed hereto as Exhibit D, as payment in full for their
respective portion of the Securities.
1.3 Wire Instructions. Wire instructions for Xxxxxxxxx,
Xxxxxxxxx & Xxxx, LLP are as follows:
Chase Manhattan Bank, N.A.
ABA No. 000000000
For the Account of:
United States Trust Company of New York
Account No. 000-0-000000
In favor of:
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP Attorney Escrow Account
Account No. 59-01383
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Section 2. Representations and Warranties of the Subscribers.
Subscribers each acknowledge, represent, warrant and agree as follows:
2.1 Organization and Authorization. Each of the
Subscribers is duly incorporated or organized and validly existing in the state
or country of its incorporation or organization and has all requisite power and
authority to purchase and hold the Securities. The decision to invest and the
execution and delivery of this Agreement by the Subscribers, the performance by
the Subscribers of their obligations hereunder and the consummation by the
Subscribers of the transactions contemplated hereby have been duly authorized
and requires no other proceedings on the part of the Subscribers. The
undersigned signatories have all right, power and authority to execute and
deliver this Agreement on behalf of the Subscribers. This Agreement has been
duly executed and delivered by the Subscribers and, assuming the execution and
delivery hereof and acceptance thereof by the Company, will constitute the
legal, valid and binding obligations of the Subscribers, enforceable against
the Subscribers in accordance with its terms.
2.2 Evaluation of Risks. Each of the Subscribers has
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of, and bearing the economic risks
entailed by, an investment in the Company and of protecting its interests in
connection with this transaction. Each Subscriber recognizes that its
investment in the Company involves a high degree of risk and each Subscriber
can afford the complete loss of its investment.
2.3 Independent Counsel. Each of the Subscribers
acknowledges that it has been advised to consult with its own attorney
regarding legal matters concerning the Company and to consult with its tax
advisor regarding the tax consequences of acquiring the Securities.
2.4 Disclosure Documentation. Each of the Subscribers
has received and reviewed copies of the Company's reports filed under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the Act,
including the Company's 10-KSBs, 10-QSBs, and registration statements, filed by
the Company since April 15, 1997 (collectively, the "Reports"). Except for the
Reports, the Subscribers are not relying on any other information relating to
the offer and sale of the Securities. Subscribers acknowledge that the Company
has offered to make available any additional public information that the
Subscribers may reasonably request, including technical information, and other
material information about the Company and Subscribers have been offered the
Company's full and unconditional cooperation in making such information
available to the Subscribers and acknowledge that the Company has recommended
that the Subscribers request and review such information prior to making an
investment decision. No oral or written representations have been made, or
oral or written information furnished to the undersigned or its advisors, if
any, in connection with the offering of the Securities which were or are in any
way inconsistent with the Reports.
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2.5 Opportunity to Ask Questions. Each of the
Subscribers has had a reasonable opportunity to ask questions of and receive
answers from the Company concerning the Company and the offering, and all such
questions, if any, have been answered to the full satisfaction of each of the
Subscribers.
2.6 Reports Constitute Sole Representations. Except as
set forth in the Reports, no representations or warranties have been made to
the Subscribers by (a) the Company or any agent, employee or affiliate of the
Company or (b) any other person, and in entering into this transaction
Subscribers are not relying upon any information, other than that contained in
the Reports and the results of independent investigation by the Subscribers.
2.7 Each of the Subscribers is Accredited Investor. Each
of the Subscribers is an "Accredited Investor" as defined in Rule 501(a) under
Regulation D and included within one or more of the following categories of
"Accredited Investors."
Any bank as defined in Section 3(a)(2) of the Act, or
any savings and loan associated or other institution as defined in
Section 3(a)(5)A of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the 1934 Act; any insurance company as defined in
Section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act; any Small Business Investment
Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Act of 1958; any plan
established and maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its political
subdivisions, for the benefits of its employees, if such plan has
total assets in excess of $5,000,000; and employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974 if
the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or
if the employee benefit plan has total assets in excess of $5,000,000
or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
Any private business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940;
Any organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000;
(iv) Any director, executive officer, or general
partner of the issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general partner
of that issuer;
(v) Any natural person whose individual net
worth, or joint net worth with that person's spouse, at the time of
his purchase exceeds $1,000,000;
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(vi) Any natural person who had an individual
income in excess of $200,000 in each of the two (2) most recent years
or joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of reaching that
same income level in the current year;
(vii) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a sophisticated
person as described in Section 230.506(b)(2)(ii) of Regulation D under
the Act;
(viii) Any entity in which all of the equity owners
are accredited investors; and
(ix) Any self-directed employee benefit plan with
investment decisions made solely by persons that are accredited
investors within the meaning of Rule 501 of Regulation D promulgated
under the Act.
