SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Sanguine
Corporation, a Nevada corporation (the "Company") hereby agrees to issue and
to sell to the Subscriber, a 5% Convertible Note convertible in accordance
with the terms thereof into shares of the Company's $.001 par value common
stock (the "Company Shares") and common stock purchase warrants ("Warrants")
for the aggregate consideration as set forth on the signature page hereof
("Purchase Price"). The form of Convertible Note is annexed hereto as Exhibit
A. (The Company Shares included in the Securities (as hereinafter defined)
are sometimes referred to herein as the "Shares", "Common Shares" or "Common
Stock"). (The Notes, the Company Shares, Warrants, and the Common Stock
issuable upon exercise of the Warrants are collectively referred to herein as,
the "Securities"). Upon acceptance of this Agreement by the Subscriber, the
Company shall issue and deliver the Note and Warrants against payment, by
federal funds wire transfer of the Purchase Price.
The following terms and conditions shall apply to this
subscription.
1. Subscriber's Representations and Warranties. The Subscriber
hereby represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been
furnished with the Company's Form 10-K for the year ended December 31, 2000 as
filed with the Securities and Exchange Commission (the "Commission") together
with all subsequently filed forms 10-Q, and other publicly available filings
made with the Commission (hereinafter referred to as the "Reports"). In
addition, the Subscriber has received from the Company such other information
concerning its operations, financial condition and other matters as the
Subscriber has requested in writing (such information in writing is
collectively, the "Other Written Information"), and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities.
(b) Information on Subscriber. The Subscriber is an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the Securities Act of 1933, as amended (the "1933 Act"),
is experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-
owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber
is able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof. The information set forth on the signature
page hereto regarding the Subscriber is accurate.
(c) Purchase of Note. On the Closing Date, the Subscriber
will purchase the Note and Warrants for its own account and not with a view to
any distribution thereof.
(d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act, by reason of their issuance in a transaction that does not require
registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of Subscriber contained herein), and that such
Securities must be held unless a subsequent disposition is registered under
the 1933 Act or is exempt from such registration.
(e) Company Shares Legend. The Company Shares, and the
shares of Common Stock issuable upon the exercise of the Warrants, shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(f) Warrants Legend. The Warrants shall bear the
following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(g) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND
THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(h) Communication of Offer. The offer to sell the Securities
was directly communicated to the Subscriber. At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article,
radio or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber represents
that the foregoing representations and warranties are true and correct as of
the date hereof and, unless the Subscriber otherwise notifies the Company
prior to the Closing Date (as hereinafter defined), shall be true and correct
as of the Closing Date. The foregoing representations and warranties shall
survive the Closing Date.
2. Company Representations and Warranties. The Company represents
and warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other
than those jurisdictions in which the failure to so qualify would not have a
material adverse effect on the business, operations or financial condition of
the Company.
(b) Outstanding Stock. All issued and outstanding shares
of capital stock of the Company and each of its subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been
duly authorized, executed and delivered by the Company and is a valid and
binding agreement enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity; and the Company has full
corporate power and authority necessary to enter into this Agreement and to
perform its obligations hereunder and all other agreements entered into by the
Company relating hereto.
(d) Additional Issuances. Except as set forth on
Schedule 2(d), there are no outstanding agreements or preemptive or similar
rights affecting the Company's common stock or equity and no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company except as described
in the Reports or Other Written Information.
(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 NASD, NASDAQ or
the Company's Shareholders is required for execution of this Agreement, and
all other agreements entered into by the Company relating thereto, including,
without limitation issuance and sale of the Securities, and the performance of
the Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the
representations and warranties of the Subscriber in Paragraph 1 are true and
correct and the Subscriber complies with its obligations under this Agreement,
neither the issuance and sale of the Securities nor the performance of its
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:
(i) violate, conflict with, result in a breach of,
or constitute a default (or an event which with the giving of notice or the
lapse of time or both would be reasonably likely to constitute a default)
under (A) the certificate of incorporation, charter or bylaws of the Company,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty,
rule, regulation or determination applicable to the Company of any court,
governmental agency or body, or arbitrator having jurisdiction over the
Company or any of its affiliates or over the properties or assets of the
Company or any of its affiliates, (C) the terms of any bond, debenture, note
or any other evidence of indebtedness, or any agreement, stock option or other
similar plan, indenture, lease, mortgage, deed of trust or other instrument to
which the Company or any of its affiliates is a party, by which the Company or
any of its affiliates is bound, or to which any of the properties of the
Company or any of its affiliates is subject, or (D) the terms of any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company, or any of its affiliates is a party except the violation, conflict,
breach, or default of which would not have a material adverse effect on the
Company; or
(ii) result in the creation or imposition of any
lien, charge or encumbrance upon the Securities or any of the assets of the
Company, or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance and on the Closing Date, as hereinafter
defined, and the date the Note is converted, and the Warrants are exercised,
the Securities will be duly and validly issued, fully paid and nonassessable
(and if registered pursuant to the 1933 Act, and resold pursuant to an
effective registration statement will be free trading and unrestricted,
provided that the Subscriber complies with the Prospectus delivery
requirements);
(iii) will not have been issued or sold in violation
of any preemptive or other similar rights of the holders of any securities of
the Company; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
(h) Litigation. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having
jurisdiction over the Company, or any of its affiliates that would affect the
execution by the Company or the performance by the Company of its obligations
under this Agreement, and all other agreements entered into by the Company
relating hereto. Except as disclosed in the Reports or Other Written
Information, there is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its affiliates which litigation if adversely determined
could have a material adverse effect on the Company.
(i) Reporting Company. The Company is a publicly-
held company subject to reporting obligations pursuant to Sections 15(d) and
13 of the Securities Exchange Act of 1934, as amended (the "1934 Act") and has
a class of common shares registered pursuant to Section 12(g) of the 1934 Act.
The Company's common stock is trading on the OTC Bulletin Board ("Bulletin
Board"). Pursuant to the provisions of the 1934 Act, the Company has filed
all reports and other materials required to be filed thereunder with the
Securities and Exchange Commission during the preceding twelve months except
as set forth in the Reports.
(j) No Market Manipulation. The Company has not
taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the common stock of the Company to facilitate the
sale or resale of the Securities or affect the price at which the Securities
may be issued.
(k) Information Concerning Company. The Reports
contain all material information relating to the Company and its operations
and financial condition as of their respective dates which information is
required to be disclosed therein. Since the date of the financial statements
included in the Reports, and except as modified in the Other Written
Information or in the Schedule hereto, there has been no material adverse
change in the Company's business, financial condition or affairs not disclosed
in the Reports. The Reports do not contain any untrue statement of a material
fact or omit to state a material fact in light of the circumstances when made
required to be stated therein or necessary to make the statements therein not
misleading.
(l) Dilution. The number of Shares issuable upon
conversion of the Notes may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the
trading price of the Common Stock declines prior to conversion of the Note.
The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have a potential dilutive effect. The board of directors of the Company
has concluded, in its good faith business judgment, that such issuance is in
the best interests of the Company. The Company specifically acknowledges that
its obligation to issue the Shares upon conversion of the Note and exercise of
the Warrants is binding upon the Company and enforceable, except as otherwise
described in this Subscription Agreement or the Note, regardless of the
dilution such issuance may have on the ownership interests of other
shareholders of the Company.
(m) Stop Transfer. The Securities are restricted
securities as of the date of this Agreement. The Company will not issue any
stop transfer order or other order impeding the sale and delivery of the
Securities, except as may be required by federal securities laws.
(n) Defaults. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or ByLaws.
Neither the Company nor any of its subsidiaries is (i) in default under or in
violation of any other material agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected, which default
or violation would have a material adverse effect on the Company, (ii) in
default with respect to any order of any court, arbitrator or governmental
body or subject to or party to any order of any court or governmental
authority arising out of any action, suit or proceeding under any statute or
other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to its knowledge in violation of any
statute, rule or regulation of any governmental authority which violation
would have a material adverse effect on the Company.
(o) No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the
offering of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the
rules and regulations of Bulletin Board nor will the Company or any of its
affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings. The Company
has not conducted and will not conduct any offering other than the
transactions contemplated hereby that will be integrated with the issuance of
the Securities.
(p) No General Solicitation. Neither the Company,
nor any of its affiliates, nor to its knowledge, any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Act) in connection
with the offer or sale of the Securities.
(q) Listing. The Company's common stock is quoted
on, and listed for trading on the Bulletin Board. Except as disclosed in the
Other Written Information, the Company has not received any oral or written
notice that its Common Stock will be delisted from the Bulletin Board or that
the Common Stock does not meet all requirements for the continuation of such
listing.
(r) No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the
aggregate, which are not disclosed in the Reports and Other Written
Information, other than those incurred in the ordinary course of the Company's
businesses since December 31, 2000 and which, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect
on the Company's financial condition.
(s) No Undisclosed Events or Circumstances. Since
December 31, 2000, 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.
(t) Capitalization. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the Closing
Date are set forth on Schedule 2(t) hereto. Except as set forth in the
Reports and Other Written Information and Schedule 2(t), there are no options,
warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable.
(u) 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, will be true and
correct as of the Closing Date in all material respects, and, unless the
Company otherwise notifies the Subscriber prior to the Closing Date, shall be
true and correct in all material respects as of the Closing Date. The
foregoing representations and warranties shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant
to the exemption from the registration provisions of the Securities Act of
1933, as amended, afforded by Rule 506 of Regulation D promulgated thereunder.
