EXHIBIT 4.1
MEDIA SERVICES GROUP, INC.
SUBSCRIPTION AGREEMENT (this "Agreement") made as of this ___
day of November ____, 2004 between Media Services Group, Inc., a corporation
organized under the laws of the State of Nevada (the "Company"), and the
undersigned (the "Subscriber").
WHEREAS, the Company desires to issue in a private placement
to "accredited investors" (the "Placement") a maximum of 18,750 shares of Series
F Convertible Preferred Stock, par value $0.01 per share ("Preferred Shares")
and warrants to purchase up to 230,770 (subject to adjustment) shares of the
Company's common stock, par value $0.01 (the "Common Stock Warrants"
collectively with the Preferred Shares, the "Offered Securities"), (the "Maximum
Offering") on the terms and conditions set forth herein the related Confidential
Offering Memorandum (the "Memorandum"), and the Subscriber desires to acquire
the Offered Securities set forth on the signature page hereof; and
WHEREAS, each Preferred Share may be converted into 24.61538
shares of the Company's common stock, par value $0.01 per share ("Common
Stock"); and
WHEREAS, the Common Stock underlying the Offered Securities
(collectively, the "Reserved Shares") are entitled to registration rights on the
terms set forth in this Subscription Agreement; and
WHEREAS, the Subscriber is delivering simultaneously herewith
a completed investor questionnaire (the "Investor Questionnaire").
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows: I. SUBSCRIPTION FOR OFFERED SECURITIES AND REPRESENTATIONS BY AND
COVENANTS OF SUBSCRIBER 1.1 Subscription for Offered Securities. Subject to the
terms and conditions hereinafter set forth, the Subscriber hereby subscribes for
and agrees to purchase from the Company such number of Offered Securities as is
set forth upon the signature page hereof at a price equal to $320.00 per
Preferred Share and the Company agrees to sell such Offered Securities to the
Subscriber for said purchase price. The purchase price is payable by certified
or bank check made payable to "________-MSGI Escrow Account" or by wire transfer
of funds, contemporaneously with the execution and delivery of this Subscription
Agreement. Commerce Bank (the "Escrow Agent") shall act as such in accordance
with the terms and conditions of an escrow agreement to be entered into among
the Placement Agent, the Company and the Escrow Agent.
1.2 Reliance on Exemptions. The Subscriber acknowledges that the Placement has
not been reviewed by the United States Securities and Exchange Commission (the
"SEC") or any state agency because of the Company's representations that this is
intended to be a nonpublic offering exempt from the registration requirements of
the Securities Act of 1933, as amended (the "1933 Act") and state securities
laws. The Subscriber understands that the Company is relying in part upon the
truth and accuracy of, and the Subscriber's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Subscriber set forth herein and in the Investor Questionnaire in order to
determine the availability of such exemptions and the eligibility of the
Subscriber to acquire the Offered Securities.
1.3 Investment Purpose. The Subscriber represents that the Offered Securities
are being purchased for its own account, for investment purposes only and not
for distribution or resale to others in contravention of the registration
requirements of the 1933 Act. The Subscriber agrees that it will not sell or
otherwise transfer the Offered Securities or the Reserved Shares (collectively,
the "Securities") unless they are registered under the 1933 Act or unless an
exemption from such registration is available.
1.4 Accredited Investor. The Subscriber represents and warrants that it is an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act, as indicated by its responses to the Investor
Questionnaire, and that it is able to bear the economic risk of any investment
in the Offered Securities. The Subscriber further represents and warrants that
the information furnished by the Subscriber in the Investor Questionnaire is
accurate and complete in all material respects.
1.5 Risk of Investment. The Subscriber recognizes that the purchase of the
Offered Securities involves a high degree of risk in that: (a) an investment in
the Company is highly speculative and only investors who can afford the loss of
their entire investment should consider investing in the Company and the
Securities; (b) transferability of the Securities is limited; and (c) the
Company may require substantial additional funds to operate its business and
there can be no assurance that the Maximum Offering will be completed or that
any other funds will be available to the Company, in addition to all of the
other risks set forth in the SEC Documents (as defined in Section 1.6 hereof).
The Subscriber acknowledges the disclosure relating to the risks affecting the
Company set forth in the SEC Documents, and as set forth in the Memorandum.