2.8 No Registration, Review or Approval. Each of the
Subscribers acknowledges and understands that the limited private offering and
sale of Securities pursuant to this Agreement has not been reviewed or approved
by the SEC or by any state securities commission, authority or agency, and is
not registered under the Act or under the securities or "blue sky" laws, rules
or regulations of any state. Each of the Subscribers acknowledges, understands
and agrees that the Securities are being offered and sold hereunder pursuant to
(i) a private placement exemption to the registration provisions of the Act
pursuant to Section 3(b) or Section 4(2) of such Act and Regulation D
promulgated under such Act, and (ii) a similar exemption to the registration
provisions of applicable state securities laws. Each of the Subscribers
understands that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Subscribers set forth herein in order to determine the applicability of
such exemptions and the suitability of the Subscribers to acquire the
Securities.
2.9 Investment Intent. Without limiting their ability to
resell the Securities pursuant to an effective registration statement or
pursuant to an exemption from registration, each of the Subscribers is
acquiring the Securities solely for their own account and not with a view to
the distribution, assignment or resale to others. Each of the Subscribers
understands and agrees that it may bear the economic risk of its investment in
the Securities for an indefinite period of time.
2.10 No Advertisements. The Subscribers are not
subscribing for the Securities as a result of or subsequent to any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
presented at any seminar or meeting.
2.11 Registration Rights. The parties have entered into a
Registration Rights Agreement (Exhibit E).
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Section 3. Representations and Warranties of the Company. The
Company acknowledges, represents, warrants and agrees as follows:
3.1 Organization/Qualification. The Company is a
corporation duly organized and validly existing under the laws of the State of
Texas and is in good standing under such laws. The Company has all requisite
corporate power and authority to own, lease and operate its properties and
assets, and to carry on its business as presently conducted. The Company
currently conducts its business only in the State of Texas. In the event the
Company conducts business in a jurisdiction outside the State of Texas, it will
become qualified to do business as a foreign corporation in such jurisdiction
if the ownership of its property or the nature of its business requires such
qualification, except where failure to so qualify would not have a material
adverse effect on the Company.
3.2 Accuracy of Reports and Information. The Company is
in compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the 1934 Act. The Company has
registered its Common Stock pursuant to Section 12 of the 1934 Act and the
Common Stock is listed and trades on the OTC Bulletin Board and the Company has
applied for listing of the Common Stock on the Nasdaq Small Cap Stock Market.
The Company has complied in all material respects and to the extent applicable
with all reporting obligations, under either Section 13(a) or 15(d) of the 1934
Act for a period of at least twelve (12) months immediately preceding the offer
and sale of the Securities (or for such shorter period that the Company has
been required to file such material). Notwithstanding the foregoing, the
Company represents that it filed it Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 more than ninety (90) days after the end of the
Company's fiscal year and the Company filed its Quarterly Report on Form 10-QSB
for the quarter ended March 31, 1998 more than forty five (45) days after the
end of the Company's fiscal quarter
3.3 SEC Filings/Full Disclosure. None of the Reports
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made, not misleading. The
Company has timely filed all requisite forms, reports and exhibits thereto with
the Securities and Exchange Commission, except as disclosed in Section 3.2
above. There is no fact known to the Company (other than general economic
conditions known to the public generally) that has not been publicly disclosed
by the Company or disclosed in writing to each of the Subscribers which (i)
could reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or on earnings, business affairs, properties or assets
of the Company, or (ii) could reasonably be expected to materially and
adversely affect the ability of the Company to perform its obligations pursuant
to this Agreement.
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3.4 Authorization. The Company has all requisite
corporate right, power and authority to execute and deliver this Agreement (and
all Exhibits annexed hereto) and to consummate the transactions contemplated
hereby. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement by the Company (to the extent performance will
occur on or before the Closing Date), the authorization, sale, issuance and
delivery of the Securities and the performance of the Company's obligations
hereunder (to the extent performance will occur on or before the Closing Date)
has been taken. This Agreement has been duly authorized, validly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in this Agreement. Upon their
issuance and delivery pursuant to this Agreement, the Securities will be
validly issued, fully paid and nonassessable and will be free of any liens or
encumbrances; provided, however, that the Securities are subject to
restrictions on transfer under state and/or federal securities laws. The
issuance and sale of the Securities will not give rise to any preemptive right
or right of first refusal or right of participation on behalf of any person.