On the Closing Date, the Company will provide an opinion reasonably acceptable
to Subscriber from the Company's legal counsel opining on the availability of
the Regulation D exemption as it relates to the offer and issuance of the
Securities. A form of the legal opinion is annexed hereto as Exhibit B. The
Company will provide, at the Company's expense, such other legal opinions in
the future as are reasonably necessary for the conversion of the Note and
exercise of the Warrants.
4. Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is
permitted to and disposes of such Securities pursuant to Rule 144(d) and/or
Rule 144(k) under the 1933 Act in the opinion of counsel reasonably
satisfactory to the Company, or (b) upon resale subject to an effective
registration statement after the Securities are registered under the 0000 Xxx.
The Company agrees to cooperate with the Subscriber in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
all reasonably requested written representations from the Subscriber and
selling broker, if any. Provided the Subscriber provides required
certifications and representation letters, if any, if the Company fails to
remove any legend as required by this Section 4 (a "Legend Removal Failure"),
then beginning on the tenth (10th) day following the date that the Subscriber
has requested the removal of the legend and delivered all items reasonably
required by the Company to be delivered by the Subscriber, the Company
continues to fail to remove such legend, the Company shall pay to each
Subscriber or assignee holding shares subject to a Legend Removal Failure an
amount equal to one percent (1%) of the Purchase Price of the shares subject
to a Legend Removal Failure per day that such failure continues. If during
any twelve (12) month period, the Company fails to remove any legend as
required by this Section 4 for an aggregate of thirty (30) days, each
Subscriber or assignee holding Securities subject to a Legend Removal Failure
may, at its option, require the Company to purchase all or any portion of the
Securities subject to a Legend Removal Failure held by such Subscriber or
assignee at a price per share equal to 120% of the applicable Purchase Price.
5. Warrants.
(a) The Company will also issue and deliver on the
Closing Date to the Subscriber a Warrant to purchase 5,937,500 Shares of
Common Stock (subject to adjustment as described in the Warrant). A form of
Warrant is annexed hereto as Exhibit C. The per share "Purchase Price" of
Common Stock as defined in the Warrant shall be the greater of $.08 or 66-2/3%
of the average of the closing bid prices of the Common Stock on the Bulletin
Board, Nasdaq SmallCap Market, Nasdaq National Market System, American Stock,
New York Stock Exchange or "Pink Sheets" (whichever of the foregoing is at the
time the principal trading exchange or market for the Common Stock, the
"Principal Market"), for the trading days immediately preceding the effective
date of the registration statement described in Section 10.1(iv). The
Warrants shall be exercisable for five years after the Issue Date (as defined
in the Warrant).
(b) All the representations, covenants, warranties,
undertakings, remedies, liquidated damages, indemnification, rights in Section
9 hereof, and other rights including but not limited to registration rights
made or granted to or for the benefit of the Subscriber are hereby also made
and granted to the Subscribers in respect of the Warrants and Company Shares
issuable upon exercise of the Warrants.
6. Fees. The Company shall pay to counsel to the Subscriber
its fees of $7,500 for services rendered to Subscribers in connection with
this Agreement for aggregate subscription amounts of up to $25,000 of
principal amount of Notes (the "Initial Offering") and acting as escrow agent
for the Initial Offering. One-half of the legal fee shall be payable in cash
and one-half shall be payable by delivery of a Note in the amount of $3,750.
The holder of the Note described in this Section 6 shall receive all the
rights and benefits, granted to the Subscriber, including but not limited to
indemnification and registration rights. All the representations and
warranties made for the benefit of the Subscriber are hereby made to and for
the benefit of the holder of the Note described in this Section 6. The cash
portion of the legal fees will be payable out of funds held pursuant to a
Funds Escrow Agreement to be entered into by the Company, Subscriber and
Escrow Agent.
7. Covenants of the Company. The Company covenants and agrees
with the Subscriber as follows:
(a) Stop Orders. The Company will advise the
Subscriber, promptly after it receives notice of issuance by the Securities
and Exchange Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock of the Company for offering or sale
in any jurisdiction, or the initiation of any proceeding for any such purpose.
(b) Listing. The Company shall promptly secure the
listing of the Company Shares and Common Stock issuable upon exercise of the
Warrants upon each national securities exchange, or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain such listing so long as any
Notes are outstanding. The Company will maintain the listing of its Common
Stock on the 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 and such other exchanges or markets, as applicable. The
Company will provide the Subscriber copies of all notices it receives
notifying the Company of the threatened or actual delisting of the Common
Stock from any Principal Market provided the provisions of such information to
the Subscriber would not violate the provisions of Regulation FD under the
1933 Act.
(c) Market Regulations. The Company shall notify
the SEC, NASD, the Principal Market and applicable state authorities, in
accordance with their requirements, if any, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation, for
the legal and valid issuance of the Securities to the Subscriber and promptly
provide copies thereof to Subscriber.
(d) Reporting Requirements. From the Closing Date
and until at least three (3) years after the effectiveness of the registration
statement on Form SB-2 or such other registration statement described in
Section 10.1(iv) hereof, the Company will (i) cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
(ii) comply in all respects with its reporting and filing obligations under
the Exchange Act, (iii) comply with all reporting requirements that is
applicable to an issuer with a class of Shares registered pursuant to Section
12(g) of the Exchange Act, and (iv) comply with all requirements related to
any registration statement filed pursuant to this Agreement. The Company will
use its best efforts not to take any action or file any document (whether or
not permitted by the Act or the Exchange Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Acts until the later of three (3)
years after the actual effective date of the registration statement on Form
SB-2 or such other registration statement described in Section 10.1(iv)
hereof. Until the earlier of the resale of the Company Shares by the
Subscriber or at least three (3) years after the Warrants have been exercised,
the Company will use its best efforts to continue the listing of the Common
Stock on the Bulletin Board and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of Bulletin
Board.
(e) Reservation of Common Stock. The Company
undertakes to reserve, pro rata on behalf of each holder of a Note or Warrant,
from its authorized but unissued Common Stock, at all times that Notes remain
outstanding, a number of Common Shares equal to not less than the amount of
Common Shares necessary to allow each such holder to be able to convert all
such outstanding Notes, at the then applicable Conversion Price, and one share
of Common Stock for each Common Share issuable upon exercise of the Warrants.
(f) Taxes. 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.
(g) Insurance. 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, in amounts
sufficient to prevent the Company from becoming a co-insurer and not in any
event less than 100% of the insurable value of the property insured; and the
Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated and to the extent available on commercially
reasonable terms.
(h) Books and Records. 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.
(i) Governmental Authorities. 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.
(j) Intellectual Property. 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.
(k) Properties. 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 needful and proper repairs,
renewals, replacements, additions and improvements thereto; and the Company
will at all times comply with each provision of all leases to which it is a
party or under which it occupies property if the breach of such provision
could reasonably be expected to have a material adverse effect.
(l) Confidentiality. The Company agrees that it
will not disclose, and will not include in any public announcement, the name
of any Subscriber, unless expressly agreed to by such Subscriber or unless and
until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement.
8. Covenants of the Company and Subscriber Regarding
Indemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend Subscriber, Subscriber's officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable
legal fees) of any nature, incurred by or imposed upon Subscriber or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant
or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered pursuant hereto; or
(ii) after any applicable notice and/or cure periods, any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall
apply to the indemnifications set forth in Sections 8(a) and 8(b) above.
9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or
its nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares
of common stock issuable upon such conversion. The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the Shares will be
unlegended, free-trading, and freely transferable, and will not contain a
legend restricting the resale or transferability of the Company Shares
provided the Shares are being sold pursuant to an effective registration
statement covering the Shares to be sold or are otherwise exempt from
registration when sold and Subscriber complies with prospectus delivery
requirements.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note or part thereof by telecopying an
executed and completed Notice of Conversion (a form of which is annexed to
Exhibit A hereto) to the Company via confirmed telecopier transmission. The
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company will or cause the transfer agent to
transmit the Company's Common Stock certificates representing the Shares
issuable upon conversion of the Note to the Subscriber via express courier for
receipt by such Subscriber within three (3) business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date"). In the event the
Shares are eligible for and are electronically transferable, then delivery of
the Shares must be made by electronic transfer provided request for such
electronic transfer has been made by the Subscriber. A Note representing the
balance of the Note not so converted will be provided to the Subscriber, if
requested by Subscriber provided an original Note is delivered to the Company.
To the extent that a Subscriber elects not to surrender a Note for reissuance
upon partial payment or conversion, the Subscriber hereby indemnifies the
Company against any and all loss or damage attributable to a third-party claim
in an amount in excess of the actual amount then due under the Note arising
from such non-surrender of the Note.
(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section 9 hereof, or
the Mandatory Redemption Amount described in Section 9.2 hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as hereinafter defined)
could result in economic loss to the Subscriber. As compensation to the
Subscriber for such loss, the Company agrees to pay late payments to the
Subscriber for late issuance of Shares in the form required pursuant to
Section 9 hereof upon Conversion of the Note or late payment of the Mandatory
Redemption Amount, in the amount of $100 per business day after the Delivery
Date or Mandatory Redemption Payment Date, as the case may be, for each
$10,000 of Note principal amount being converted or redeemed. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand. Furthermore, in addition to any other remedies which may
be available to the Subscriber, in the event that the Company fails for any
reason to effect delivery of the Shares by the Delivery Date or make payment
by the Mandatory Redemption Payment Date, the Subscriber will be entitled to
revoke all or part of the relevant Notice of Conversion or rescind all or part
of the notice of Mandatory Redemption by delivery of a notice to such effect
to the Company whereupon the Company and the Subscriber shall each be restored
to their respective positions immediately prior to the delivery of such
notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to the Company.