1.6 Information. The Subscriber acknowledges that the Company has made available
for its review: (a) the Company's Annual Report on Form 10-K for the year ended
June 30, 2004, (b) the Company's Quarterly Reports, on Form 10-Q for the fiscal
quarters ended September 30, 2003, December 31, 2003, and March 31, 2004 (c) the
Company's Proxy Statements, Definitive Information Statements, Current Reports
on Form 8-K, as filed with the SEC between December 31, 2003 and the date of
this Subscription Agreement (collectively the "SEC Documents") and Subscriber
hereby represents and warrants that: (i) the Subscriber has been furnished by
the Company during the course of this transaction with all information regarding
the Company which it has requested; and (ii) that the Subscriber has been
afforded the opportunity to ask questions of and receive answers from duly
authorized officers of the Company concerning the terms and conditions of the
Placement, and any additional information which it has requested, if any.
1.7 No Representations. The Subscriber hereby represents that, except as
expressly set forth in (a) this Subscription Agreement, (b) the Memorandum, (c)
the Common Stock Warrants and (d) all exhibits, schedules and appendices which
are part of the aforementioned documents, (collectively, the "Offering
Documents"), no representations or warranties have been made to the Subscriber
by the Company or any agent, employee or affiliate of the Company, including the
Placement Agent, and in entering into this transaction the Subscriber is not
relying on any information other than that contained in the Offering Documents,
the SEC Documents and the results of independent investigation by the
Subscriber.
1.8 Tax Consequences. The Subscriber acknowledges that the Placement may involve
tax consequences and that the contents of the Offering Documents do not contain
tax advice or information. The Subscriber acknowledges that he must retain his
own professional advisors to evaluate the tax and other consequences of an
investment in the Offered Securities.
1.9 Transfer or Resale. The Subscriber understands that Rule 144 (the "Rule")
promulgated under the 1933 Act requires, among other conditions, a one-year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration requirements
under the 1933 Act. The Subscriber understands and hereby acknowledges that the
Company is under no obligation to register the securities comprising the Offered
Securities under the 1933 Act, with the exception of certain registration rights
covering the resale of the Reserved Shares set forth in Article V hereof.
1.10 Legends. The Subscriber understands that the certificates or other
instruments representing the Securities, until such time as they have been
registered under the 1933 Act, shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
such certificates or other instruments):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF
COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS, OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall promptly issue
a certificate or other instrument without such legend to the holder of the
Securities upon which it is stamped, if (a) such Securities are being sold by
the holder pursuant to an effective registration statement under the 1933 Act,
or (b) such holder delivers to the Company an opinion of counsel, in a
reasonably satisfactory and acceptable form to the Company and its counsel
directed to the Company or expressly providing that the Company may rely
thereon, that a disposition of the Securities is being made pursuant to an
exemption from such registration. 1.11 No General Solicitation. The Subscriber
represents that the Subscriber was not induced to invest by any of the
following: (a) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over the news
or radio; and (b) any seminar or meeting whose attendees were invited by any
general solicitation or advertising.
1.12 Validity; Enforcement. If the Subscriber is a corporation, partnership,
trust or other entity, the Subscriber represents and warrants that: (a) it is
authorized and otherwise duly qualified to purchase and hold the Offered
Securities; and (b) that this Subscription Agreement has been duly and validly
authorized, executed and delivered and constitutes the legal, binding and
enforceable obligation of the undersigned. 1.13 Address. The Subscriber hereby
represents that the address of Subscriber furnished by the Subscriber at the end
of this Subscription Agreement is the principal residence if the Subscriber is
an individual or its principal business address if it is a corporation or other
entity.
1.14 No Hedging Transactions. The Subscriber hereby agrees not to engage in any
Hedging Transaction until such time as the Reserved Shares have been registered
for resale under the 1933 Act or may otherwise be sold in the public market
without an effective registration statement under the 1933 Act. "Hedging
Transaction" means any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Company's Common Stock or any rights, warrants, options or
other securities that are convertible into, or exercisable or exchangeable for,
Common Stock.
1.15 Foreign Subscriber. If the Subscriber is not a United States person, such
Subscriber hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with any invitation to
subscribe for the Securities comprising the Offered Securities or any use of
this Subscription Agreement, including: (a) the legal requirements within its
jurisdiction for the purchase of the Offered Securities; (b) any foreign
exchange restrictions applicable to such purchase; (c) any governmental or other
consents that may need to be obtained; and (d) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Securities. Such Subscriber's subscription and payment
for, and its continued beneficial ownership of the Securities, will not violate
any applicable securities or other laws of the Subscriber's jurisdiction.