3.5 No Conflict. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or to a
loss of a material benefit, under, any provision of the Certificate of
Incorporation, and any amendments thereto, Bylaws, Stockholders Agreements and
any amendments thereto of the Company or any material mortgage, indenture,
lease or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets and which would have a material
adverse effect on the Company's business and financial condition.
3.6 No Undisclosed Liabilities or Events. The Company
has no liabilities or obligations other than those disclosed in the Reports,
this Agreement or those incurred in the ordinary course of the Company's
business since April 15, 1997, and which individually or in the aggregate (i)
would reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or on prospects, operations, earnings, business
affairs, properties or assets of the Company, or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.. No event or circumstances
has occurred or exists with respect to the Company or its earnings, properties,
assets, business, condition (financial or otherwise), operations or prospects,
which, 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.
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3.7 No Default. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its
property is bound, and neither the execution, nor the delivery by the Company,
nor the performance by the Company of its obligations under this Agreement or
the Exhibits annexed hereto, including the conversion or exercise provision of
the Securities, will conflict with or result in the breach or violation of any
of the terms or provisions of, or constitute a default or result in the
creation or imposition of any lien or charge on any assets or properties of the
Company under, any material indenture, mortgage, deed of trust or other
material agreement applicable to the Company or instrument to which the Company
is a party or by which it is bound or any statute or the Certificate of
Incorporation or by-laws of the Company, or any decree, judgment, order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company or its properties, which individually or in the aggregate (i)
would reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), or on prospects, operations, earnings, business
affairs, properties or assets of the Company, or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
3.8 Absence of Events of Default. Except as set forth in
the Reports and this Agreement (including all Exhibits annexed hereto), no
default, as defined in the respective agreement to which the Company is a
party, and no event which, with the giving of notice or the passage of time or
both, would become a default, has occurred and is continuing, which
individually or in the aggregate (i) could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), or on
prospects, operations, earnings, business affairs, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
3.9 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement (including all Exhibits annexed
hereto), or the offer, sale or issuance of the Securities, or the consummation
of any other transaction contemplated hereby, except as may be required by
applicable securities laws.
3.10 Intellectual Property Rights. Except as disclosed in
the Reports, the Company has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct its business as presently conducted in the
Reports. Except as disclosed in the Reports, to the Company's actual knowledge
its products do not infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of others currently in
existence; and there is no claim being made against the Company regarding any
trademark, trade name, patent, copyright, license, trade secret or other
intellectual property right which individually or in the aggregate (i) could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), or on the prospects, operations, earnings, business
affairs, properties or assets of the Company, or (ii) could reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
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3.11 Material Contracts. Except as set forth in the
Reports, the agreements to which the Company is a party described in the
Reports are valid agreements, in full force and effect, and the Company is not
in material breach or material default under any of such agreements which
individually or in the aggregate (i) could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), or on the
prospects, operations, earnings, business affairs, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement..
3.12 Litigation. Except as disclosed in the Reports,
there is no action, proceeding or investigation pending, or to the Company's
knowledge threatened, against the Company which individually or in the
aggregate (i) could reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), or on the prospects, operations,
earnings, business affairs, properties or assets of the Company, or (ii) could
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement. The Company is
not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality which
could have a material adverse effect on the properties, business, condition
(financial or otherwise), operations or prospects of the Company.
3.13 Title to Assets. Except as set forth in Reports, the
Company has good and marketable title to all properties and material assets
described in the Reports as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interests other than such of
the foregoing as are customary or are not material to the business of the
Company.
3.14 Subsidiaries. Except as disclosed in the Reports,
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, association or other business
entity.
3.15 Required Governmental Permits. The Company is in
possession of and operating in material compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities which are material to the conduct of its business,
all of which are valid and in full force and effect.
3.16 Other Outstanding Securities/Financing Restrictions.
Except as disclosed in the Reports, the Company has no outstanding restricted
shares, or shares of Common Stock sold under Regulation S, Regulation D or
outstanding under any other exemption from registration, which are available
for sale as unrestricted ("free trading") stock.