(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest or dividends required to be paid or other charges hereunder exceed
the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscriber and
thus refunded to the Company.
9.2. Mandatory Redemption at Subscriber's Election. In the event
the Company is prohibited from issuing Shares, or fails to timely deliver
Shares on a Delivery Date, or upon the occurrence of any other Event of
Default (as defined in the Note) or for any reason other than pursuant to the
limitations set forth in Section 9.3 hereof, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber or on the Delivery Date (if requested by the
Subscriber) at the Subscriber's election, a sum of money determined by (i)
multiplying up to the outstanding principal amount of the Note designated by
the Subscriber by 130%, or (ii) multiplying the number of Shares otherwise
deliverable upon conversion of an amount of Note principal and/or interest
designated by the Subscriber (with the date of giving of such designation
being a Deemed Conversion Date) at the then Conversion Price that would be in
effect on the Deemed Conversion Date by the highest closing price of the
Common Stock on the principal market for the period commencing on the Deemed
Conversion Date until the day prior to the receipt of the Mandatory Redemption
Payment, whichever is greater, together with accrued but unpaid interest
thereon ("Mandatory Redemption Payment"). The Mandatory Redemption Payment
must be received by the Subscriber on the same date as the Company Shares
otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the
Mandatory Redemption Payment, the corresponding Note principal and interest
will be deemed paid and no longer outstanding.
9.3. Maximum Conversion. The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i)
the number of shares of Common Stock beneficially owned by the Subscriber and
its affiliates on a Conversion Date, and (ii) the number of shares of Common
Stock issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date, which
would result in beneficial ownership by the Subscriber and its affiliates of
more than 9.99% of the outstanding shares of Common Stock of the Company on
such Conversion Date. For the purposes of the provision to the immediately
preceding sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber shall
not be limited to aggregate conversions of only 9.99% and aggregate conversion
by the Subscriber may exceed 9.99%. The Subscriber may void the conversion
limitation described in this Section 9.3 upon 75 days prior written notice to
the Company. The Subscriber may allocate which of the equity of the Company
deemed beneficially owned by the Subscriber shall be included in the 9.99%
amount described above and which shall be allocated to the excess above 9.99%.
9.4. Injunction - Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof, the Company may not refuse
conversion based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or
for any other reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of said Note shall have
been sought and obtained and the Company posts a surety bond for the benefit
of such Subscriber in the amount of 130% of the amount of the Note, which is
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment.
9.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if ten (10) days
after the Delivery Date the Subscriber purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by such Subscriber of the Common Stock which the Subscriber anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall pay in
cash to the Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the
Note for which such conversion was not timely honored, together with interest
thereon at a rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). For example, if the Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of note principal
and/or interest, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.
The delivery date by which Common Stock must be delivered pursuant to this
Section 9.5 shall be tolled for the amount of days that the Subscriber does
not deliver information reasonably requested by the Company's transfer agent.
9.6 Adjustments. The Conversion Price and amount of Shares
issuable upon conversion of the Notes shall be adjusted to offset the effect
of stock splits, stock dividends and pro rata distributions of property or
equity interests to the Company's shareholders.
9.7. Redemption. The Company may not redeem or call the Note
without the consent of the holder of the Securities except as otherwise
described herein.
10.1. Registration Rights. The Company hereby grants the
following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 121
days after the Closing Date, but not later than three years after the Closing
Date ("Request Date"), the Company, upon a written request therefor from any
record holder or holders of more than 50% of the aggregate of the Company's
Shares issued and issuable upon Conversion of the Notes (the Common Stock
issued or issuable upon conversion of the Notes issued to the Subscriber and
described in Section 6 above or issuable by virtue of ownership of such Notes,
and one share of Common Stock for each Share issuable upon exercise of the
Warrants, collectively the "Registrable Securities"), shall prepare and file
with the SEC a registration statement under the Act covering the Registrable
Securities which are the subject of such request, unless such Registrable
Securities are the subject of an effective registration statement or included
for registration in a pending registration statement. In addition, upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within 10
days after the Company gives such written notice. Such other requesting
record holders shall be deemed to have exercised their demand registration
right under this Section 10.1(i). As a condition precedent to the inclusion
of Registrable Securities, the holder thereof shall provide the Company with
such information as the Company reasonably requests. The obligation of the
Company under this Section 10.1(i) shall be limited to one registration
statement.
(ii) If the Company at any time proposes to register
any of its securities under the Act for sale to the public, whether for its
own account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscriber or Holder pursuant to an effective registration statement, each
such time it will give at least 25 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by the Company within 15 days after
the giving of any such notice by the Company, to register any of the
Registrable Securities, the Company will cause such Registrable Securities as
to which registration shall have been so requested to be included with the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent required to permit the sale or other
disposition of the Registrable Securities so registered by the holder of such
Registrable Securities (the "Seller"). In the event that any registration
pursuant to this Section 10.1(ii) shall be, in whole or in part, an
underwritten public offering of common stock of the Company, the number of
shares of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in
writing of any such reduction. Notwithstanding the foregoing provisions, or
Section 10.4 hereof, the Company may withdraw or delay or suffer a delay of
any registration statement referred to in this Section 10.1(ii) without
thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration
is received by the Company pursuant to Section 10.1(i), the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the 1933 Act in connection with the proposed offer and sale
for cash of any of its securities for the Company's own account, such written
request shall be deemed to have been given pursuant to Section 10.1(ii) rather
than Section 10.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 10.1(ii).
(iv) The Company shall file with the Commission not later
than thirty (30) days after the Closing Date (the "Filing Date"), and use its
reasonable commercial efforts to cause to be declared effective a Form SB-2
registration statement (or such other form that it is eligible to use) in
order to register the Registrable Securities for resale and distribution under
the Act. The registration statement described in this paragraph must be
declared effective by the Commission one hundred and twenty days (120) of the
Closing Date ("Effective Date"). The Company will register not less than a
number of shares of Common Stock in the aforedescribed registration statement
that is equal to 200% of the Company Shares issuable at the Conversion Price
that would be in effect on the Closing Date or the date of filing of such
registration statement (employing the Conversion Price which would result in
the greater number of Shares), assuming the conversion of 100% of the Notes
and one share of Common Stock for each of the shares issuable upon exercise of
the Warrants. The Registrable Securities shall be reserved and set aside
exclusively for the benefit of the Subscriber, and not issued, employed or
reserved for anyone other than the Subscriber. Such registration statement
will immediately be amended or additional registration statements will be
immediately filed by the Company as necessary to register additional Company
Shares to allow the public resale of all Common Stock included in and issuable
by virtue of the Registrable Securities.
10.2. Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any shares of
Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
for the period of the distribution contemplated thereby (determined as herein
provided), and promptly provide to the holders of Registrable Securities
("Sellers") copies of all filings and Commission letters of comment;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the latest of: (i) twelve months after the latest
Maturity Date of a Note; (ii) until one year after all the Company Shares are
eligible for resale pursuant to Rule 144(k) of the 1933 Act; or (iii) until
such registration statement has been effective for a period of not less than
270 days, and comply with the provisions of the Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Seller's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Seller, such number of copies of
the registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use its best efforts to register or qualify the
Seller's Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of such jurisdictions as the Seller shall
reasonably designate, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock
of the Company is then listed;
(f) immediately notify the Seller when a prospectus
relating thereto is required to be delivered under the Act, of the happening
of any event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) make available for inspection by the Seller,
and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.
10.3. Provision of Documents. At the request of the Seller,
provided a demand for registration has been made pursuant to Section 10.1(i)
or a request for registration has been made pursuant to Section 10.1(ii), the
Registrable Securities will be included in a registration statement filed
pursuant to this Section 10. In connection with each registration hereunder,
the Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public
offering, the Company and the Seller agree to enter into a written agreement
with the managing underwriter in such form and containing such provisions as
are customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber
agree that the Seller will suffer damages if any registration statement
required under Section 10.1(i) or 10.1(ii) above is not filed within 30 days
after written request by the Holder and not declared effective by the
Commission within 90 days after such request [or the Filing Date and Effective
Date, respectively, in reference to the Registration Statement on Form S-3 or
such other form described in Section 10.1(iv)], and maintained in the manner
and within the time periods contemplated by Section 10 hereof, and it would
not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement described in Sections 10.1(i)
or 10.1(ii) is not filed within 30 days of such written request, or is not
declared effective by the Commission on or prior to the date that is 90 days
after such request, or (ii) the registration statement on Form S-3 or such
other form described in Section 10.1(iv) is not filed on or before the Filing
Date or not declared effective on or before the sooner of the Effective Date,
or within five business days of receipt by the Company of a written or oral
communication from the Commission that the registration statement described in
Section 10.1(iv) will not be reviewed, or (iii) any registration statement
described in Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 30 days in the aggregate
per year but not more than 20 consecutive calendar days (defined as a period
of 365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses (i), (ii) and (iii) of this
Section 10.4 is referred to herein as a "Non-Registration Event"), then, for
so long as such Non-Registration Event shall continue, the Company shall pay,
at the Subscriber's option, in cash or stock at the applicable Conversion
Price, as Liquidated Damages to each holder of any Registrable Securities an
amount equal to two (2%) percent per month or part thereof for each month or
part thereof thereafter during the pendency of such Non-Registration Event, of
the principal of the Notes and Additional Notes issued in the Initial Offering
and Additional Offering, whether or not converted, then owned of record by
such holder or issuable as of or subsequent to the occurrence of such Non-
Registration Event. Payments to be made pursuant to this Section 10.4 shall
be due and payable within ten (10) business days after demand in immediately
available funds. In the event a Mandatory Redemption Payment is demanded from
the Company by the Holder pursuant to Section 9.2 of this Subscription
Agreement, then the Liquidated Damages described in this Section 10.4 shall no
longer accrue on the portion of the Purchase Price underlying the Mandatory
Redemption Payment, from and after the date the Holder receives the Mandatory
Redemption Payment. It shall also be deemed a Non-Registration Event if at
any time a Note is outstanding, there is less than 125% of the amount of
Common Shares necessary to allow full conversion of such Note at the then
applicable Conversion Price, registered for unrestricted resale in an
effective registration statement.