1.16 NASD Member. The Subscriber acknowledges that if it is a Registered
Representative of a NASD member firm, the Subscriber must give such firm notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber, except as set forth in
the SEC Documents, the Memorandum or the disclosure schedules attached hereto:
2.1 Securities Law Compliance. The offer, offer for sale, and sale of the
Offered Securities have not been registered under the 1933 Act. The Offered
Securities are to be offered, offered for sale and sold in reliance upon the
exemptions from the registration requirements of Section 4 of the 1933 Act. The
Company will use its commercially reasonable efforts to conduct the Placement in
compliance with the requirements of Regulation D of the General Rules and
Regulations under the 1933 Act and applicable state "blue sky" laws, and the
Company will file all appropriate notices of offering with the SEC. The Offering
Documents will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. If at any
time prior to the completion of the Placement or other termination of this
Subscription Agreement any event shall occur as a result of which it might
become necessary to amend or supplement the Offering Documents so that they do
not include any untrue statement of any material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances then existing, not misleading, the Company will promptly
notify the Subscriber and will supply the Subscriber with amendments or
supplements correcting such statement or omission.
2.2 Organization and Qualification. The Company is duly organized and validly
existing in good standing under the laws of the jurisdiction in which it is
organized, and has the requisite power and authorization to own its properties
and to carry on its business as now being conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Subscription Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition of the Company,
or on the transactions contemplated hereby, or on the authority or ability of
the Company to perform its obligations under this Subscription Agreement.
2.3 Capitalization. The authorized, issued and outstanding capital stock of the
Company as of October 1, 2004 is set forth in the SEC Documents and the
Memorandum. 2.4 SEC Documents; Financial Statements. The SEC Documents represent
all reports, schedules, forms, statements and other documents required to be
filed by it since June 30, 2003 with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). The
Company has made available to the Subscriber or its representatives copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (a) as may be
otherwise indicated in such financial statements or the notes thereto, or (b) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that would not be material). The Company has no reason to believe
its independent auditors will withhold their consent to the inclusion of their
audit opinion concerning the Company's financial statements which are to be
included in any Registration Statement.
2.5 Absence of Changes. Since June 30, 2004, other than as set forth in the SEC
Documents, neither the Company, nor, to the Company's knowledge, its
subsidiaries have (a) incurred any debts, obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business and consistent
with past practices, having individually or in the aggregate a Material Adverse
Effect, (b) made or suffered any changes in its contingent obligations by way of
guaranty, endorsement (other than the endorsement of checks for deposit in the
usual and ordinary course of business), indemnity, warranty or otherwise, (c)
discharged or satisfied any liens or paid any obligation or liability other than
current liabilities shown on the balance sheet dated as of June 30, 2004, in
each case in the usual and ordinary course of business and consistent with past
practices, (d) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, (e) sold, transferred or leased any of its assets except
in the usual and ordinary course of business and consistent with past practices,
(f) cancelled or compromised any debt or claim, or waived or released any right,
of material value, (g) suffered any physical damage, destruction or loss
(whether or not covered by insurance) adversely affecting any of its properties,
business or prospects, (h) entered into any transaction other than in the usual
and ordinary course of business except for this Subscription Agreement, (i)
declared or paid any dividends on or made any other distributions with respect
to, or purchased or redeemed, any of its outstanding equity securities, (j)
suffered or experienced any change in, or condition affecting, its condition
(financial or otherwise), properties, assets, liabilities, business operations,
results of operations or prospects other than changes, events or conditions in
the usual and ordinary course of its business and consistent with past
practices, having (either by itself or in conjunction with all such other
changes, events and conditions) a Material Adverse Effect or (k) made any change
in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted.
2.6 Title. The Company, and to the Company's knowledge, each of its subsidiaries
have good and marketable title to all properties and assets owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such as
are not significant or important in relation to its business. All of the
material leases and subleases under which the Company or, to the Company's
knowledge, any of its subsidiaries is the lessor or sublessor of properties or
assets or under which they hold properties or assets as lessee or sublessee are
in full force and effect. Neither the Company nor, to the Company's knowledge,
any of its subsidiaries is in default in any material respect with respect to
any of the terms or provisions of any of such leases or subleases, and no
material claim has been asserted by anyone adverse to the rights of the Company
or, to the Company's knowledge, its subsidiaries as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or, to the Company's knowledge, any of its
subsidiaries to continued possession of the leased or subleased premises or
assets under any such lease or sublease. The Company and, to the Company's
knowledge, each subsidiary own or lease all such properties as are necessary to
its operations.