3.17 Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, $0.01 par value per
share, of which 6,356,852 are outstanding. There are no shares of Preferred
Stock currently outstanding. All issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable.
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3.18 Dilution. The Company is aware and acknowledges that
conversion of the Debentures, and/or exercise of the Warrants, may cause
dilution to existing stockholders and may significantly increase the
outstanding number of shares of Common Stock.
3.19 Employee Relations. The Company is not involved in
any labor dispute, nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union and the
Company believes that its relations with its employees are good.
3.20 Environmental Laws. The Company is (i) in compliance
with any and all foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants and which
the Company know is applicable to them ("Environmental Laws"), (ii) has
received all permits, licenses or other approvals required under applicable
Environmental Laws to conduct its business, and (iii) is in compliance with all
terms and conditions of any such permit, license or approval.
3.21 Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in
the businesses in which the Company is engaged. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires, or obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
materially and adversely affect the condition, financial or otherwise, or the
earnings, business or operation, of the Company.
Section 4. Further Representations and Warranties of the
Company. For so long as any Securities held by any of the Subscribers remain
outstanding, the Company acknowledges, represents, warrants and agrees as
follows:
(i) It will reserve from its authorized but
unissued shares of Common Stock a sufficient number of shares of
Common Stock to permit the conversion in full of such outstanding
Securities.
(ii) It will permit the Subscribers to exercise
their right to convert the Debentures and/or exercise the Warrants by
telecopying an executed and completed Notice of Conversion and/or
Notice of Exercise to the Company and delivering the original Notice
of Conversion and/or original Notice of Exercise and the certificate
representing the Debenture and/or the original Warrant to the Company
by express courier. Each business date on which a Notice of
Conversion and/or Notice of Exercise is telecopied to and received by
the Company in accordance with the provisions hereof shall be deemed a
"Conversion Date" and/or "Exercise Date". The Company will transmit
the certificates representing shares of Common Stock issuable upon
conversion of any Debenture and/or exercise of any Warrants (together
with the certificates representing the Debenture not so converted
and/or Warrants not so exercised) to the Subscriber via express
courier, by electronic transfer or otherwise, within three business
days after the Conversion Date and/or Exercise Date if the Company has
received the
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original Notice of Conversion and Debenture certificate being so
converted and/or the original Notice of Exercise and Warrant being
exercised. In addition to any other remedies which may be available
to the Subscribers, in the event that the Company fails to effect
delivery of such shares of Common Stock within such three business day
period, the Subscribers will be entitled to revoke the relevant Notice
of Conversion and/or Notice of Exercise by delivering a notice to such
effect to the Company whereupon the Company and the Subscribers shall
each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion and/or Notice of Exercise. The
Notice of Conversion and Debenture and/or the Notice of Exercise and
Warrant representing the portion of the Debenture converted and/or
Warrant exercised shall be delivered as follows:
To the Company:
Fresh'n Lite, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxx
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
In the event that the Common Stock is not delivered by the
Company (or its transfer agent) within three (3) business days after
the Conversion Date and/or Exercise Date, and the Company has received
the original Notice of Conversion and Debenture, the Company shall pay
to the Subscriber(s), in immediately available funds, upon demand, as
liquidated damages for such failure and not as a penalty, for each
$100,000 of Debenture sought to be converted, $500 for each of the
first ten (10) days and $1,000 per day thereafter that the shares of
Common Stock issuable upon conversion of the Debentures are not
delivered, and for each thousand (1,000) shares of Common Stock sought
to be exercised under the Warrant, $7.50 for each of the first ten
(10) days and $15 per day thereafter that the shares of Common Stock
underlying the Warrant are not delivered, which liquidated damages
shall run from the fourth business day after the Conversion Date
and/or Exercise Date. Any and all payments required pursuant to this
paragraph shall be payable only in cash.
(iii) The Company will use commercially reasonable efforts
to maintain the listing of its Common Stock on the OTC Bulletin Board
(or, if applicable, the Nasdaq Small Cap Stock Market), the successors
thereto, or other organized United States market or quotation system.
The Company has not received any notice, oral or written, affecting
its continued listing, the Company will take no action which would
impact their continued listing or eligibility of the Company for such
listing (except for inclusion on the Nasdaq Small Cap Stock Market),
and the Company is in full compliance with the listing requirements of
the OTC Bulletin Board.