10.5. Expenses. All expenses incurred by the Company in complying
with Section 10, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, and costs of insurance
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, including any
fees and disbursements of any special counsel to the Seller, are called
"Selling Expenses". The Seller shall pay the fees of its own additional
counsel, if any. The Company will pay all Registration Expenses in connection
with the registration statement under Section 10. All Selling Expenses in
connection with each registration statement under Section 10 shall be borne by
the Seller and may be apportioned among the Sellers in proportion to the
number of shares sold by the Seller relative to the number of shares sold
under such registration statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the Act pursuant to Section 10, the Company will indemnify
and hold harmless the Seller, each officer of the Seller, each director of the
Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Seller or underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which the Seller, or such underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities was registered under the Act pursuant to Section 10,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances when made, and will subject to the provisions of
Section 10.1(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
to the Seller to the extent that any such damages arise out of or are based
upon an untrue statement or omission made in any preliminary prospectus if (i)
the Seller failed to send or deliver a copy of the final prospectus delivered
by the Company to the Seller with or prior to the delivery of written
confirmation of the sale by the Seller to the person asserting the claim from
which such damages arise, (ii) the final prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, or (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the Act pursuant to Section 10, the Seller will
indemnify and hold harmless the Company, and each person, if any, who controls
the Company within the meaning of the Act, each officer of the Company who
signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Act, against all losses, claims, damages or liabilities, joint or several,
to which the Company or such officer, director, underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the Act pursuant to Section 10,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable
hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with information pertaining to such Seller, as such,
furnished in writing to the Company by such Seller specifically for use in
such registration statement or prospectus, and provided, further, however,
that the liability of the Seller hereunder shall be limited to the gross
proceeds received by the Seller from the sale of Registrable Securities
covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 10.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 10.6(c), except and only if and
to the extent the indemnifying party is prejudiced by such omission. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to
it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified parties shall have the right to select one separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the Act in any case in
which either (i) the Seller, or any controlling person of the Seller, makes a
claim for indemnification pursuant to this Section 10.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10.6 provides for indemnification
in such case, or (ii) contribution under the Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is provided under this Section 10.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the Seller is responsible
only for the portion represented by the percentage that the public offering
price of its securities offered by the registration statement bears to the
public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (y) the Seller will not
be required to contribute any amount in excess of the public offering price of
all such securities offered by it pursuant to such registration statement; and
(z) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
11. Miscellaneous.
(a) Notices. All notices or other communications given or
made hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy
is delivered by first class mail) to the party to receive the same at its
address set forth below or to such other address as either party shall
hereafter give to the other by notice duly made under this Section: (i) if to
the Company, to Sanguine Corporation, 000 Xxxx Xxxxx Xxxxxx, #00, Xxxxxxxx, XX
00000, telecopier number: (000) 000-0000, with a copy by telecopier only to:
Xxxxxxxxxx & Xxxxxxxxxx, Hermes Building, Suite 205, 000 Xxxx Xxxxx Xxxxx,
Xxxx Xxxx Xxxx, Xxxx 00000-0000, Attn: Xxxxxxx X. Xxxxxxxxxx, Esq., telecopier
number: (000) 000-0000, and (ii) if to the Subscriber, to the name, address
and telecopy number set forth on the signature page hereto, with a copy by
telecopier only to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx 00000, telecopier number: (000) 000-0000.
(b) Closing. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko & Xxxxxxx,
P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the
satisfaction of all conditions to Closing set forth in this Agreement. The
closing date shall respectively be the dates that subscriber funds
representing the net amount due the Company from the Purchase Price of the
Initial Offering (the "Closing Date").
(c) Entire Agreement; Assignment. This Agreement
represents the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by a writing executed by both
parties. No right or obligation of either party shall be assigned by that
party without prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by
facsimile transmission, and in counterparts, each of which will be deemed an
original.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by
either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party
its reasonable attorney's fees and costs. In the event that any provision of
this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other provision of
any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The
Company and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof or thereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity. Subject to Section 12(e) hereof, each of the Company and
Subscriber hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper.
Nothing in this Section shall affect or limit any right to serve process in
any other manner permitted by law.
(g) The Company agrees to indemnify the Subscriber
against and hold the other Subscriber harmless from any and all liabilities to
any persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the Company in
connection with this Agreement or the transactions contemplated hereby. The
Company represents that there are no parties entitled to receive fees,
commissions, or similar payments in connection with the offering described in
the Subscription Agreement.
(h) Confidentiality. The Company agrees that it will not
disclose publicly or privately the identity of the Subscriber unless expressly
agreed to in writing by the Subscriber or only to the extent required by law.
(i) Automatic Termination. This Agreement shall
automatically terminate without any further action of either party hereto if
the Closing shall not have occurred by the tenth (10th) business day following
the date this Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it
shall become a binding agreement between us.
SANGUINE CORPORATION
A Nevada Corporation
By:/s/Xxxxxx Xxxxx
Name:
Title:
Dated: March 15, 2002
------------------------------------------------------------------------------
Purchase Price of Note: $25,000.00
Warrants to Purchase 5,937,500 Common Shares (subject to adjustment)
ACCEPTED as of March 19, 2002
FIRST YORK PARTNERS, INC. Subscriber
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
By:/s/
Name:
Title: President
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Legal Opinion
Exhibit C Form of Warrant
Schedule 2(d) Additional Issuances
Schedule 2(t) Capitalization
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, SANGUINE CORPORATION, a Nevada corporation (the
"Borrower"), hereby promises to pay to FIRST YORK PARTNERS, INC., 00 Xxxxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Fax: 000-000-0000 (the "Holder") or
order, without demand, the sum of Twenty-Five Thousand Dollars ($25,000.00),
with simple interest accruing at the annual rate of five percent (5%), on
February 28, 2004 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE 1
PAYMENT RELATED PROVISIONS
1.1. Payment Grace Period. The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which
grace period a default interest rate of fifteen percent (15%) per annum
shall apply to the amounts owed hereunder.
1.2. Conversion Privileges. The Conversion Privileges set forth in Article
II shall remain in full force and effect commencing from the date hereof
and until the Note is paid in full.
1.3. Interest Rate. Subject to the Holder?s right to convert, interest
payable on this Note shall accrue at the annual rate of five percent
(5%) and be payable February 28, 2003 and annually thereafter, and on
the Maturity Date, accelerated or otherwise, when the principal and
remaining accrued but unpaid interest shall be due and payable, or
sooner as described below.
ARTICLE 2
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the issuance of
this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note,
and/or at the Holder's election, the interest accrued on the Note,
(the date of giving of such notice of conversion being a
"Conversion Date") into fully paid and nonassessable shares of
common stock of Borrower as such stock exists on the date of
issuance of this Note, or any shares of capital stock of Borrower
into which such stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion price, as defined in
Section 2.1(b) hereof (the "Conversion Price"), determined as
provided herein. Upon delivery to the Company of a Notice of
Conversion, as described in Section 9 of the subscription
agreement entered into between the Company and Holder relating to
this Note (the "Subscription Agreement"), the terms of which are
incorporated herein by this reference, of the Holder's written
request for conversion, Borrower shall issue and deliver to the
Holder within three (3) business days from the Conversion Date
that number of shares of Common Stock for the portion of the Note
converted in accordance with the foregoing. At the election of
the Holder, the Company will deliver accrued but unpaid interest
on the Note through the Conversion Date directly to the Holder on
or before the Delivery Date (as defined in the Subscription
Agreement). The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing
that portion of the principal (and interest, at the election of
the Holder) of the Note to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be at the election of the Holder:
the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent
(66-2/3%) of the average of the closing bid prices as reported by
the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ
National Market System, American Stock Exchange, New York Stock
Exchange or ?Pink Sheets? (whichever of the foregoing is at the
time the principal trading exchange or market for the Common
Stock, the ?Principal Market?), or if not then trading on a
Principal Market, such other principal market or exchange where
the Common Stock is listed or traded for the five trading days
immediately preceding but not including a Conversion Date. If
the Principal Market does not report bid prices, then the closing
price shall be substituted for the bid price referred to in this
Section 2.1(b)(ii) when determining the Conversion Price.
(c) The Conversion Base Price described in Section 2.1(b)(i) above and
number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a) and 2.1(b), shall
be subject to adjustment from time to time upon the happening of
certain events while this conversion right remains outstanding, as
follows:
(A) Merger, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all
or substantially all its assets to any other corporation,
this Note, as to the unpaid principal portion thereof and
accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of
shares or other securities and property as would have been
issuable or distributable on account of such consolidation,
merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right
immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly apply
to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of
the foregoing, the anti-dilution provisions of this Section
shall apply to such securities of such successor or
purchaser after any such consolidation, merger, sale or
conveyance.