2.7 Proprietary Rights. The Company and, to the Company's knowledge, each
subsidiary own, or is duly licensed to use or possess, or possesses exclusive
and enforceable rights to use all patents, patent applications, trademarks,
service marks, copyrights, trade secrets, processes, formulations, technology or
know-how used in the conduct of its business (the "Proprietary Rights"). The
Company and, to the Company's knowledge, its subsidiaries, have not received any
notice of any claims, and the Company does not have any knowledge of any
threatened claims, and knows of no facts which would form the basis of any
claim, asserted by any person to the effect that the sale or use of any product
or process now used or offered by the Company or its subsidiaries proposed to be
used or offered by the Company or its subsidiaries infringes on any patents or
infringes upon the use of any such Proprietary Rights of another person and, to
the best of the Company's knowledge, no others have infringed the Company's or
any of its subsidiaries' Proprietary Rights. 2.8 Litigation. There is no
material action, suit, investigation, customer complaint, claim or proceeding at
law or in equity by or before any arbitrator, court, governmental
instrumentality or agency, self-regulatory organization or body or public board
now pending or, to the knowledge of the Company, threatened against the Company,
its subsidiaries, or any of the Company's officers or directors in their
capacities as such (or basis therefor known to the Company), the adverse outcome
of which would have a Material Adverse Effect. Neither the Company nor, to the
Company's knowledge, any subsidiary is subject to any judgment, order, writ,
injunction or decree of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign that has a Material Adverse Effect.
2.9 Non-Defaults; Non-Contravention. The Company and, to the Company's
knowledge, its subsidiaries, are not in violation of or in default under, nor
will the execution and delivery of this Subscription Agreement or consummation
of the transactions contemplated herein result in a violation of or constitute a
default in the performance or observance of any obligation under: (a) its
Certificate of Incorporation, or its By-laws; or (b) any indenture, mortgage,
contract, material purchase order or other agreement or instrument to which the
Company or, to the Company's knowledge, its subsidiaries is a party or by which
it or its property is bound, where such violation or default would have a
Material Adverse Effect; or (c) any material order, writ, injunction or decree
of any court of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
(including, to the Company's knowledge, federal and state securities laws and
regulations), where such violation or default would have a Material Adverse
Effect. 2.10 Taxes. The Company has filed all tax returns that are required to
be filed by it or otherwise met its disclosure obligations to the relevant
agencies and all such returns are true and correct. The Company has paid or
adequately provided for all tax liabilities of the Company as reflected on such
returns or pursuant to any assessments received by it or that it is obligated to
withhold from amounts owing to any employee, creditor or third party. The
Company has properly accrued all taxes required to be accrued by GAAP
consistently applied. The income tax returns of the Company have not been
audited by any government or regulatory authorities with in the last five years.
The Company has not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency.
2.11 Compliance With Laws; Licenses, Etc. The Company and, to the Company's
knowledge, its subsidiaries have not received notice of any violation of or
noncompliance with any laws, ordinances, regulations and orders applicable to
its business that would have a Material Adverse Effect and that has not been
cured. The Company and, to the Company's knowledge, its subsidiaries have all
material licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, "Licenses") required by
every government or regulatory body for the operation of its business as
currently conducted and the use of its properties. The Licenses are in full
force and effect and to the Company's knowledge no violations currently exist in
respect of any License and no proceeding is pending or threatened to revoke or
limit any thereof. 2.12 Authorization; Enforcement; Validity. The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Subscription Agreement and the other Offering Documents,
to file and perform its obligations under the Offering Documents, and to issue
the Securities in accordance with the terms of the Offering Documents. The
execution and delivery of the Offering Documents by the Company and the
consummation by the Company of the transactions contemplated by the Offering
Documents, including without limitation the issuance of the Securities, have
been duly authorized by the Company's board of directors. This Agreement
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
2.13 Authorization of Securities. The issuance, sale and delivery of the Offered
Securities have been duly authorized by all requisite corporate action of the
Company. When so issued, sold and delivered in accordance with the Offering
Documents for the consideration set forth therein, the Offered Securities will
be duly executed, issued and delivered and will constitute valid and legal
obligations of the Company enforceable in accordance with their respective terms
and, in each case, will not be subject to preemptive or any other similar rights
of the stockholders of the Company or others which rights shall not have been
waived prior to the Initial Closing (as defined herein). Prior to the Initial
Closing, the Offered Securities will be duly reserved for issuance and when so
issued, sold, paid for and delivered for the consideration set forth in the
Offering Documents, the Offered Securities will be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive or any
other similar rights of the stockholders of the Company or others which rights
shall not have been waived prior to the Initial Closing. The Common Stock
issuable upon conversion of the Preferred Shares or exercise of the Warrants
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance will be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws.
2.14 Exemption from Registration. Assuming the accuracy of the information
provided by the respective Subscribers in the Subscription Agreements, the offer
and sale of the Offered Securities pursuant to the terms of this Subscription
Agreement are exempt from the registration requirements of the 1933 Act and the
rules and regulations promulgated thereunder.
2.15 Registration Rights. Except as set forth in Article V to this Subscription
Agreement and on Schedule 2.15 attached hereto, no person has any right to cause
the Company to effect registration under the 1933 Act of any securities of the
Company.