(iv) The Company covenants and agrees that for so long as
any of the Common Stock issuable upon conversion of the Debentures or
exercise of the Warrants, remain outstanding and continue to be
"restricted securities" within the meaning of Rule
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144 under the Act, the Company shall cooperate in order to permit
resales of the underlying Common Stock pursuant to Rule 144 under the
Act. The Company and the Subscribers shall provide the Company's
Transfer Agent any and all papers requested by the Company's Transfer
Agent necessary to complete the transfer under Rule 144, including,
but not limited to, opinions of counsel to the Transfer Agent.
Section 5. Opinion of Counsel. The Subscribers shall, upon
the Closing, receive an opinion from counsel to the Company as set forth in
Exhibit F.
Section 6. Opinion of Counsel Upon Conversion. The Company
will obtain for each Subscriber, at the Company's expense, any and all opinions
of counsel which may be reasonably required in order to convert the Debentures,
subject only to receipt of a Notice of Conversion in the form of Exhibit G and
receipt by Counsel of such representations, warranties, and documents as are
determined to be necessary to comply with applicable securities laws, duly
executed by the Subscriber which shall be satisfactory to the Transfer Agent,
directing the Transfer Agent to remove the legend from the Common Stock
certificate if the Registration Statement has been declared effective by the
SEC or if another exemption is available for resale.
Section 7. Rule 144 Reporting. With a view to making
available the benefits of certain rules and regulations of the SEC which may at
any time permit the sale of the Securities to the public without registration,
the Company agrees, for so long as the Securities are held by the Subscribers,
and such action is necessary to:
(i) make and keep public information available,
as those terms are understood and defined in Rule 144 under the Act,
at all times after the effective date on which the Company becomes
subject to the reporting requirements of the Act or the 1934 Act;
(ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and
the 1934 Act;
(iii) furnish to each Subscriber forthwith, upon
request, a written statement by the Company as to its compliance with
the reporting requirements of said Rule 144, and of the Act and the
1934 Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the
Company as each Subscriber may reasonably request in availing itself
of any rule or regulation of the SEC allowing any Subscriber to sell
any such Securities without registration.
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Section 8. Representations and Warranties of the Company and
Subscribers. Each of the Subscribers, and the Company represent, warrant,
covenant, and agree to the other the following with respect to itself:
8.1 Approvals. Neither the Company, nor any Subscriber,
is aware of any authorization, approval or consent of any governmental body
which is legally required for the Company's issuance and sale of the Securities
to the Subscribers.
8.2 Indemnification. The Company and each of the
Subscribers agrees to indemnify the other, and to hold the other harmless, from
and against any and all losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees) which the other may sustain or incur in
connection with the breach by the indemnifying party of any representation,
warranty or covenant made by it in this Agreement.
Section 9. Restrictions on Conversion of Debenture. Each
Subscriber or any subsequent holder of the Debenture (the "Holder") shall be
prohibited from converting any portion of the Debenture which would result in
any Subscriber or Holder being deemed the beneficial owner, in accordance with
the provisions of Rule 13d-3 of the 1934 Act, as amended, of 4.99% or more of
the then issued and outstanding Common Stock of the Company.
Section 10. 20% Rule Limitation. In the event the rules of
the OTC Bulletin Board require, or if the Company's Common Stock becomes listed
on the NASDAQ Small Cap Stock Market, the Company agrees that it will call a
stockholders' meeting for the purpose of approving below market price issuances
of Common Stock to the Subscribers in excess of twenty percent (20%) of the
number of shares of Common Stock outstanding as of First Tranche Closing Date.
In the event that the aforementioned proposal is not ratified by the
stockholders, the Company agrees that it shall seek a waiver from the OTC
Bulletin Board (if available) or Nasdaq Stock Market (if then listed on the
Nasdaq Small Cap Stock Market) for such issuance if necessary. In the event
the Company does not get such a waiver within ten (10) days after the
stockholder meeting, the Company agrees that it will pay to the Subscribers the
"Economic Benefit" of that number of shares of Common Stock issuable to the
Subscribers above said twenty (20%) percent. The "Economic Benefit" is defined
as the number of shares of Common Stock issuable to the Subscribers upon
conversion pursuant to the terms hereunder and in the Debentures in excess of
twenty (20%) percent of the outstanding Common Stock as of the applicable
Closing Date multiplied by the Bid Price on the tenth (10th) Trading Day after
the aforementioned stockholder meeting.