(B) Reclassification, etc. If the Borrower at any time shall,
by reclassification or otherwise, change the Common Stock
into the same or a different number of securities of any
class or classes, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such
number and kind of securities as would have been issuable as
the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
(C) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend
is paid on the Common Stock in shares of Common Stock, the
Conversion Base Price shall be proportionately reduced in
case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of
shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately
after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
(D) Share Issuance. Subject to the provisions of this Section,
if the Borrower at any time shall issue any shares of Common
Stock prior to the conversion of the entire principal amount
of the Note (otherwise than as provided in Sections 2.1(c)A,
2.1(c)B or 2.1(c)C or this subparagraph D, the "Existing
Option Obligations") for a consideration less than the
Conversion Base Price that would be in effect at the time of
such issue, then, and thereafter successively upon each such
issue, the Conversion Base Price shall be reduced as
follows: (i) the number of shares of Common Stock
outstanding immediately prior to such issue shall be
multiplied by the Conversion Base Price in effect at the
time of such issue and the product shall be added to the
aggregate consideration, if any, received by the Borrower
upon such issue of additional shares of Common Stock; and
(ii) the sum so obtained shall be divided by the number of
shares of Common Stock outstanding immediately after such
issue. The resulting quotient shall be the adjusted
Conversion Base Price. Except for the Existing Option
Obligations, for purposes of this adjustment, the issuance
of any security of the Borrower carrying the right to
convert such security into shares of Common Stock or of any
warrant, right or option to purchase Common Stock shall
result in an adjustment to the Conversion Base Price upon
the issuance of shares of Common Stock upon exercise of such
conversion or purchase rights.
(d) From and after the issuance date of this Note and for the
remaining period during which the conversion right exists,
Borrower will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of
Common Stock upon the full conversion of this Note. Borrower
represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. Borrower agrees
that its issuance of this Note shall constitute full authority to
its officers, agents and transfer agents who are charged with the
duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon
the conversion of this Note.
2.2. Method of Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof and the Subscription
Agreement. Upon partial conversion of this Note, if requested by the
Holder, a new Note containing the same date and provisions of this Note
shall be issued by the Borrower to the Holder for the remaining
principal balance of this Note and interest which shall not have been
converted or paid.
2.3. Maximum Conversion. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number
of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and
its affiliates on a Conversion Date, (ii) any Common Stock issuable in
connection with the unconverted portion of the Note, and (iii) the
number of shares of Common Stock issuable upon the conversion of the
Note with respect to which the determination of this provision is being
made on a Conversion Date, which would result in beneficial ownership by
the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock of the Company on such Conversion Date. For the
purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Subject to the foregoing, the Holder shall not be
limited to aggregate conversions of only 9.99% and aggregate conversion
by the Holder may exceed 9.99%. The Holder shall have the authority and
obligation to determine whether the restriction contained in this
Section 2.3 will limit any conversion hereunder and to the extent that
the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the Notes are convertible
shall be the responsibility and obligation of the Holder. The Holder
may void the conversion limitation described in this Section 2.3 upon 75
days prior written notice to the Borrower. The Holder may allocate
which of the equity of the Company deemed beneficially owned by the
Holder shall be included in the 9.99% amount described above and which
shall be allocated to the excess above 9.99%.
ARTICLE 3
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, all without demand, presentment
or notice, or grace period, all of which hereby are expressly waived, except
as set forth below:
3.1. Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of principal or interest hereon when due and such failure
continues for a period of ten (10) days after the due date. The ten
(10) day period described in this Section 3.1 is the same ten (10) day
period described in Section 1.1 hereof.
3.2. Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note in any material respect and such
breach, if subject to cure, continues for a period of seven (7) days
after written notice to the Borrower from the Holder.
3.3. Breach of Representations and Warranties. Any material representation
or warranty of the Borrower made herein, in the Subscription Agreement
entered into by the Holder and Borrower in connection with this Note, or
in any agreement, statement or certificate given in writing pursuant
hereto or in connection therewith shall be false or misleading in any
material respect.
3.4. Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against Borrower or any of its property or other assets
for more than $50,000, and shall remain unpaid, unvacated, unbonded or
unstayed for a period of forty-five (45) days.
3.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against the
Borrower and if instituted against Borrower are not dismissed within
forty-five (45) days of initiation.
3.7. Default. A default by the Borrower, after applicable notice and cure
periods, under any one or more obligations in an aggregate monetary
amount in excess of $50,000.
3.8. Stop Trade. A Securities and Exchange Commission stop trade order or
Principal Market trading suspension for longer than five (5) trading
days.
3.9. Failure to Deliver Common Stock or Replacement Note. Borrower's failure
to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 9 of the Subscription Agreement, or if
required, a replacement Note.
3.10. Non-Registration Event. The occurrence of a Non-Registration Event as
described in Section 10.4 of the Subscription Agreement.
3.11. Delisting. Delising of the Common Stock from the OTC Bulletin Board or
such other principal exchange on which the Common Stock is listed for
trading; failure to comply with the requirements for continued listing
on the OTC Bulletin Board for a period of three consecutive trading
days; or notification from the OTC Bulletin Board or any Principal
Market that the Borrower is not in compliance with the conditions for
such continued listing on the OTC Bulletin Board or other Principal
Market.
ARTICLE 4
MISCELLANEOUS
4.1. Failure or Indulgence Not Waiver. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights
and remedies existing hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
4.2. Notices. Any notice herein required or permitted to be given shall be
in writing and may be personally served or sent by facsimile
transmission (with copy sent by regular, certified or registered mail or
by overnight courier). For the purposes hereof, the address and
facsimile number of the Holder is as set forth on the first page hereof.
The address and facsimile number of the Borrower shall be Sanguine
Corporation, 000 Xxxx Xxxxx Xxxxxx, #00, Xxxxxxxx, XX 00000, facsimile
number: (000) 000-0000. Both Holder and Borrower may change the address
and facsimile number for notice by service of notice to the other as
herein provided. Notice of Conversion shall be deemed given when made
to the Company pursuant to the Subscription Agreement.
4.3. Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4. Assignability. This Note shall be binding upon the Borrower and its
successors and permitted assigns, and shall inure to the benefit of the
Holder and its successors and assigns, and may be assigned by the
Holder.
4.5. Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
4.6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. 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 New York County in the
State of New York. Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the jurisdiction
of such courts. The prevailing party shall be entitled to recover from
the other party its reasonable attorney's fees and costs.
4.7. Maximum Payments. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess
of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Borrower to the Holder and
thus refunded to the Borrower.
4.8. Redemption. This Note is subject to certain mandatory redemption rights
described in the Subscription Agreement.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its Chief Executive Officer on this 19 day of March, 2002.
SANGUINE CORPORATION
By:/s/Xxxxxx X. Xxxxx
WITNESS:
/s/Xxxxxxx X. Xxxxxxxxxx
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by SANGUINE CORPORATION on
March ___, 2002 into Shares of Common Stock of SANGUINE CORPORATION according
to the conditions set forth in such Note, as of the date written below.
Date of Conversion:
Conversion Price:
Shares To Be Delivered:
Signature:
Print Name:
Address:
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, SANGUINE CORPORATION, a Nevada corporation (the
"Borrower"), hereby promises to pay to XXXXXXX X. XXXXXXX, 000 Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Fax: 000-000-0000 (the "Holder") or
order, without demand, the sum of Three Thousand Seven Hundred and Fifty
Dollars ($3,750.00), with simple interest accruing at the annual rate of five
percent (5%), on February 28, 2004 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE 1
PAYMENT RELATED PROVISIONS
1.1. Payment Grace Period. The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which
grace period a default interest rate of fifteen percent (15%) per annum
shall apply to the amounts owed hereunder.
1.2. Conversion Privileges. The Conversion Privileges set forth in Article
II shall remain in full force and effect commencing from the date hereof
and until the Note is paid in full.
1.3. Interest Rate. Subject to the Holder?s right to convert, interest
payable on this Note shall accrue at the annual rate of five percent
(5%) and be payable February 28, 2003 and annually thereafter, and on
the Maturity Date, accelerated or otherwise, when the principal and
remaining accrued but unpaid interest shall be due and payable, or
sooner as described below.
ARTICLE 2
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the issuance of
this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note,
and/or at the Holder's election, the interest accrued on the Note,
(the date of giving of such notice of conversion being a
"Conversion Date") into fully paid and nonassessable shares of
common stock of Borrower as such stock exists on the date of
issuance of this Note, or any shares of capital stock of Borrower
into which such stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion price, as defined in
Section 2.1(b) hereof (the "Conversion Price"), determined as
provided herein. Upon delivery to the Company of a Notice of
Conversion, as described in Section 9 of the subscription
agreement entered into between the Company and Holder relating to
this Note (the "Subscription Agreement"), the terms of which are
incorporated herein by this reference, of the Holder's written
request for conversion, Borrower shall issue and deliver to the
Holder within three (3) business days from the Conversion Date
that number of shares of Common Stock for the portion of the Note
converted in accordance with the foregoing. At the election of
the Holder, the Company will deliver accrued but unpaid interest
on the Note through the Conversion Date directly to the Holder on
or before the Delivery Date (as defined in the Subscription
Agreement). The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing
that portion of the principal (and interest, at the election of
the Holder) of the Note to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be at the election of the Holder:
the lesser of (i) $.08; or (ii) sixty-six and two-thirds percent
(66-2/3%) of the average of the closing bid prices as reported by
the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ
National Market System, American Stock Exchange, New York Stock
Exchange or ?Pink Sheets? (whichever of the foregoing is at the
time the principal trading exchange or market for the Common
Stock, the ?Principal Market?), or if not then trading on a
Principal Market, such other principal market or exchange where
the Common Stock is listed or traded for the five trading days
immediately preceding but not including a Conversion Date. If
the Principal Market does not report bid prices, then the closing
price shall be substituted for the bid price referred to in this
Section 2.1(b)(ii) when determining the Conversion Price.