2.16 Brokers. Neither the Company nor any of its officers, directors, employees
or stockholders has employed any broker or finder in connection with the
transactions contemplated by this Subscription Agreement. Notwithstanding, the
Company has agreed to pay the Placement Agent a cash fee of 6%, to issue to the
Placement Agent or its designee five year common stock warrants equal to the
number of shares of Common Stock that 6% of the total Preferred Shares sold in
the offering is convertible into, and to pay an initial engagement fee of
$25,000 in connection with the Placement.
2.17 Title to Securities. When the Offered Securities have been duly delivered
to the Subscribers participating in the Placement and payment shall have been
made therefor, the several Subscribers shall receive from the Company good and
marketable title to such securities free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising through the acts or
omissions of the Subscribers and except as arising from applicable federal and
state securities laws), and the Company shall have paid all taxes, if any, in
respect of the original issuance thereof.
2.18 Consents. Except as contemplated by this Subscription Agreement, to the
Company's knowledge, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
this Subscription Agreement. Except as otherwise provided in this Subscription
Agreement, all consents, authorizations, orders, filings and registrations that
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is unaware of
any facts or circumstances that might prevent the Company from obtaining or
effecting any of the foregoing.
2.19 No General Solicitation. None of the Company, any of its affiliates, and,
to the Company's knowledge, any person acting on its behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
III. TERMS OF PURCHASE
3.1 Closing Date. Provided the funds representing the sale thereof shall have
cleared, and all conditions to closing have been satisfied or waived and the
Company has not notified the Subscribers that they do not intend to effect the
closing, the initial closing shall take place at the offices of counsel to the
Company, Xxxxxxxxx Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
such other location as mutually agreed to by the Company and the Subscribers
within three business days thereafter (the "Initial Closing"). At the Initial
Closing, payment for the Offered Securities issued and sold by the Company shall
be made against delivery of the Offered Securities comprising such Offered
Securities. Subsequent closings (each of which shall be deemed a "Closing"
hereunder) shall take place at any time prior to the Termination Date as may be
decided by the Company. The date of the last closing of the Placement is
hereinafter referred to as the "Final Closing" and the date of any Closing
hereunder is hereinafter referred to as a "Closing Date." The Placement will
terminate on October 31, 2004 (the "Termination Date"), however the Company may
extend the Placement pursuant to one or more extensions with the agreement of
the Placement Agent for an additional period or periods ending on or before 90
days thereafter.
3.2 Expenses. Simultaneously with payment for and delivery of the Offered
Securities at each Closing, the Company shall pay to the Placement Agent a cash
fee equal to 6% of the gross proceeds of the Offered Securities sold. The
Company shall also pay all expenses in connection with the qualification of the
Securities under the blue sky laws of the states which the Company shall
designate. In addition, the Company will issue to the Placement Agent or its
designee, Warrants for the purchase of shares of Common Stock, equal to the
number of shares of Common Stock that 6% of the Preferred Shares sold in the
offering is convertible into as of the date of issuance. Each Warrant will give
the Placement Agent or its designee the right to purchase, for a period of five
(5) years, one share of Common Stock at a price per share equal to $16.25 per
share of Common Stock. Also, an initial engagement fee of $25,000 was paid to
the Placement Agent upon the signing of the engagement letter. 3.3 Escrow.
Pending the sale of the Offered Securities, all funds paid hereunder shall be
deposited by the Company in escrow with the Escrow Agent. If the Company does
not have the Initial Closing on or before the Termination Date, and the Company
does not extend the Offering, pursuant to Section 3.1 above, then this
subscription shall be void and all funds paid hereunder by the Subscriber,
without interest, shall be promptly returned to the Subscriber, subject to
Section 3.5 hereof.
3.4 Certificates. The Subscriber hereby authorizes and directs the Company, upon
each Closing in the Offering, to deliver the Offered Securities to be issued to
such Subscriber pursuant to this Subscription Agreement to the Subscriber's
address indicated on the signature page hereto.
3.5 Return of Funds. The Subscriber hereby authorizes and directs the Company to
return any funds for unaccepted subscriptions to the same account from which the
funds were drawn.
IV. USE OF PROCEEDS
The Company will receive net proceeds of up to approximately
$5,615,000, if all Offered Securities are sold, after deducting the fee payable
to the [Placement Agent] and other offering costs. As of June 30, 2004, we had
approximately $2,548,598 of cash and cash equivalents.
Net proceeds from the Placement will be used by the Company in
accordance with the description in the Memorandum.