Section 11. Registration or Exemption Requirements. Each of
the Subscribers acknowledges and understands that the Securities may not be
resold or otherwise transferred except in a transaction registered under the
Act and any applicable state securities laws or unless an exemption from such
registration is available. Each of the Subscribers understands that the
Securities will be imprinted with a legend that prohibits the transfer of the
Securities unless (i) they are registered or such registration is not required,
and (ii) if the transfer is pursuant to an exemption from registration other
than Rule 144 under the Act and, if the Company shall so
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request in writing, an opinion of counsel reasonably satisfactory to the
Company is obtained to the effect that the transaction is so exempt.
Section 12. Legend. The certificates representing the
Securities, which are issued prior to registration or if no exemption to
registration is available, shall be subject to a legend restricting transfer
under the Act, such legend to be substantially as follows:
"THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN
THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
The certificates representing these Securities, and each
certificate issued in transfer thereof, will also bear any legend required
under any applicable state securities law.
Section 13. Stock Delivery Instructions. The Debenture
Certificates shall be delivered to each of the Subscribers on a delivery versus
payment basis as set forth in the Escrow Agreement.
Section 14. Closing Dates. The "First Tranche Closing Date"
shall be the date the Escrow Agent (i) receives the A Debentures and the First
Tranche Purchase Price, and (ii) each of the conditions set forth in Sections
15 and 16, and the terms and conditions of the Escrow Agreement (Exhibit D)
herein are satisfied or waived. The "Second Tranche Closing Date" shall be the
date the Escrow Agent (i) receives the B Debentures and the Second Tranche
Purchase Price, and (ii) each of the conditions set forth in Sections 15 and
16, and the terms and conditions of the Escrow Agreement (Exhibit D) herein are
satisfied or waived
Section 15. Conditions to the Company's Obligation to Sell.
Each of the Subscribers understands that the Company's obligation to sell the
Debentures and Warrants is conditioned upon:
(i) The receipt and acceptance by the Company of
this Subscription Agreement and all Exhibits duly executed by all
other parties thereto;
(ii) Delivery into escrow by each of the
Subscribers of good cleared funds as payment in full for the purchase
of the Securities;
(iii) All representations and warranties of each of
the Subscribers contained herein shall remain true and correct in all
material respects as of the Closing Date; and
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(iv) The Company shall have obtained all permits
and qualifications required by any state for the offer and sale of the
Debentures and Warrants, or shall have the availability of exemptions
therefrom. At the applicable Closing Date, the sale and issuance of
the Debentures, Warrants, and the proposed issuance of the Common
Stock underlying the Debentures and Warrants shall be legally
permitted by all laws and regulations to which each of the
Subscribers and the Company are subject.
Section 16. Conditions to Subscriber's Obligation to
Purchase Debentures. The Company agrees to sell and the Investors agree to
purchase up to an aggregate principal amount of Three Million ($3,000,000)
Dollars principal amount of Debentures in two separate tranches (of One Million
Five Hundred Thousand ($1,500,000) Dollars principal amount each) as set forth
in (a) and (b) below. The number of shares of Common Stock issuable upon
conversion of the Debentures shall be determined by dividing $1,500,000 by the
conversion formula contained in the applicable Debenture Certificate.
(a) First Tranche. The Subscribers shall purchase an
aggregate principal amount of One Million Five Hundred Thousand ($1,500,000)
Dollars principal amount of A Debentures (the dollar amount subscribed to for
each Subscriber is set forth on Schedule A annexed hereto) upon the
satisfaction of each of the following conditions:
(i) Acceptance by each of the Subscribers of a
satisfactory Subscription Agreement and due execution by all parties
of this Agreement and the Exhibits annexed hereto;
(ii) Delivery into escrow by the Company of an
aggregate principal amount of One Million Five Hundred Thousand
($1,500,000) Dollars of original A Debentures, as more fully set forth
in the Escrow Agreement attached hereto as Exhibit F;
(iii) All representations and warranties of the
Company contained herein shall remain true and correct in all material
respects as of the First Tranche Closing Date;
(iv) Each of the Subscribers shall have received
an opinion of counsel substantially in the form of Exhibit F annexed
hereto;
(v) The Company shall have obtained all permits
and qualifications required by any state for the offer and sale of the
A Debentures, and Warrants, or shall have the availability of
exemptions therefrom. At the Closing Date, the sale and issuance of
the A Debentures and Warrants shall be legally permitted by all laws
and regulations to which the Company and each of the Subscribers are
subject.