(c) The Conversion Base Price described in Section 2.1(b)(i) above and
number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a) and 2.1(b), shall
be subject to adjustment from time to time upon the happening of
certain events while this conversion right remains outstanding, as
follows:
(A) Merger, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all
or substantially all its assets to any other corporation,
this Note, as to the unpaid principal portion thereof and
accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of
shares or other securities and property as would have been
issuable or distributable on account of such consolidation,
merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right
immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly apply
to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of
the foregoing, the anti-dilution provisions of this Section
shall apply to such securities of such successor or
purchaser after any such consolidation, merger, sale or
conveyance.
(B) Reclassification, etc. If the Borrower at any time shall,
by reclassification or otherwise, change the Common Stock
into the same or a different number of securities of any
class or classes, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such
number and kind of securities as would have been issuable as
the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
(C) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend
is paid on the Common Stock in shares of Common Stock, the
Conversion Base Price shall be proportionately reduced in
case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of
shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately
after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
(D) Share Issuance. Subject to the provisions of this Section,
if the Borrower at any time shall issue any shares of Common
Stock prior to the conversion of the entire principal amount
of the Note (otherwise than as provided in Sections 2.1(c)A,
2.1(c)B or 2.1(c)C or this subparagraph D, the "Existing
Option Obligations") for a consideration less than the
Conversion Base Price that would be in effect at the time of
such issue, then, and thereafter successively upon each such
issue, the Conversion Base Price shall be reduced as
follows: (i) the number of shares of Common Stock
outstanding immediately prior to such issue shall be
multiplied by the Conversion Base Price in effect at the
time of such issue and the product shall be added to the
aggregate consideration, if any, received by the Borrower
upon such issue of additional shares of Common Stock; and
(ii) the sum so obtained shall be divided by the number of
shares of Common Stock outstanding immediately after such
issue. The resulting quotient shall be the adjusted
Conversion Base Price. Except for the Existing Option
Obligations, for purposes of this adjustment, the issuance
of any security of the Borrower carrying the right to
convert such security into shares of Common Stock or of any
warrant, right or option to purchase Common Stock shall
result in an adjustment to the Conversion Base Price upon
the issuance of shares of Common Stock upon exercise of such
conversion or purchase rights.
(d) From and after the issuance date of this Note and for the
remaining period during which the conversion right exists,
Borrower will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of
Common Stock upon the full conversion of this Note. Borrower
represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. Borrower agrees
that its issuance of this Note shall constitute full authority to
its officers, agents and transfer agents who are charged with the
duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon
the conversion of this Note.
2.2. Method of Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof and the Subscription
Agreement. Upon partial conversion of this Note, if requested by the
Holder, a new Note containing the same date and provisions of this Note
shall be issued by the Borrower to the Holder for the remaining
principal balance of this Note and interest which shall not have been
converted or paid.
2.3. Maximum Conversion. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number
of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and
its affiliates on a Conversion Date, (ii) any Common Stock issuable in
connection with the unconverted portion of the Note, and (iii) the
number of shares of Common Stock issuable upon the conversion of the
Note with respect to which the determination of this provision is being
made on a Conversion Date, which would result in beneficial ownership by
the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock of the Company on such Conversion Date. For the
purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Subject to the foregoing, the Holder shall not be
limited to aggregate conversions of only 9.99% and aggregate conversion
by the Holder may exceed 9.99%. The Holder shall have the authority and
obligation to determine whether the restriction contained in this
Section 2.3 will limit any conversion hereunder and to the extent that
the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the Notes are convertible
shall be the responsibility and obligation of the Holder. The Holder
may void the conversion limitation described in this Section 2.3 upon 75
days prior written notice to the Borrower. The Holder may allocate
which of the equity of the Company deemed beneficially owned by the
Holder shall be included in the 9.99% amount described above and which
shall be allocated to the excess above 9.99%.
ARTICLE 3
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, all without demand, presentment
or notice, or grace period, all of which hereby are expressly waived, except
as set forth below:
3.1. Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of principal or interest hereon when due and such failure
continues for a period of ten (10) days after the due date. The ten
(10) day period described in this Section 3.1 is the same ten (10) day
period described in Section 1.1 hereof.
3.2. Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note in any material respect and such
breach, if subject to cure, continues for a period of seven (7) days
after written notice to the Borrower from the Holder.
3.3. Breach of Representations and Warranties. Any material representation
or warranty of the Borrower made herein, in the Subscription Agreement
entered into by the Holder and Borrower in connection with this Note, or
in any agreement, statement or certificate given in writing pursuant
hereto or in connection therewith shall be false or misleading in any
material respect.
3.4. Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against Borrower or any of its property or other assets
for more than $50,000, and shall remain unpaid, unvacated, unbonded or
unstayed for a period of forty-five (45) days.
3.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against the
Borrower and if instituted against Borrower are not dismissed within
forty-five (45) days of initiation.
3.7. Default. A default by the Borrower, after applicable notice and cure
periods, under any one or more obligations in an aggregate monetary
amount in excess of $50,000.
3.8. Stop Trade. A Securities and Exchange Commission stop trade order or
Principal Market trading suspension for longer than five (5) trading
days.
3.9. Failure to Deliver Common Stock or Replacement Note. Borrower's failure
to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 9 of the Subscription Agreement, or if
required, a replacement Note.
3.10. Non-Registration Event. The occurrence of a Non-Registration Event as
described in Section 10.4 of the Subscription Agreement.
3.11. Delisting. Delising of the Common Stock from the OTC Bulletin Board or
such other principal exchange on which the Common Stock is listed for
trading; failure to comply with the requirements for continued listing
on the OTC Bulletin Board for a period of three consecutive trading
days; or notification from the OTC Bulletin Board or any Principal
Market that the Borrower is not in compliance with the conditions for
such continued listing on the OTC Bulletin Board or other Principal
Market.
ARTICLE 4
MISCELLANEOUS
4.1. Failure or Indulgence Not Waiver. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights
and remedies existing hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
4.2. Notices. Any notice herein required or permitted to be given shall be
in writing and may be personally served or sent by facsimile
transmission (with copy sent by regular, certified or registered mail or
by overnight courier). For the purposes hereof, the address and
facsimile number of the Holder is as set forth on the first page hereof.
The address and facsimile number of the Borrower shall be Sanguine
Corporation, 000 Xxxx Xxxxx Xxxxxx, #00, Xxxxxxxx, XX 00000, facsimile
number: (000) 000-0000. Both Holder and Borrower may change the address
and facsimile number for notice by service of notice to the other as
herein provided. Notice of Conversion shall be deemed given when made
to the Company pursuant to the Subscription Agreement.
4.3. Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4. Assignability. This Note shall be binding upon the Borrower and its
successors and permitted assigns, and shall inure to the benefit of the
Holder and its successors and assigns, and may be assigned by the
Holder.
4.5. Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
4.6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. 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 New York County in the
State of New York. Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the jurisdiction
of such courts. The prevailing party shall be entitled to recover from
the other party its reasonable attorney's fees and costs.
4.7. Maximum Payments. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess
of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Borrower to the Holder and
thus refunded to the Borrower.
4.8. Redemption. This Note is subject to certain mandatory redemption rights
described in the Subscription Agreement.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its Chief Executive Officer on this 19 day of March, 2002.
SANGUINE CORPORATION
By:/s/Xxxxxx X. Xxxxx
WITNESS:
/s/Xxxxxxx X. Xxxxxxxxxx
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by SANGUINE CORPORATION on
March ___, 2002 into Shares of Common Stock of SANGUINE CORPORATION according
to the conditions set forth in such Note, as of the date written below.
Date of Conversion:
Conversion Price:
Shares To Be Delivered:
Signature:
Address:
[letterhead of Xxxxxxx X. Xxxxxxxxxx]
March 15, 2002
First York Partners, Inc.
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. 000-000-0000
Gentlemen:
I have acted as counsel to Sanguine Corporation, a Nevada corporation
(the "Company") in connection with the offer and sale by the Company of
$25,000 principal amount of a Convertible Note (the "Note") and issuance of
common stock purchase warrants ("Warrants") to the Subscriber identified
above, pursuant to the exemption from registration under the Securities Act of
1933, as amended (the "Act) as set forth in Regulation D ("Regulation D")
promulgated thereunder. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the subscription agreement
(the "Agreement") by and between the Company and (Subscriber) (the
"Purchaser") entered into at or about the date hereof. The Agreement, and the
agreements described below are sometimes hereinafter referred to collectively
as the "Documents".
In connection with the opinions expressed herein, I have made such
examination of law as I considered appropriate or advisable for purposes
hereof. As to matters of fact material to the opinions expressed herein, I
have relied, with your permission, upon the representations and warranties as
to factual matters contained in and made by the Company and the Purchaser
pursuant to the Documents and upon certificates and statements of certain
government officials and of officers of the Company as described below. I
have also examined originals or copies of certain corporate documents or
records of the Company as described below:
(a) Form of Subscription Agreement
(b) Forms of Convertible Notes to First York Partners and to Xxxxxxx
X. Xxxxxxx
(c) Form of Common Stock Purchase Warrant (the "Warrants")
(d) Funds Escrow Agreement
(e) Certificate of Incorporation of the Company as amended
(f) Bylaws of the Company
(g) Minutes of the action of the Company=s Board of Directors,
including approval of the Board of Directors of the Documents, a
copy of which is annexed hereto.