V. REGISTRATION RIGHTS
5.1 Automatic Registration. The Company hereby agrees with the holders of the
Securities or their transferees (other than a transferee who acquires shares
pursuant to Rule 144 or an effective registration statement) (collectively, the
"Holders") that no later than 180 days following the date of the Initial
Closing, the Company shall prepare and file a registration statement under the
1933 Act with the SEC covering the resale of the Reserved Shares and the Company
will use its reasonable best efforts to cause such registration to become
effective as soon as practical. In the event that the Company's registration
statement has not been filed with the SEC within 180 days following the date of
the Initial Closing, the Company shall issue to the Holders additional shares of
Series F Preferred Stock equal to 5% of the number of Reserved Shares issued in
the Placement, for each 30 day period, following the 180 day period, during
which such registration statement has not been filed. The Company's obligation
to keep the registration statement effective shall continue until the earlier of
(a) the date that all of the Reserved Shares have been sold pursuant to Rule 144
under the 1933 Act or an effective registration statement, or (b) such time as
the Reserved Shares are eligible for immediate resale pursuant to Rule 144(k)
under the 1933 Act.
5.2Registration Procedures. To the extent required by Section 5.1, the Company
will: (a) prepare and file with the SEC a registration statement with respect to
the Reserved Shares, and use its reasonable best efforts to cause such
registration statement to become and remain effective; (b) prepare and file with
the SEC such amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective; (c) furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities; (d) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holders may reasonably request in
writing within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified; (e)
notify the Holders, promptly after it shall receive notice thereof, of the time
when such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed; (f)
notify the Holders promptly of any request by the SEC for the amending or
supplementing of such registration statement or prospectus or for additional
information; (g) prepare and file with the SEC, promptly upon the request of any
Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Holders (and concurred in
by counsel for the Company), is required under the 1933 Act or the rules and
regulations thereunder in connection with the distribution of Common Stock by
such Holders; (h) prepare and promptly file with the SEC and promptly notify
such Holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the 1933 Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and (i) advise the
Holders, promptly after it shall receive notice or obtain knowledge thereof, of
the issuance of any stop order by the SEC suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
The Holders shall cooperate with the Company in providing the
information necessary to effect the registration of their Reserved Shares,
including completion of customary questionnaires. Failure to do so may result in
exclusion of such Holders' Reserved Shares from the registration statement. 5.3
Expenses.
(a) With respect to the any registration required pursuant to Section 5.1
hereof, all fees, costs and expenses of and incidental to such registration,
inclusion and public offering (as specified in paragraph (b) below) in
connection therewith shall be borne by the Company, provided, however, that the
Holders shall bear their pro rata share of the underwriting discount and
commissions and transfer taxes. (b) The fees, costs and expenses of registration
to be borne by the Company as provided in paragraph (a) above shall include,
without limitation, all registration, filing, and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees of
counsel to the Holders (not to exceed $20,000 in the aggregate) and all legal
fees and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be offered are to
be registered and qualified (except as provided in 5.3(a) above). Fees and
disbursements of counsel for the Holders in excess of $20,000 and any other
expenses incurred by the Holders not expressly included above shall be borne by
the Holders (on a pro rata basis if and to the extent required by state
securities laws).
5.4 Indemnification.
(a) The Company will indemnify and hold harmless each
Holder of Reserved Shares which are included in a
registration statement pursuant to the provisions of
Section 5.1 hereof, its directors and officers, and
any underwriter (as defined in the 0000 Xxx) for such
Holder and each person, if any, who controls such
Holder or such underwriter within the meaning of the
1933 Act, from and against, and will reimburse such
Holder and each such underwriter and controlling
person with respect to, any and all loss, damage,
liability, cost and expense to which such Holder or
any such underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue
statement of any material fact contained in such
registration statement, any prospectus contained
therein or any amendment or supplement thereto, 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, in light of the circumstances
in which they were made, not misleading; provided,
however, that the Company will not be liable in any
such case to the extent that any such loss, damage,
liability, cost or expenses 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 or on behalf of such
Holder, such underwriter or such controlling person
in writing specifically for use in the preparation
thereof.