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(vi) The Investors shall have received
certification that the Company has obtained shareholder approval for
the Company's issuance of more than twenty (20%) percent of its Common
Stock in connection with the transactions contemplated hereby, if
required pursuant to the listing requirements of the OTC Bulletin
Board or Nasdaq Small Cap Stock Market, to the extent the Common Stock
is then so listed; and
(vii) Payment of fees as set forth in Section 17.6
below.
(b) Second Tranche. The Subscribers shall purchase an
aggregate principal amount of One Million Five Hundred Thousand ($1,500,000)
Dollars principal amount of B Debentures (the dollar amount subscribed to for
each Subscriber is set forth on Schedule A annexed hereto), on the ninetieth
(90th) day following the Effective Date upon the satisfaction of the following
conditions:
(i) The Subscribers shall have received certification
that the Company has obtained shareholder approval for the Company's
issuance of more than twenty (20%) percent of its Common Stock in
connection with the transactions contemplated hereby, if required
pursuant to the listing requirements of the OTC Bulletin Board or
Nasdaq Small Cap Stock Market, to the extent the Common Stock is then
so listed;
(ii) Delivery into escrow by the Company of an aggregate
principal amount of One Million Five Hundred Thousand ($1,500,000)
Dollars of original B Debentures, as more fully set forth in the
Escrow Agreement attached hereto as Exhibit F;
(iii) The Subscribers shall have received an opinion of
counsel of the Company as set forth in Exhibit F annexed to this
Agreement, dated on the Second Tranche Closing Date;
(iv) The Subscribers shall have received written proof
that the Registration Statement (which includes all shares of Common
Stock underlying the Debentures and Warrants) has previously become
effective and remains effective during the ten (10) Trading Days
immediately prior to the Second Tranche Closing Date, and (A) neither
the Company nor any of the Subscribers shall have received notice that
the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so
(unless the SEC's concerns have been addressed and the Investors are
reasonably satisfied that the SEC no longer is considering or intends
to take such action), and (B) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or
related prospectus shall exist;
(v) The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the B
Debentures, or shall have the availability of exemptions therefrom.
The sale and issuance of the B Debentures shall be legally permitted
by all laws and regulations to which the Company is subject;
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(vi) The Subscribers shall have received written
certification that the representations and warranties of the Company
contained in this Agreement and all Exhibits annexed hereto are true
and correct in all material respects as of the Second Tranche Closing
Date as though made at each such time (except for representations and
warranties specifically made as of a particular date) with respect to
all periods, and as to all events and circumstances occurring or
existing to and including the Second Tranche Closing Date;
(vii) The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and
conditions required by this Agreement, the B Debentures, the Escrow
Agreement, the Registration Rights Agreement and the Warrants, to be
performed, satisfied or complied with by the Company at or prior to
the Second Tranche Closing Date;
(viii) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits or directly and adversely
affects any of the transactions contemplated by this Agreement or the
Exhibits annexed hereto, and no proceeding shall have been commenced
that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement or the Exhibits
annexed hereto;
(ix) Since the date of filing of the Company's most recent
SEC Document, no event that had or is reasonably likely to have a
material adverse effect on the properties, business, condition
(financial or otherwise), operations or prospects of the Company has
occurred;
(x) The trading of the Common Stock is not suspended by
the SEC or the OTC Bulletin Board, or the Nasdaq Small Cap Stock
Market (if applicable), and the Common Stock shall not have been
delisted from the OTC Bulletin Board or the Nasdaq Small Cap Stock
Market, if applicable. The issuance of shares of Common Stock with
respect to the conversion of the B Debentures shall not violate the
shareholder approval requirements of the Nasdaq Small Cap Stock Market
(if applicable). The Company shall not have been contacted by the
NASD concerning the delisting of the Common Stock on the OTC Bulletin
Board, or the Nasdaq Small Cap Stock Market (if applicable), and the
Company currently meets all applicable listing requirements; and
(xii) Payment of fees as set forth in Section 17.6 below.
Notwithstanding the foregoing, the Subscribers will not be obligated
to purchase the B Debenture in the event the Registration Statement has not
been declared effective by the SEC prior to the first anniversary of the First
Tranche Closing Date.
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Section 17. Miscellaneous.