In rendering this opinion, I have, with your permission, assumed: (a)
the authenticity of all documents submitted to us as originals; (b) the
conformity to the originals of all documents submitted to us as copies; (c)
the genuineness of all signatures; (d) the legal capacity of natural persons;
(e) the truth, accuracy and completeness of the information, factual matters,
representations and warranties contained in all of such documents; (f) the due
authorization, execution and delivery of all such documents by Subscribers,
and the legal, valid and binding effect thereof on Subscribers; and (g) that
the Company and the Purchasers will act in accordance with their respective
representations and warranties as set forth in the Documents.
I am a member of the bar of the State of Utah. I express no opinion as
to the laws of any jurisdiction other than Utah, Nevada (the state of the
Company's organization) and the federal securities laws of the United States
of America. I express no opinion with respect to the effect or application of
any other laws. Special rulings of authorities administering any of such laws
or opinions of other counsel have not been sought or obtained by us in
connection with rendering the opinions expressed herein.
1. The Company (it has no subsidiaries) is duly incorporated, validly
existing and in good standing in its state of incorporation; has qualified to
do business in each state where required unless the failure to do so would not
have a material impact in the Company=s operations; and has the requisite
corporate power and authority to conduct its business, and to own, lease and
operate its properties.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents. The
Documents, and the issuance of the Notes, and Warrants and the reservation and
issuance of Common Stock issuable upon conversion of the Notes and exercise of
the Warrants have been (a) duly approved by the Board of Directors of the
Company, and (b) all such Securities, when issued pursuant to the Agreement
and upon delivery, shall be validly issued and outstanding, fully paid and non
assessable.
3. The execution, delivery and performance of the Documents by the
Company and the consummation of the transactions contemplated thereby, will
not, with or without the giving of notice or the passage of time or both:
(a) Violate the provisions of the Certificate of Incorporation
or bylaws of the Company; or
(b) To the best of counsel's knowledge, violate any judgment,
decree, order or award of any court binding upon the Company.
4. The Documents constitute the valid and legally binding obligations
of the Company and are enforceable against the Company in accordance with
their respective terms.
5. Based upon the representations and warranties in the Documents,
the Notes, Warrants and the Common Stock issuable upon conversion of the
Notes, and exercise of the Warrants, have not been registered under the
Securities Act of 1933, as amended (the "Act") or under the laws of any state
or other jurisdiction, and are or will be issued pursuant to a valid exemption
from registration.
6. The holders of the Common Stock issuable upon conversion of the
Notes and exercise of the Warrants will not be subject to the provisions of
the anti-takeover statutes of Nevada.
My opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting the relief of debtors or the
rights and remedies of creditors generally, including without limitation the
effect of statutory or other law regarding fraudulent conveyances and
preferential transfers.
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants
or other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether
enforcement of any such agreement is considered in a proceeding in equity or
at law.
C. This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this
opinion letter should be read in conjunction therewith.
This opinion is rendered as of the date first written above, is solely
for your benefit in connection with the Agreement and may not be relief upon
or used by, circulated, quoted, or referred to nor may any copies hereof by
delivered to any other person without my prior written consent. I disclaim
any obligation to update this opinion letter or to advise you of facts,
circumstances, events or developments which hereafter may be brought to my
attention and which may alter, affect or modify the opinions expressed herein.
Yours very sincerely,
/s/Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxx
LWB
cc. Sanguine Corporation
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO SANGUINE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
Right to Purchase 5,937,500 shares of Common
Stock of Sanguine Corporation (subject to
adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2002-1 Issue Date: March 19, 2002
SANGUINE CORPORATION, a corporation organized under the laws of the
State of Nevada (the "Company"), hereby certifies that, for value received,
FIRST YORK PARTNERS, INC. (the "Holder"), or assigns, is entitled, subject to
the terms set forth below, to purchase from the Company from and after the
Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through five (5) years after such date (the "Expiration
Date"), up to 5,937,500 fully paid and nonassessable shares of Common Stock
(as hereinafter defined), $.001 par value per share, of the Company. The
shares of Common Stock purchaseable hereunder shall have a per share purchase
price of $.08 or higher pursuant to adjustment that may be made pursuant to
Section 1.7 below. The aforedescribed purchase prices per share, as adjusted
from time to time as herein provided, are referred to herein as the "Purchase
Price". The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Sanguine Corporation and any
corporation which shall succeed or assume the obligations of Sanguine
Corporation hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement referred to in Section 9 hereof, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after
such date, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in
the absence of contingencies, be entitled to vote for the election of a
majority of directors of the Company (even if the right so to vote has been
suspended by the happening of such a contingency) and (c) any other securities
into which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such holder and surrender of the original Warrant within seven (7)
days of exercise, to the Company at its principal office or at the office of
its Warrant Agent (as provided hereinafter), accompanied by payment, in cash,
wire transfer or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Purchase Price
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner
and at the place provided in subsection 1.2 except that the amount payable by
the holder on such partial exercise shall be the amount obtained by
multiplying (a) the number of shares of Common Stock designated by the holder
in the Subscription Form by (b) the Purchase Price then in effect. On any
such partial exercise, the Company, at its expense, will forthwith issue and
deliver to or upon the order of the holder hereof a new Warrant of like tenor,
in the name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, the number of shares of
Common Stock for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange
or is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market,
then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market
but is traded in the over-the-counter market, then the mean of the closing bid
and asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a
single arbitrator to be chosen from a panel of persons qualified by education
and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's charter, then
all amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up, plus
all other amounts to be payable per share in respect of the Common Stock in
liquidation under the charter, assuming for the purposes of this clause
(d) that all of the shares of Common Stock then issuable upon exercise of all
of the Warrants are outstanding at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 1.
1.7. Adjustment of Purchase Price. The Purchase Price shall be
adjusted to be sixty-six and two-thirds percent (66-2/3%) of the average of
the closing bid prices for the Common Stock as reported for the Principal
Market (as defined in Section 10(d) of this Warrant) for the five trading days
preceding but not including the effective date of the registration statement
referred to in Section 10.1(iv) of the Subscription Agreement. Except in
connection with other adjustments set forth in this Warrant the Purchase Price
will not be adjusted below $.08. In the event the foregoing adjustment is
made then the number of shares of Common Stock purchasable upon exercise of
this Warrant after such adjustment shall equal a number the numerator of which
is the number of shares of Common Stock purchasable prior to the adjustment
multiplied by $.08 and the denominator of which is the adjusted Purchase
Price. An adjustment of the Purchase Price shall be effective if and only if
written notice of the adjustment with support for the adjustment is given to
the Holder within five business days of the effective date of the registration
statement described in Section 10.1(iv) of the Subscription Agreement. No
adjustment shall be made in connection with any Common Stock for which a Form
of Subscription in the form of Exhibit A hereto, has been given to the
Company.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon
as practicable after the exercise of this Warrant in full or in part, and in
any event within seven (7) days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder
would otherwise be entitled, cash equal to such fraction multiplied by the
then Fair Market Value of one full share, together with any other stock or
other securities and property (including cash, where applicable) to which such
holder is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2. Cashless Exercise.
(a) Payment may be made either in (i) cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Purchase Price, (ii) by delivery of Warrants, Common
Stock and/or Common Stock receivable upon exercise of the Warrants in
accordance with Section (b) below or (iii) by a combination of any of the
foregoing methods, for the number of Common Shares specified in such form (as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the holder per the terms of this
Warrant) and the holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of
Common Stock (or Other Securities) determined as provided herein.
(b) Notwithstanding any provisions herein to the contrary, if
the Fair Market Value of one share of Common Stock is greater than the
Purchase Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, upon consent of the Company, the holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant
at the principal office of the Company together with the properly endorsed
Subscription Form in which event the Company shall issue to the holder a
number of shares of Common Stock computed using the following formula:
X=Y (A-B)
A
Where X= the number of shares of Common Stock to be issued to the
holder
Y= the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being
exercised (at the date of such calculation)
A= the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B= Purchase Price (as adjusted to the date of such
calculation)
(c) The cashless exercise feature of this Warrant may be
employed only commencing on the first anniversary of the Issue Date of the
Warrant and then only if a Non-Registration Event (as defined in the
Subscription Agreement) has occurred and is continuing on such date or occurs
after such date.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition to the consummation of such a transaction,
proper and adequate provision shall be made by the Company whereby the holder
of this Warrant, on the exercise hereof as provided in Section 1, at any time
after the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Common Stock (or Other Securities) issuable on such exercise prior to
such consummation or such effective date, the stock and other securities and
property (including cash) to which such holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver
or cause to be delivered the stock and other securities and property
(including cash, where applicable) receivable by the holders of the Warrants
after the effective date of such dissolution pursuant to this Section 3 to a
bank or trust company having its principal office in New York, NY, as trustee
for the holder or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4. In the event this Warrant does not continue in full force and
effect after the consummation of the transaction described in this Section 3,
then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the holders of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that
the Company shall (a) issue additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock or (c) combine its outstanding shares of
the Common Stock into a smaller number of shares of the Common Stock, then, in
each such event, the Purchase Price shall, simultaneously with the happening
of such event, be adjusted by multiplying the then Purchase Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Purchase Price then
in effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein
in this Section 4. The number of shares of Common Stock that the holder of
this Warrant shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive shall be increased to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction
of which (a) the numerator is the Purchase Price that would otherwise (but for
the provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on
the exercise of the Warrants, the Company at its expense will promptly cause
its Chief Financial Officer or other appropriate designee to compute such
adjustment or readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable
by the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding
and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to
the holder of the Warrant and any Warrant Agent of the Company (appointed
pursuant to Section 12 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. From and after the Issue Date of this Warrant, the
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant. This
Warrant entitles the holder hereof to receive copies of all financial and
other information distributed or required to be distributed to the holders of
the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") with respect
to any or all of the Shares. On the surrender for exchange of this Warrant,
with the Transferor's endorsement in the form of Exhibit B attached hereto
(the "Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
securities laws, the Company at its expense, but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on
the order of the Transferor thereof a new Warrant or Warrants of like tenor,
in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Subscription Agreement entered into by the Company and Subscriber
of the Company's 5% Convertible Notes ("Note") at or prior to the issue date
of this Warrant. The terms of the Subscription Agreement are incorporated
herein by this reference. Upon the occurrence of a Non-Registration Event, as
defined in the Subscription Agreement, in the event the Company is unable to
issue Common Stock upon exercise of this Warrant that has been registered in
the Registration Statement described in Section 10.1(iv) of the Subscription
Agreement, within the time periods described in the Subscription Agreement,
which Registration Statement must be effective for the periods set forth in
the Subscription Agreement, then upon written demand made by the Holder, the
Company will pay to the Holder of this Warrant, in lieu of delivering Common
Stock, a sum equal to the closing price of the Company's Common Stock on the
Principal Market (as defined in the Subscription Agreement) or such other
principal trading market for the Company's Common Stock on the trading date
immediately preceding the date notice is given by the Holder, less the
Purchase Price, for each share of Common Stock designated in such notice from
the Holder.