(b) Each Holder of Reserved Shares included in a
registration pursuant to the provisions of Section
5.1 hereof will indemnify and hold harmless the
Company, its directors and officers, any controlling
person and any underwriter from and against, and will
reimburse the Company, its directors and officers,
any controlling person and any underwriter with
respect to, any and all loss, damage, liability, cost
or expense to which the Company or any controlling
person and/or any underwriter may become subject
under the 1933 Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue
statement of any material fact contained in such
registration statement, any prospectus contained
therein or any amendment or supplement thereto, 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, in light of the circumstances
in which they were made, not misleading, in each case
to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance
upon and in strict conformity with written
information furnished by or on behalf of such Holder
specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of
this Section 5.4 of notice of the commencement of any
action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if
a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but
the omission to so notify the indemnifying party will
not relieve it from any liability which it may have
to any indemnified party otherwise under this Section
except to the extent the defense of the claim is
prejudiced. In case such action is brought against
any indemnified party and it notifies the
indemnifying party of the commencement thereof, the
indemnifying party shall have the right to
participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party,
provided, however, if counsel for the indemnifying
party concludes that a single counsel cannot under
applicable legal and ethical considerations,
represent both the indemnifying party and the
indemnified party, the indemnified party or parties
have the right to select separate counsel to
participate in the defense of such action on behalf
of such indemnified party or parties; provided that
there shall be no more than one such separate
counsel. After notice from the indemnifying party to
such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal
or other expense subsequently incurred by such
indemnified party in connection with the defense
thereof other than reasonable costs of investigation,
unless (i) the indemnified party shall have employed
counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified
party within a reasonable time after the notice of
the commencement of the action or (iii) the
indemnifying party has, in its sole discretion,
authorized the employment of counsel for the
indemnified party at the expense of the indemnifying
party.
VI. CONDITIONS TO CLOSING. The Subscriber's obligation to
purchase the Offered Securities is subject to the
satisfaction of the following conditions, any one or
more of which may be waived or modified by the
Subscriber.
6.1 Material Adverse Event. There shall not have occurred, at any time prior to
the closing of this subscription (a) any domestic or international event, act or
occurrence that has materially disrupted, or in the Subscriber's opinion will in
the immediate future materially disrupt, the securities markets; (b) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange, the Nasdaq, or the Amex Stock Exchange; (c) any
outbreak of major hostilities or other national or international calamity; (d)
any banking moratorium declared by a state or federal authority; (e) any
moratorium declared in foreign exchange trading by major international banks or
other persons; (f) any material interruption in the mail service or other means
of communication within the United States; (g) any material adverse change in
the business, properties, assets, results of operations, or financial condition
of the Company; or (h) any material adverse change in the market for securities
in general or in political, financial, or economic conditions. 6.2 Additional
Conditions. The obligations of the parties are subject to the following
additional conditions:
(a) All representations and warranties of the other party contained herein shall
remain true and correct as of the Closing Date and all covenants of the other
party shall have been performed if due prior to such date. (b) From the date
hereof to the Closing Date, trading in the Common Stock shall not have been
suspended by the SEC (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the
Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Principal
Market, nor shall a banking moratorium have been declared either by the United
States or New York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable judgment of each
Subscriber, makes it impracticable or inadvisable to purchase the Shares at the
Closing.
(c) There shall not then be in effect any legal or other order enjoining or
restraining the transactions contemplated by this Agreement. (d) There shall not
be in effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person to issue the Shares which
consent or approval shall not have been obtained (except as may otherwise be
provided in this Agreement).
VII. MISCELLANEOUS
7.1 Notice. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Subscription Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally, (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party), or (c) one (1) business day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Media Services Group, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxx Xxxxxxx
With a copy to:
Xxxxxxxxx Traurig, LLP
MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Annex, Esq.
If to the Subscriber, to its address and facsimile number set forth at the end
of this Subscription Agreement, or to such other address and/or facsimile number
and/or to the attention of such other person as specified by written notice
given to the Company five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (a) given by the recipient of such notice,
consent, waiver or other communication, (b) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission, or (c)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (a), (b) or (c) above, respectively.
7.2 Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable following the Closing (but not later than the earlier of the
Effective Date and the first anniversary of the Closing Date) to list all of the
Reserved Shares on such Principal Market. The Company further agrees, if the
company applies to have the Common Stock traded on any other Principal Market,
it will include in such application all of the Reserved Shares, and will take
such other action as is necessary to cause all of the Reserved Shares to be
listed on such other Principal Market as promptly as possible. The Company will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on a Principal Market and will comply in all material respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market. "Principal Market" initially means the NASDAQ Small-Cap
Market and shall also include the New York Stock Exchange, the Nasdaq National
Market or the American Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock, based upon share volume.
7.3 Equal Treatment of Purchasers. No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any provision of
any of the Offering Documents unless the same consideration is also offered to
all of the parties to the Offering Documents. For clarification purposes, this
provision constitutes a separate right granted to each Subscriber by the Company
and negotiated separately by each Subscriber, and is intended to treat the
Subscriber as a class and shall not in any way be construed as the Subscribers
acting in concert or as a group with respect to the purchase, disposition or
voting of Shares or otherwise.