17.1 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the parties consents to the
jurisdiction of the Southern District of the State of New York or the state
courts of the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that if another party to this Agreement obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any state or country having jurisdiction over
the party against whom such judgment was obtained, and each party hereby waives
any defenses available to it under local law and agrees to the enforcement of
such a judgment. Each party to this Agreement irrevocably consents to the
service of process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address set
forth herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
17.2 Confidentiality. The Company and each of the
Subscribers agrees to keep confidential and not to disclose to or use for the
benefit of any third party the terms of this Agreement (including the names of
the Subscribers) or any other information which at any time is communicated by
the other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required
to be disclosed by law. If for any reason the transactions contemplated by
this Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party, including the names
of the Subscribers (except information publicly available or in such party's
domain prior to the date hereof, and except as required by court order) and
shall promptly return to the other parties, or destroy (if the other party so
requests), all schedules, documents, instruments, work papers or other written
information, without retaining copies thereof, previously furnished by it as a
result of this Agreement or in connection herewith.
17.3 Facsimile/Counterparts/Entire Agreement. Except as
otherwise stated herein, in lieu of the original, a facsimile transmission or
copy of the original (except the Securities) shall be as effective and
enforceable as the original. This Agreement may be executed in counterparts
which shall be considered an original document and which together shall be
considered a complete document. This Agreement and the Exhibits annexed hereto
constitute the entire agreement between the Subscribers and the Company with
respect to the subject matter hereof. This Agreement may be amended only by a
writing executed by all parties.
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17.4 Severability. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or void, this Agreement shall continue in full force
and effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
17.5 Reliance by Company. Each of the Subscribers
represents to the Company that the representations and warranties of each
Subscriber contained herein are complete and accurate and may be relied upon by
the Company in determining the availability of an exemption from registration
under federal and state securities laws in connection with a private offering
of securities.
17.6 Fees and Expenses. Each of the parties shall pay its
own fees and expenses (including the fees of any accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby except that the Company agrees to pay: (a) on
the First Tranche Closing Date, (i) to Corporate Capital Management, (A) that
dollar amount in cash equal to ten (10%) percent of the First Tranche Purchase
Price, and (B) a Warrant to purchase fifty thousand (50,000) shares of Common
Stock; and (ii) to Goldstein, Goldstein, & Xxxx, LLP fifteen thousand ($15,000)
dollars for legal and escrow fees; and (b) on the Second Tranche Closing Date,
(i) to Corporate Capital Management that dollar amount in cash equal to ten
(10%) percent of the Second Tranche Purchase Price, and (ii) to Goldstein,
Goldstein, & Xxxx, LLP seven thousand five hundred ($7,500) dollars for legal
and escrow fees.
17.7 Authorization. Each of the parties hereto represents
that the individual executing this Agreement on its behalf has been duly and
appropriately authorized to execute the Agreement.
17.8 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 reputable 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:
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(i) If to the Company:
Fresh'n Lite, Inc.
0000 Xxxxxx
Xxxxxxxx, Xxxxx
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(ii) If to the Subscribers, at the addresses and numbers
listed on Schedule A annexed hereto.
Any party hereto may from time to time change its address or facsimile
number for notices under this Section by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, this 6% Convertible Debenture Subscription
Agreement was duly executed on the date first written below.
Agreed to and Accepted on
this day of May 1998
----
FRESH'N LITE, INC.
By
--------------------------
Name:
Title:
DOMINION CAPITAL FUND, LTD.
By
------------------------------
Xxxx Xxxxxxxxx, Agent
Executed this day of May, 1998
---
CANADIAN ADVANTAGE LIMITED
PARTNERSHIP
By
------------------------------
Xxxx Xxxxxxxxx, General Partner
Executed this day of May, 1998
---
SOVEREIGN PARTNERS LIMITED
PARTNERSHIP
By
------------------------------
Xxxx Xxxxxxxxx, Agent
Executed this day of May, 1998
---
22
SCHEDULE A
LIST OF PURCHASERS
1. DOMINION CAPITAL FUND, LTD.
000 Xxx Xxxxxx, 00xx Xx.
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Initial Investment Amount: $800,000.
2. CANADIAN ADVANTAGE LIMITED PARTNERSHIP
000 Xxx Xxxxxx, 00xx Xx.
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Initial Investment Amount: $200,000.
3. SOVEREIGN PARTNERS LIMITED PARTNERSHIP
000 Xxx Xxxxxx, 00xx Xx.
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Initial Investment Amount: $500,000.
2