10. Call Option. The Company shall have the option to "call" the
Warrants (the "Warrant Call"), in accordance with and governed by the
following:
(a) The Company shall exercise the Warrant Call by giving to
each Warrant Holder a written notice of call (the "Call Notice") during the
period in which the Warrant Call may be exercised.
(b) The Company's right to exercise the Warrant Call shall
commence with the actual effective date of the registration statement
described in Section 10.1(iv) of the Subscription Agreement and thereafter,
shall be coterminous with the exercise period of the Warrants for up to one
hundred percent (100%) of the Common Stock issuable upon the exercise of this
Warrant (the "Warrant Shares"), provided, that the Registration Statement is
effective at the date the Call Notice is given and through the period ending
fourteen (14) business days thereafter. In no event may the Company exercise
the Warrant Call at any time unless the Warrant Shares to be delivered upon
exercise of the Warrant, will be upon delivery, immediately resalable, without
restrictive legend and upon such resale freely transferable on the transfer
books of the Company.
(c) Unless otherwise agreed to by the Holder of this Warrant,
the Call Notice must be given to all Warrant Holders who hold Warrants similar
to this Warrant (in terms of exercise price and other principal terms) in
proportion to the amounts of Common Stock which can be purchased by the
respective Warrant Holders in accordance with the respective Warrant held by
each.
(d) The Company may give a Call Notice in connection with up to
$50,000 aggregate Purchase Price provided the closing bid price of the Common
Stock, as reported on the Principal Market (as defined in the Subscription
Agreement) for the five (5) trading days prior to but not including the date
of the Call Notice, for each trading day during the five (5) trading days
prior to the giving of the Call Notice is not less than one hundred and fifty
percent (150%) of the Purchase Price and the average daily trading volume of
the Common Stock during such period is not less than forty thousand (40,000)
Common Shares.
(e) The Company may give a Call Notice in connection with up to
an additional $50,000 of aggregate Purchase Price provided the closing bid
price of the Common Stock, as reported for the Principal Market for the ten
(10) trading days prior to but not including the date of the Call Notice for
each trading day during such ten (10) trading days is not less than one
hundred and fifty percent (150%) of the Purchase Price and the average daily
trading volume of the Common Stock during such ten (10) trading days is not
less than eighty thousand (80,000) Common Shares.
(f) Provided Call Notices have been given in connection with
Sections 10(d) and 10(e), then the Company may give a Call Notice in
connection with up to an additional $275,000 of aggregate Purchase Price
provided the closing bid price of the Common Stock, as reported for the
Principal Market for the ten (10) trading days prior to but not including the
date of the Call Notice for each trading day during such ten (10) trading days
is not less than two hundred and fifty percent (250%) of the Purchase Price
and the average daily trading volume of the Common Stock during such ten (10)
trading days is not less than eighty thousand (80,000) Common Shares.
(g) Provided Call Notices have been given in connection with
Sections 10(d), 10(e) and 10(f), then the Company may give a Call Notice in
connection with up to an additional $100,000 of aggregate Purchase Price
provided the closing bid price of the Common Stock, as reported for the
Principal Market for the ten (10) trading days prior to but not including the
date of the Call Notice for each trading day during such ten (10) trading days
is not less than three hundred and twelve percent (312%) of the Purchase Price
and the average daily trading volume of the Common Stock during such ten (10)
trading days is not less than one hundred thousand (100,000) Common Shares.
(h) The respective Warrant Holders shall exercise their Warrant
rights and purchase the appropriate Warrant Shares and pay for same within
fourteen (14) business days of the date of the Call Notice. If the Warrant
Holder fails to timely pay the funds required by the Warrant Call, the Company
may elect to cancel a corresponding amount of this Warrant.
(i) The Company may not exercise the right to Call this Warrant
or any part of it after the occurrence of a Non-Registration Event, as defined
in the Subscription Agreement, or an Event of Default as defined in the Note
referred to in the Subscription Agreement.
11. Maximum Exercise. The Holder shall not be entitled to exercise
this Warrant on an exercise date, in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on an
exercise date, and (ii) the number of shares of Common Stock issuable upon the
exercise of this Warrant with respect to which the determination of this
limitation is being made on an exercise date, which would result in beneficial
ownership by the Holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock of the Company on such date. For the
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing,
the Holder shall not be limited to aggregate exercises which would result in
the issuance of more than 9.99%. The restriction described in this
paragraph may be revoked upon seventy-five (75) days prior notice from the
Holder to the Company. The Holder may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
9.99% amount described above and which shall be allocated to the excess above
9.99%.
12. Warrant Agent. The Company may, by written notice to the each
holder of the Warrant, appoint an agent for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
holder hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary.
14. Notices. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to
the Company an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of New York. Any dispute relating to
this Warrant shall be adjudicated in New York County in the State of New York.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity
or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
SANGUINE CORPORATION
By:/s/Xxxxxx X. Xxxxx
Witness:
/s/Xxxxxxx X. Xxxxxxxxxx
Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: Sanguine Corporation
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a Fair Market
Value of $_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2, to exercise
this Warrant with respect to the maximum number of shares of Common Stock
purchasable pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to
_____________________________________________________
whose address is
____________________________________________________________________
______________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an
exemption from registration under the Securities Act.
Dated:___________________ -----------------------------------
(Signature must conform to name of
holder as specified on the face of the
Warrant)
-----------------------------------
-----------------------------------
(Address)
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number
of shares of Common Stock of Sanguine Corporation to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the
books of Sanguine Corporation with full power of substitution in the premises.
Transferees Percentage Transferred Number Transferred
Dated: ______________,___________ ----------------------------
(Signature must conform to name of holder
on face of the warrant)
Signed in the presence of:
-----------------------------
(Name)
-----------------------------
(address)
ACCEPTED AND AGREED:
[TRANSFEREE] -----------------------------
-----------------------------
(address)
(Name)
SCHEDULE 2(d)
On August 27, 2001, Sanguine entered into a one year Financial
Consulting Agreement with Xxxxxx Xxxxxxx and granted him 1,000,000 warrants to
acquire 1,500,000 shares of common stock of Sanguine at an exercise price of
$.22 (TWENTY-TWO CENTS) per share, subject to his ability to raise Sanguine
the sum of $3,000,000 on terms acceptable to Sanguine. The exercise of these
warrants was accorded "registration rights."
On February 20, 2002, Sanguine executed and delivered three
Warrants under which they granted to Xxxxxxx X. Xxxxxx, Xxxx Xxxxxxxxxx and
Xxxxxxx X. Xxxxxxx warrants to acquire 1,000,000 shares each of common stock
of Sanguine at an exercise price of $0.15 per share (the "Warrants").
Each of the Warrants provided, among other things, for:
the issuance of 1,000,000 warrants convertible into shares of
Sanguine common stock;
the warrants to expire on February 21, 2005;
protection against dilution in certain events, including the
payment of dividends or splits or in the event of any merger where
Sanguine is not the survivor, or any reclassification or capital
reorganization; and
The exercise of these warrants was accorded "registration rights."
The foregoing was adopted at a special meeting of the Board of
Directors held on March 11, 2002, with the Board of Director's resolutions in
this respect providing that the warrants to be issued to Messrs. Xxxxxx,
Bergedahl and Xxxxxxx were approved subject to an amendment to the warrants to
provide for a "call" at any time the common stock of the Company trades on the
OTC Bulletin Board or any other national medium on which such shares are
regularly traded at a price of no less than $1.00 for 10 consecutive trading
days.
Also, for services rendered, Xxxxxxx X. Xxxxxxxxxx, Esq. has been
granted 500,000 warrants to purchase common stock at an exercise price of 50%
of the bid price for the five trading days prior to the date of exercise at
the end of any monthly billing cycle or $0.08 (Eight Cents) per share,
whichever is lower, payable in cash or services. These warrants are
exercisable only after March 1, 2002, and are void after March 2, 2005.
The exercise of these warrants was accorded "registration rights."
These warrants were also approved at the March 11, 2002, special
meeting of the Board of Directors, along with the related Engagement Letter of
Xx. Xxxxxxxxxx.
SCHEDULE 2(t)
The authorized and outstanding capital stock of the Company as of
March 14, 2002, is as follows:
Common stock - par value $.001 per share.
Authorized 100,000,000 shares;
issued and outstanding 30,723,607 shares