7.4 Entire Agreement; Amendment. This Subscription Agreement supersedes all
other prior oral or written agreements between the Subscriber, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Subscription Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Subscriber makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Subscription Agreement may be amended or waived other than by an instrument
in writing signed by the Company and the Subscriber. 7.5 Severability. If any
provision of this Subscription Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Subscription Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Subscription Agreement in any other jurisdiction.
7.6 Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Subscription
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
federal courts sitting in the Southern District of New York, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by sending a copy thereof to such
party by overnight courier service at the address for such notices to it under
this Subscription Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereby irrevocably waives any right it may have,
and agrees not to request, a jury trial for the adjudication of any dispute
hereunder or in connection with or arising out of this Subscription Agreement or
any transaction contemplated hereby.
7.7 Headings. The headings of this Subscription Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Subscription Agreement. 7.8 Successors And Assigns. This Subscription Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any Subscribers of the Offered
Securities. The Company shall not assign this Subscription Agreement or any
rights or obligations hereunder without the prior written consent of the holders
of at least a majority the Securities then outstanding, except by merger or
consolidation. The Subscriber may assign some or all of its rights hereunder
without the consent of the Company, provided, however, that any such assignment
shall not release the Subscriber from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption, which consent shall not be unreasonably withheld.
7.9 Survival. The representations and warranties of the Company and the
Subscriber contained in Articles I and II shall survive the Final Closing for a
period of one year. 7.10 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Subscription Agreement and the
consummation of the transactions contemplated hereby. 7.11 No Strict
Construction. The language used in this Subscription Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party, notwithstanding
anything herein to the contrary.
7.12 Legal Representation. The Subscriber acknowledges that: (a) it has read
this Subscription Agreement and the exhibits hereto; (b) it understands that the
Company has been represented in the preparation, negotiation, and execution of
this Subscription Agreement by Xxxxxxxxx Traurig, LLP, counsel to the Company;
and that such counsel has not represented and is not representing it or any
other Subscriber; (c) it understands that the Placement Agent has been
represented by Xxxx Xxxxx, LLP and that such counsel has not represented and is
not representing it or any other Subscriber; (d) it has either been represented
in the preparation, negotiation, and execution of this Subscription Agreement by
legal counsel of its own choice, or has chosen to forgo such representation by
legal counsel after being advised to seek such legal representation; and (e) it
understands the terms and consequences of this Subscription Agreement and is
fully aware of its legal and binding effect. 7.13 Confidentiality; Required
Press Release. The Subscriber agrees that it shall keep confidential and not
divulge, furnish or make accessible to anyone, the confidential information
concerning or relating to the business or financial affairs of the Company, if
any, contained in the Offering Documents to which it becomes privy until such
information has been publicly disclosed by the Company or until such information
is no longer confidential. The Company agrees promptly after the closing of the
Final Closing, it shall issue a press release which shall set forth all of the
material terms of the Placement, including pricing. 7.14 Counterparts. This
Subscription Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.
7.15 Legal Fees. In the event that any dispute among the parties to this
Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Subscription Agreement, including without limitation such reasonable fees and
expenses of attorneys and accountants, which shall include, without, limitation,
all fees, costs and expense of appeals.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
SUBSCRIBER**: CO-SUBSCRIBER**:
------------------------------------- ---------------------------------------
Signature of Subscriber Signature of Co-Subscriber
------------------------------------- ---------------------------------------
Name of Subscriber [please print] Name of Co-Subscriber [please print]
------------------------------------- ---------------------------------------
Address of Subscriber Address of Co-Subscriber
------------------------------------- ---------------------------------------
Social Security or Taxpayer Social Security or Taxpayer
Identification Number of Subscriber Identification Number of Co-Subscriber
Name of Holder(s) as it should appear on the security certificates*
[please print]
*Please provide the exact names that you wish to see on the certificates (1) For
individuals, print full name of Subscriber. (2) For joint, print full name of
Subscriber and all co-Subscribers.
(3) For corporations, partnerships, LLC, print full name of entity, including
"&," "Co.," "Inc.," "etc.," "LLC," "LP," etc. (4) For Trusts, print trust name
(please contact your trustee for the exact name that should appear on the
certificates).
Subscription Accepted:
Dollar Amount of Preferred Shares By:___________________________
and Common Stock Warrants Subscribed For: Name:_________________________
Title:________________________
$__________________________________
$___________________________
Amount of Offered Securities
Subscription Accepted
** If Subscriber is a Registered Representative with an The undersigned NASD
member firm acknowledges receipt NASD member firm or an affiliated person of an
NASD member of the notice required by Rule 3040 of the NASD Conduct firm, have
the acknowledgment to the right signed by the Rules.
appropriate party
_____________________________
Name of NASD Member
By____________________________
Authorized Officer Accepted
